Red Deer city council opted on Monday to stick with its own self-imposed lower debt limit policy.
During the 2023-2024 budget discussion, city council passed a resolution to review its debt policy. The idea was to see whether a previous council decision to restrict borrowing to 75 per cent of what the Province allows is appropriate.
The Alberta government will allow municipality the size of Red Deer to borrow up to 1.5 times the annual total revenue.
Based on risk management principles, city administration recommended that council maintain the limit of 75 per cent of provincial debt limits. “To fully use the entire amount of debt allowed by the province is to ignore the risk that some event, or priority arises that could then not be addressed with debt. In essence, using the entire mortgage limit provided by a bank, and leaving nothing left for the just-in-case,” states a report to council.
When the report was presented to the city’s Audit Committee on June 21, the audit committee also supported keeping the self-imposed lower debt ceiling.
Coun. Kraymer Barnstable, who sits on the Audit Committee, said the chart provided to council tells him all he needs to know.
The chart shows Red Deer is actually bearing relatively more debt (the city is at 56 per cent of the provincial debt limit right now) than other Alberta cities. Calgary is at 33 per cent of its provincial limit, Edmonton (11 per cent), Lethbridge (32 per cent), Medicine Hat (40 per cent). By comparison, Saskatoon is at (52 per cent).
A note to council stated that Edmonton, Calgary, and Medicine Hat have provincial limits of two times their total revenue, while all other municipalities in Alberta have a limit of 1.5 times total revenue. (Saskatchewan municipalities are at two times revenue).
The Government Finance Officers Association does not provide guidance on self-imposed debt restrictions.
After some discussion, Red Deer city councillors thought it prudent to stick with the status quo and keep the local debt limit at 75 per cent of what the government allows.