St. Albert’s city manager wants more money to go towards growth projects in the community and has come up with a way to go about it – have the city borrow the money from itself.
Unveiled at Monday’s standing committee on finance meeting by Patrick Draper, the plan would see the entire10-year capital plan, valued at $15.3 million, committed to “reinvestment” or repairs and improvements to city infrastructure, which take up the lion’s share of the funds to begin with.
Separately, the city would borrow $6.2 million per year, plus the 15 per cent of its municipal sustainability initiative (MSI) grant from the province slotted for growth, for a total of $8 million per year for five years to fund new projects.
“As the population grows out over the next five, 10 or 15 years, the chances for enhanced infrastructure will continue to decrease,” Draper said.
Draper’s strategy could save the city from boxing itself into a position where funds available for growth continue to dwindle as existing infrastructure demands more attention. As an example, the city’s current model would see just $2.8 million committed for growth for 2013 compared to $12.5 million for funded reinvestment projects. By 2015, a mere $450,000 in 2015 would be available for growth, as reinvestment would command 97 per cent of available funds.
The value of unfunded growth projects continues to climb, Draper noted, with a total of $38.9 million unfunded for 2013 compared to $9.1 million in reinvestment. That disparity is projected to climb until it reaches $14.8 million unfunded in reinvestment in 2015 compared to $60.5 million in unfunded growth projects.
“Establishing a capital growth fund of $40 million over five years will address the shortfall, increase the potential for grants and partnerships and allow enough lead time to engage stakeholders and ensure more comprehensive long-term planning,” Draper said.
The finance committee, comprised of all councillors, looked at three different options for funding the proposed growth plan: 1) borrowing $8 million per year for five years externally, 2) borrowing $8 million internally for five years or 3) borrowing $6.2 million per year for five years and adding in the 15 per cent in MSI funding already designated for growth.
The third option, involving the MSI funds, was administration’s proposed option.
“We don’t charge ourselves [interest] but we do incur an interest loss,” when it comes to internal borrowing, Draper said. “That amount is recognized as coming in against the operating budget.”
The difference between servicing an outside debt compared to borrowing internally is the city would save approximately $650,000 by using the latter. Borrowing externally would also increase the tax burden more, requiring an incremental tax increase of 0.7 per cent to service the debt compared to 0.3 per cent in the internal borrowing/MSI scenario.
The committee gave its approval to the idea, which will return to its July meeting, at which point administration will have fleshed out more of the policy, procedure and public consultation requirements for the committee to put it to a more substantive vote, Draper said.
Mayor Nolan Crouse said he needs to see a little more detail before he makes a final decision.
“It’s going to take me a while to get my head around how this doesn’t cost money. It does cost money – we’re saving a bit on interest costs by borrowing internally and raising taxes a little bit and that I like,” Crouse said.
He also likes that Draper has brought forward a new funding idea, which is exactly why he was hired.
“This was him starting to look at growth and development,” Crouse said. “We hired him because of his skills, knowledge and because he has a different way of looking at it.”
