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City of Kamloops took out a $7.15 -million loan to buy hotel, adjacent property

At an Oct. 1 press conference to confirm the deal, the city had said funds for the purchase came from the city’s affordable housing reserve
Northbridge Hotel
The city purchased 377 Tranquille Rd. (home to the hotel) and 346 Campbell Ave. ( a one-acre parcel of land behind the hotel that has a vacant building on it).

The City of Kamloops will take out a loan to purchase the Northbridge Hotel and adjacent Campbell Avenue property in North Kamloops at a cost of $7.15 million.

The city’s corporate services director, Kathy Humphrey, explained funds for the purchase will not come from the city’s affordable housing reserve, as previously stated by the city, but will be paid for via a short-term loan from the Municipal Financing Authority.

The city’s affordable housing reserve is sitting at $1.3 million.

The $7.15 million loan will require interest payments. Humphrey said the interest will be covered by revenues from tenants currently in the hotel. Asked if the city will be making money off of such revenues, she said the building will have some expenses and some revenues and it remains to be worked out, with the property deal yet to close.

Expenses include not only the loan interest, but also property taxes collected annually for the properties and building operation costs. Details about revenues collected and expenses incurred could not be provided.

Humphrey said the intent is for no additional costs to be placed upon the city.

The city has purchased the hotel at 377 Tranquille Rd. and a one-acre parcel of property behind the hotel, at 346 Campbell Ave. The plan is to sell the Campbell Avenue property to BC Housing and offer the Tranquille Road property for future redevelopment, in alignment with development plans underway for the North Shore.

In 2011, the city sought to borrow funds to build a parkade in the parking lot at Riverside Park in previous years. However, the project was defeated through a counter-petition, or alternative approval process.

That process requires that at least 10 per cent of eligible electors sign and submit response forms in opposition to the proposed initiative by a municipality. If the threshold is met — as it was in the case of the proposed parkade — the municipality must then send the issue to referendum or abandon the proposal. At the time, city council decided to abandon the parkade proposal

Humphrey said the hotel loan is not subject to a a counter-petition/alternative approval process because the city is not seeking consent from the electorate for borrowing agreements longer than five years.

“The fact that this is short-term debt, we are borrowing the money right now, but when we sell the piece [Campbell Avenue property] to BC Housing, that’ll go off to pay the debt,” Humphrey said.

“And when we sell the piece [Northbridge Hotel] or redevelop it or whatever happens with the piece that we own, then we’ll repay the debt. So, we’re anticipating that the debt will be paid off well within the five years.”

Humphrey explained the city does not plan to hold onto the land for the long term, but rather the deal was to gain control of the property to influence what goes on it.

“The intent is, with the city holding the property, we will hold it, develop a plan of what the North Shore community and what the community decides is the most appropriate for that piece of land on Tranquille, and then we’ll sell it and develop it or whatever happens with it,” Humphrey said.

“If anything, it’s a good investment for the city because whatever gets developed on there will be worth more than what’s on it right now. In the long term, we will get more property taxes from whatever goes in there because it will be newer and redeveloped.”

As for whether the purchase of the properties impedes the city’s ability to borrow for future city initiatives, Humphrey said the city’s borrowing has been declining significantly over the past four or five years. Municipalities are allowed to borrow certain amounts of money based on their revenues.

Humphrey said the city’s debt payments can be 25 per cent of its revenues. She said the city can pay $25 million in debt payments based on its approximate $100 million in property taxes and has been in the $6 million to $10 million range for the past decade.

“We have capacity,” she said, noting the city is sitting at less than a quarter of what it is permitted for debt repayments. “The other thing we’ve talked about is right now the interest we’re getting on our investments is quite low, as is the interest rate to borrow money. So the trade off between spending money on debt or having it just sit in investments, it’s really not that much different. This is the time for the city to strategically invest in the community.”

The city hopes purchase of the properties will also stimulate additional changes in the community.