Dungate money rolling in

The District of Houston is continuing its policy of placing its annual Dungate Community Forest dividend into reserve accounts for the eventual replacement of aging facilities.

And this year the $434,703 dividend declared for the community forest’s 2018 financial year is being allocated to two accounts — $130,410.90 to the community hall reserve account and $304,292.10 to the arena reserve account.

The allocations put the District on a more solid financial footing when in addition to anticipated outside grants to help cover replacement costs, it will put some of its own money into the projects.

In particular, the District is advancing plans to replace the community hall beginning as early as 2020.

The $130,410.90 Dungate dividend amount being allocated to the community hall account means the District won’t have to dip into its federal gas tax account as much as first anticipated.

This keeps gas tax revenues free for other projects, said District of Houston chief administrative officer Gerald Pinchbeck.

At an estimated cost of $4.9 million in 2018 dollars for a new community hall, the District is seeking a federal grant to bolster the $1.02 million it’s taking from the Northern Capital and Planning Grant received by the District earlier this year and $1.31 million from its own sources in addition to monies from the now larger reserve account.

Financing of a new arena is a longer term project at 20 years down the road and considerably more expensive with an estimated price tag of $20 million in 2018 dollars.

Putting the $304,292.10 from this year’s Dungate dividend will help build up reserves toward the standard financing model used by senior governments whereby the District has to put up as much as 33 per cent of the capital expense of a construction project.

“It won’t completely resolve the issue, but gives us a good foundation for an eventual replacement in the next 20 years,” said Pinchbeck.

Other spending scenarios were also introduced to council, including using the dividend for the next phase of the Highway 16 improvement project next year, for this year’s projects such as sealcoating or for repairs to asphalt roads.

The result would be reducing the amount needed from the District surplus or, in the case of asphalt road repair, increasing what is planned for this year.

But Pinchbeck noted there would be no reserves then to replace facilities and subsequently less time to build up facility replacement reserve accounts.

Council was also told the District should not expect large dividends such as this year’s $434,703 in future years because the community forest is benefitting from currently high commodity prices for timber and lumber.

In order to take advantage of those high prices, the community forest has accelerated its logging in the first years of its 2018-2022 harvest cycle.

“Although harvesting may continue between 2020 and 2022, it will likely be at much lower volumes than in 2018-2019, meaning a reduce return on investment for the District over those years,” a briefing note prepared by Pinchbeck for council stated.

And because of that, council should not consider using Dungate dividends as a source to supplement general revenues when making annual budget and financial plans.

The policy of using Dungate dividends instead to build up reserves for facility replacements was adopted in 2017.

In that dividend year, the District received 409,584 from the community forest.

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