Town Committee of the Whole discusses debt management policy
By John Watson Local Journalism Initiative Reporter
The Town of Strathmore Committee of the Whole discussed a debt management policy during the May 14 meeting, which aims to help develop guidelines for future budgets and taxation.
A need for the town to establish a debt management policy was identified within the strategic plan, thus administration undertook a review of the policy and compared it with recommendations by the Government Financial Officers Association (GFOA), as well as best practices used by other municipalities.
As recommended by the GFOA and requested by town council, the policy helps ensure local debt is issued and managed prudently in order to maintain a sound fiscal position and maintain the town’s credit.
It was clarified during the meeting the policy does not represent a change in current practices but rather adds a formal policy to ensure these practices are followed and provides future councils and administrations with guidelines to adhere to.
“One of the things that I have found with this council is we have been really diligent on paying down our debt to ensure that we are well beneath our debt limits,” said Leana Ashbacher, senior manager of financial services. “Our total debt servicing in this policy … states that the debt servicing should not be above 18 per cent. We are a total of 6.6 per cent. Our tax supported debt servicing is only 4.3 per cent.”
Coun. Denise Peterson added during her tenure as a councillor she has never seen the town’s debt serving at such low numbers.
Generational equity, which is referenced throughout the document, suggests ensuring the “right taxpayer pays for the right project.” For example, financing a project with a 10-year service life over 25 years may see taxpayers who did not benefit from that given project would still be paying for it beyond the expiry of such a project.
Inversely, financing a project with, for example, a 75-year service life over 25 years would be more appropriate, as taxpayers who would actively benefit from the project throughout its service will be the ones contributing to it.
“If we build a road, it is great to be able to pay for stuff up front with cash, obviously, but the road is going to get used for the next 25 years, so in theory, the people who could be paying for it, could be paying for it over the next 25 years as well,” said Coun. Jason Montgomery. “If the cost of borrowing does not exceed the cost of inflation by too much, or even if it is less, then you are actually coming out ahead.”
In regard to new councils, it was also clarified during the meeting, financial management training is included in new council orientation packages, and in-depth, targeted training sessions on specific topics are provided to councillors during their terms.