A recommended change to the city’s debt policy Monday night marks a new era of financial practice, one where borrowing for infrastructure will no longer be frowned upon.
Council’s finance and audit committee decision means the city has fewer borrowing restrictions for long-term debt.
“It sends a message that we still need help and that we’re looking at borrowing money to deal with our infrastructure,” said Dean Screpnek, the city’s chief financial officer.
In 2003 the city adopted a “no debt” policy that restricted the types of projects for which the city could borrow money. Screpnek said the recession is forcing many Alberta municipalities to use debt as a financing tool to pay for infrastructure needs, and St. Albert would be wise to do the same.
“We have a huge infrastructure gap,” he said. “The fact that a municipality has to borrow money would suggest that they don’t have enough money to deal with infrastructure deficit.”
Last month the city identified a $238 million funding gap in its 10-year capital plan for equipment purchases and road and building projects. Fewer borrowing restrictions could mean using debt to pay for infrastructure projects, and reallocating provincial and federal grant dollars to help front-end the cost of extending water and sewer utilities to the annexed land.
According to Screpnek, the new policy will give the city more financially flexibility to pay for big infrastructure projects.
Coun. Len Bracko doesn’t agree.
“Whenever you have debt you limit flexibility, so I see that as the reverse instead of a plus,” said Bracko, who has consistently opposed changing the no-debt policy.
The city received $3.1 million less this year from the provincial government in Municipal Sustainability Initiative grants than it had expected.
Bracko said more debt on the city’s balance sheets will hurt future taxpayers, and council needs to consider the big picture.
“In the public sector it’s important to move away from debt … we don’t have to be like most Canadian municipalities,” he said.
In 2008 the city’s debt increased by $3.5 million to pay for Ray Gibbon Drive. That brought the city’s total long-term debt to $71.8 million, roughly three per cent more than 2007.
Although the new policy eases borrowing restrictions, Screpnek said debt would not be a good tool to fund growth needs, such as extending utilities to the annexed land, which carries greater risk.
“We’re suggesting that debt not be used as a tool for funding things like growth,” he said. “If you utilize debt to pay for that, and if the economic development doesn’t occur at the pace you thought … it’s your citizens that are left with paying the debenture debt on that.”
Coun. James Burrows said the policy change marked an excellent new direction for the city.
“I think this is a wonderful new tool that gives council today and in the future a lot of flexibility,” said Burrows. “Things have changed, interest rates have changed and our capital plan has changed, and I think it’s very important that we don’t handcuff city councils of the future.”
The updated policy must be ratified in council chambers before the change is official.
