The Town of Sundre has not previously had a capital financing and debt management policy, which administrative staff wants to remedy.
“This is a new policy,” said Chris Albert, director of corporate services, who was joined during council’s Oct. 1 meeting by consultant Tracey Seitz Polowich, principal of Contigo Business Service Inc., the company previously commissioned to facilitate the municipality’s effort to develop a new strategic plan and vision.
“I have not been able to find any previous policies that outline the town’s position on long-term and short-term debt,” said Albert.
Outlining several of the policy’s highlights, he said the Municipal Government Act regulates the town’s debt limits at 150 per cent of operating revenue as well as debt servicing limits of 25 per cent of operating revenue.
“Currently, what that translates to is from the 2017 financial statements, I believe that gave us somewhere around a $15-million debt limit.”
Administration’s goal is to never reach that limit if at all possible, he said.
“We would suggest limiting that maximum to 75 per cent of the requirements.”
The idea, he said, is to allow some financial wiggle room in the event of an emergent issue that must be immediately or as quickly as possible dealt with.
“It would just kind of allow us that financial stability and comfort that we’re not getting too close to those debt limits.”
Administration is also looking to ensure that financing and debenture practices are responsive and flexible, he said.
“In this particular case, we believe that they need to be fair to the needs of both current taxpayers and future taxpayers.”
Taking on debt today for projects means future taxpayers pick up the tab for current infrastructure, he said.
Another part of the policy deemed a prudent step by administration is that financing for a project will not exceed the useful lifespan of the purchase, he said.
“Within our accounting policies, we have useful lifespans defined for infrastructure for roads, for pipes, for all various types of assets, and we will incorporate that into the long-term debt.”
Additionally, administration’s intent is not to accrue long-term debt for capital projects valued at less than $500,000, he said.
“Administratively, it’s a little bit of an annoyance to borrow for smaller dollar amounts such as that.”
Sources of funding addressed in the policy outline options including internal borrowing, such as drawing from restricted surpluses, “loans from financial institutions, or debentures from Alberta Capital Finance Authority, which is currently the sole entity that we borrow funds from. We’d like to expand that use a little more, really to get more favourable rates and repayment terms.”
Responding to a written query prepared by Coun. Cheri Funke, who was unable to attend the meeting, Albert said administration would never transfer funds from or to restricted surpluses — the new term that will replace references of "reserves" — without council’s approval.
Mayor Terry Leslie said council was getting accustomed to the new terminology, and wondered whether the municipality would still have unrestricted surpluses similar to unrestricted reserves, which Albert confirmed and deferred to Polowich for additional explanation.
A municipality’s accumulated surplus is divided into three components, she said.
“One is the equity in tangible capital assets, so, what you own of all of the infrastructure and assets that are owned by the municipality, excluding the debt portion. Just like with your house, you have equity in your home,” she elaborated.
“The other two components are unrestricted surplus and restricted surplus, so that’s the cash that you have in the bank. Some of that, council has made motions to restrict for specific purposes. You can keep those specific purpose accounts. If you like, you can change them, that’s completely council’s realm of authority.”
Unrestricted surpluses are not set aside for specific uses, she added.
Albert’s presentation was for council’s consideration, and further discussion ahead of a workshop later this month was expected during the Oct. 15 meeting.
Coun. Rob Wolfe’s motion to accept the report for information carried.
