Today, Victoria residents will vote in a referendum on three things: whether they are in favour of the City of Victoria adopting the Loan Authorization (Crystal Pool Replacement) bylaw to borrow up to $168.9M and what their preferred location is for the proposed Crystal Pool project: Central Park South or Central Park North.

Initially budgeted in 2017, the Crystal Pool project was set to cost approximately $69.4M. However, as inflation and other factors have escalated costs, the current budget for the project stands between $209M (for the Central Park South option) and $216M (for the Central Park North option. For either option, $47M would be used from the city’s reserve funds to reduce the amount of borrowing required.

With price tags like that, the stakes are high

The stakes got even higher a little over a week ago, when US President Donald Trump threatened to slap a 25% trade tariff on goods imported into the US from Canada. Also looming on the horizon, is the renegotiation of the United States-Mexico-Canada Agreement (USMCA) set for a legislated six-year review in 2026.  The USMCA updated the North American Free Trade Agreement and took effect in 2020 during Trump’s last time in office. 

Economists have warned that Trump will pull any trade levers possible, including additional tariffs, to ensure US advantage in that negotiation.

The construction sector, in particular, has been struggling to adjust to shifting market conditions. Paul Ashworth, chief North American economist at Capital Economics, highlighted the impact of this uncertainty in a recent CTV interview. He said manufacturers in Canada, are holding off on investments, pausing hiring efforts, and anticipating their production orders where possible.

The tariffs are adding to ongoing industry pressures

Materials cost more and supply chain issues endure in the wake of the COVID-19 pandemic. Bird flu is currently on the rise in the US, causing outbreaks in poultry and dairy cows. The flu is mainly killing birds and some mammals, but, should it develop into a threat to humans, as Shayan Sharif, dean of the veterinary college at the University of Guelph has indicated is increasingly possible, a full-blown pandemic could have unforeseen cross-boarder economic consequences. 

Reporting by Statistic Canada shows more than one-third (36.7%) of construction businesses have said that supply chain challenges have worsened and prices paid by the construction sector for machinery and equipment (domestic and imported) increased 4.8% year over year. Rising material costs are reflected in Statistics Canada’s 2024 industrial product price indices (IPPI) and raw materials price indices (RMPI). In January 2023, the Industrial Product Price Index increased 0.4% month over month and rose 5.4% year over year.

According to the prominent Canadian business law firm Osler, steel and aluminum—critical for infrastructure projects like the Crystal Pool—have experienced average annual price increases of 3.4%, especially during trade disputes, such as the one in 2018. The firm reports that prefabricated metal components—essential for non-residential projects—saw even steeper year-over-year increases of as much as 17.3% as of January 2019. 

When Capital Daily asked the city for a line-by-line of potential site costs, similar to the budget breakdown—publicly available in the 2017 feasibility study—in order to identify where materials and construction cost pressures might lie, the request was rejected. The 2024 feasibility study provides only net costs per site.

“Our decision to provide only a summary of budget information reflects our current procurement practices for major projects and helps protect the integrity of competitive processes,” said city spokesperson Colleen Mycroft in an email. 

Coun. Jeremy Caradonna isn’t taking the tariff threats seriously. He told Capital Daily in an email “The tariffs are a bluff meant to frighten allied countries into capitulating to hostile American imperialism. I don’t think Victoria voters should take these threats into account when voting.” 

Vancouver Island Construction Association (VICA) CEO Rory Kulmala is taking the opposite view. “I am a cautious skeptic,” he told Capital Daily. For Kulmala, it's about risk, unknowns and priorities.

“As a project manager, I've managed risk my entire career and it's about finding those little nuggets of, where's this going to kick us in the keister. You're not just going to get kicked in the keister, you're going to get kicked, put on the ground, and somebody's going to keep kicking you.”

“Without putting some kind of tariff clause in a contract, I would have to negotiate, because we can't be left holding the bag. We [contractors] can't hold 25% to 30% on our costs or eat that much when and if something goes sideways,” he said.

Taxpayers can’t be left holding the bag either.

“We're looking for a tax base of a relatively small population in Victoria to fund the Crystal Pool at $220M, which will end up being $250 to $300M,” Kulmala said.

Caradonna is far more optimistic. He’s hopeful that, if things do go sideways, the $56M or 26% contingency fund will be sufficient to cover potential cost escalation. 

“There is a good chance that the project ends up costing less than the worst-case scenario, which is why the referendum requests permission to borrow ‘up to’ $168.9M,” he said. These conservative budgeting principles make the project look expensive but also mitigate the city’s long-term risks.”

One of those risks is the potential for higher construction costs to exacerbate housing affordability in Victoria, a city which already faces a shortage of affordable housing. With the rising cost of building materials, developers may be disincentivized to pursue new residential and commercial projects, slowing the pace of housing supply and further driving up prices.

In a letter to the Minister of Foreign Affairs, Kevin Lee, CEO of the Canadian Home Builders Association (CHBA), asked that construction materials be excluded from any retaliatory tariffs Canada might consider. Such tariffs, he said, would increase costs by billions and delay housing and infrastructure projects across the country.

Everything in the economy is tied to everything else

The potential impact of tariffs on the Crystal Pool’s financing is indelibly linked to broader economic concerns, including Bank of Canada's lending rates.

The National Bank of Canada is hoping to see the Bank of Canada reduce interest rates this year to roughly 2.25% to stimulate the economy before hiking them back up again in 2026. While the dip might make borrowing slightly more affordable for the city through the Municipal Finance Authority—the entity through which the city must arrange its long-term capital loan—the reduction would signal broader economic instability, impacting the households footing the bill through their property taxes.

In light of the current Trump-inspired uncertainty, Kulmala asked “Do we want to drag resources [to the Crystal Pool] when we could be building affordable housing, improving infrastructure, better transit, or better community oriented development?”

He acknowledged that, if a decision is to be made, the time to make it is now because the pool will never be cheaper to build than it is today, even once the tariff and trade dust settles.

“I think, said Kulmala, “in these times, we have to rethink what's important to us.”

If Victoria residents choose not to approve of council borrowing for the project, Mayor Marianne Alto has said in council a “No” vote means that council will look more closely at the reasons it was not accepted by residents and come up with a better plan.”