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City debt in a ‘reasonable spot’

Red Deer’s debt per capita is on par with other Alberta municipalities.

Red Deer ranked fourth lowest out of eight municipalities in debt per capita in city released figures based on 2011 financial reports. The debt per capita is $2,163. This puts the city ahead of Edmonton, Calgary, Medicine Hat and Wood Buffalo. Lethbridge has the lowest debt per capita at $744 followed by Strathcona County and Grande Prairie respectively.

The figures showed Red Deer’s debt limit was $402.7 million and the debt it carried was $196.7 million in 2011.

Adoption of the 2013 capital budget on Tuesday brought the city’s debt limit to an estimated $431.4 million. The city is estimated to carry a debt of $258.1 million or 59.8 per cent of the debt limit for 2013.

“We’re in a reasonable spot,” said Coun. Dianne Wyntjes. “What worries me is the pinch point in 2015. That is probably going to be a worrisome year. But if you look at the history of the city. We’ll have been there before.”

The city’s debt load is projected to peak at $336.8 million or 72.9 per cent of the $462 million debt limit in 2015. The debt per capita would be $3,374 in 2015. At the city’s peak borrowing in 1983, the debt per capita was $1,559 or $3,434 in current dollars. The projected per capita is not expected to exceed the 1983 peak.

Coun. Tara Veer said she is pleased because a few years ago council had anticipated the peak debt load would reach 90 per cent in 2015. She said council has scaled back on spending and deferred multi-million dollar projects including the City Hall expansion to reduce the load.

Veer said interest rates are favorable for municipalities and at times it makes sense to incur debt.

“I like having a self-imposed ceiling for council because the province has the ceiling limitations,” said Veer. “I don’t want the city to meet that ceiling limitation. I think we need to leave room in debt capacity to respond to future and any emerging critical issues that will come our way.”

Some municipalities have applied to the province to increase their debt ceiling.

Veer said she hopes the City of Red Deer would never be in that position because it would compromise the city’s ability to respond to emerging issues. In recent years, city council has practiced a self-imposed policy of not exceeding the provincially prescribed debt limit and the self-imposed mandate of 90 per cent.

Veer filed a motion recently to put in policy the self-imposed mandate because she was concerned there would be a temptation to spend beyond the 90 per cent in 2015.

“To me it’s what you do with that debt,” said Wyntjes. “A lot of it is some of the pipes in the ground. Those are infrastructure needs that we need to invest in.”

She said initiatives the city needs to invest in such as the regional wastewater management plant for the future growth. She said city council was prudent in earmarking dollars in the 2013 capital budget debate and further councils will have to follow suit.

Much of the city’s debt was incurred for the large infrastructure projects including the upgrades to the waste water and water treatment plants ($44 million combined outstanding), the Civic Yards relocation ($79 million outstanding) and Storm Offsite projects ($12 million).

City manager Craig Curtis said the Conference Board of Canada recommends municipalities take on debt so the facilities pay for the cost instead of saving in advance.

In Alberta the debt limit is calculated based on 1.5 times the revenue for most municipalities

The additional projects increased the debt by $5 million but the actual borrowing for 2013 is around $47.7 million. This accounts for borrowing against projects approved in 2012 and earlier budgets.

crhyno@reddeeradvocate.com

 
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