Westlock Foundation faces $3 million deficit
Delayed Pembina Lodge expansion results in higher operating, building costs
Changes to the final form of the Pembina Lodge expansion, as well as a delay in the completion date, have led to the Westlock Foundation needing $3 million in loans.
At the July 31 Westlock County meeting, Coun. Jim Wiese presented a report on the foundation’s most recent meeting, where it came out that the foundation requires new loans to cover a $1 million shortfall in operating expenses and a $2 million deficit in capital expenses relating to the Pembina Lodge expansion.
In order to cover those two shortfalls, the foundation is asking its four member municipalities – the town, the county, the Village of Clyde and the M.D. of Lesser Slave River – for letters of support in order to apply for loans. Although he was not at the county meeting, foundation board chair David Truckey explained how the two deficits came to be.
“With construction being delayed from when we were originally told we would have occupancy, we’ve got quite a few months where we’ve had no revenue from those suites, so that’s put a damper on our operating budget,” he said.
To make financial matters tighter, the foundation had hired new staff for when the expansion was due to open, so there were those added expenses, along with the missing revenue, eating a hole in the foundation’s books, he said.
In order to cover that shortfall, Truckey said the foundation is hoping to receive approval from its member municipalities to apply for a $1 million loan to be repaid over a three-year term.
On the capital side, Truckey said the $2 million shortfall came about in part due to the delays in construction and partly due to changes in how the lodge will look when completed. The loan to cover this shortfall would be paid back in 10 years. Of that $2 million, only about $500,000 is a result of cost overruns, he said. Even so, he said he isn’t particularly worried about the project having gone over budget.
“Let’s face it, on $14 million, you’re going to have a cost overrun at some point. That’s pretty much what people expect in this day and age,” Truckey said. “I wouldn’t say that I’m happy about it, but people sort of have that expectation.”
He said a general rule of thumb when it comes to cost overruns is an amount equal to about 10 per cent. In this case, $500,000 is only 3.5 per cent, so it’s well under that threshold, he said.
Specifically, those cost overruns were due to the delayed completion date, which meant the foundation was paying for mileage, vehicles and other parts of the building process.
“We’re paying for people to be there when we thought this would be over with and we’d be carrying on,” he said.
For the remaining $1.5 million shortfall, Truckey said it’s because of “items that the board of directors felt were important additions or changes to the lodge.”
However, in some cases those changes didn’t have a direct connection to the expansion project.
One such example is paving being done at the Smithfield Lodge in conjunction with a new entrance on the south side of the building. That new entrance also necessitates renovations that include moving the front offices.
Other changes that do pertain to the expansion include a different atrium roof structure to provide a “positive atmosphere,” tabbed at $60,000.
There are also modified doors, balcony railings and windows costing close to $100,000 to improve those rooms that face into the atrium.
On the other hand, Truckey said the design team proposed a number of changes, but those were rejected because the board “felt they were over the top.”
“I wasn’t involved in that discussion,” he said. “That was other members of the board, but they felt that being good stewards of the money that some of those choices were beyond what were wanted to spend.”
Perhaps the biggest cut the board made was deciding not to build an underground parking garage, a decision that saved $500,000, Truckey said.
All things considered, he said he’s happy with the how the expansion went and hopes that once the books have been gone through the foundation will be able to pay back the loans ahead of schedule.
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