PUC gets nod for new headquarters on Second Line

A majority of Sault Ste. Marie City councillors last night indicated their support for PUC Inc. to commence design and cost estimates for a new headquarters building to be constructed next to its existing service centre on Second Line.

Councillors gave unanimous support to the idea, even though Ward 4 Councillor Lorena Tridico expressed initial concern about the continued development of office space outside the downtown.

PUC president Brian Curran told City Council last night that the City-owned utility's current head office on Queen Street East is seriously deficient, and a number of studies on either renovating or replacing it have been conducted since 1990.

Curran cited problems including insufficient space for vehicle repair and lockers.

One study, done two years ago, put the cost of renovating the downtown building at between $11 million and $14 million, compared to $14.5 million to $16 million for a new building. The new headquarters, to be finished by 2012 at an estimated cost of $20.5 million, would have a total of 92,549 square feet, including:

- 28,330 square feet of office space.

- 16,895 squre feet for storage and purchasing.

- 27,520 square feet for vehicles and equipment storage. - 14,332 square feet for operations.

About $1.3 million would be spent to ensure the new headquarters complies with silver LEED standards.

The new building will be constructed adjacent to the PUC's existing service centre on Second Line, which will eventually be sold, together with the property surrounding it.

Curran said that a rate increase granted to the PUC last year has significantly increased the utility's cash flow and a financial restructuring completed earlier this year allows it to access outside financing.

One initial concern to City administrators was the PUC's ability to pay off its massive municipal debt.

Earlier this year, the utility owed $40.2 million to the City of Sault Ste. Marie, but a debt restructuring in January reduced that to $31.3 million.

The PUC is paying that down with about $1.9 million in annual interest payments and $600,000 in dividends.

It was hoping to stop paying the annual dividends in 2012, in view of higher property taxes payable on its new headquarters.

However, City staff say they need the money and tax hikes would be needed if the PUC dividends are stopped.

Curran said last night that the dividend payments can continue, subject to regulatory approvals and available working capital.

The PUC's Trbovich and Murphy buildings can be sold for about $3 million, councillors were told last night.

The existing Queen Street headquarters is worth about $1 million.

That means the PUC will need a $17.5 million mortgage on the new building, probably at five percent over 25 years.

The expected impact on residential consumer rates in 2012 will be about $1 a month for electricity consumers and $1 a month for water users.