City Coun­cil look­ing to change strat­egy away from debt fi­nanc­ing to fund op­er­a­tions


Afi­nan­cial dis­cus­sion pa­per was re­ceived by Swift Cur­rent City Coun­cil at their Dec. 9 meet­ing open­ing the topic of ex­plor­ing an end to the city’s strat­egy of debt fi­nanc­ing in or­der to keep prop­erty taxes low.

Swift Cur­rent City Coun­cil re­cently ap­proved a mo­tion to bor­row an ad­di­tional $ 14.99 mil­lion to pay for a se­ries of cap­i­tal in­vest­ments and make pay­ments to the RM of Swift Cur­rent fol­low­ing the Mu­nic­i­pal Bound­ary Com­mit­tee an­nex­a­tion de­ci­sion ear­lier this year. With the City be­gin­ning the year ow­ing $61.3 mil­lion in out­stand­ing debt, and with $ 3.27 mil­lion to be re­paid this year, Swift Cur­rent’s over­all debt level will sit at $ 73 mil­lion at the end of the year.

Af­ter in­cur­ring ad­di­tion debt, the City is now ex­plor­ing their cur­rent tax min­i­miza­tion model which uti­lizes debt to fund cap­i­tal ex­pen­di­tures in or­der to pro­vide higher ser­vice lev­els in the com­mu­nity.

“That’s the re­al­ity even when some­body sug­gests why does Swift Cur­rent have higher debt lev­els than other com­mu­ni­ties our size, or why would we. We’re not spend­ing our money any dif­fer­ently. We’re not spend­ing our money frivolously. We’re not in­vest­ing in things that our com­mu­nity doesn’t need or aren’t es­sen­tial. For the ba­sic ser­vices that our res­i­dents re­quire, but also for a high qual­ity of life. We just don’t have the cash- f low that other com­mu­ni­ties do,” Mayor Jer­rod Schafer said dur­ing Mon­day’s Coun­cil meet­ing.

The fi­nan­cial strat­egy dis­cus­sion pa­per looks at in­creased prop­erty taxes as a way to elim­i­nate debt and pro­vide a bet­ter rev­enue stream to fund the ameni­ties, ser­vices and equip­ment nec­es­sary in the City.

“We hear from our pub­lic that they want no debt, or lit­tle debt, or there’s con­cern about debt. That they want low taxes, and that’s a de­mand, they don’t want to see their taxes grow. But yet they want a high level of ser­vices. So as you can see those are three ex­pec­ta­tions that we face that cre­ate a very chal­leng­ing en­vi­ron­ment,” Schafer said. “I can’t em­pha­size enough how good of a deal our res­i­dents are get­ting in this par­tic­u­lar com­mu­nity com­pared to ev­ery­where else. Now that’s a great thing, and that’s some­thing that we’ve en­joyed for a long time, but it also poses a chal­lenge for us as well.”

“The re­al­ity of it is is part of the rea­son why our res­i­dents con­tinue to en­joy such low taxes is be­cause debt has been our tool to rely on to fund many of the cap­i­tal projects that other com­mu­ni­ties do sim­ply through cash flow or through their higher rev­enues.”

All coun­cil mem­bers weighed in on the topic, voic­ing their unan­i­mous sup­port of re­duc­ing debt lev­els though higher rev­enue from prop­erty taxes.

Coun­cil­lor Gord Budd ad­mit­ted that the preva­lent feel­ing from pre­vi­ous coun­cils even a decade ago was to hold the line on tax in­creases, as the feel­ing was that even a one per cent prop­erty tax in­crease would not be ac­cept­able to ratepay­ers. He ad­mit­ted that the City has not ben­e­fited fully from uti­liz­ing the ben­e­fits of the Light and Power div­i­dend for growth pur­poses.

“I feel it’s im­por­tant that we wean our­selves off the Light and Power div­i­dend by in­creas­ing prop­erty taxes at a rea­son­able rate. The prof­its from Light and Power can be used to fund those projects in our com­mu­nity that not all tax­pay­ers use,” Budd said.

“The bot­tom line here folks, I be­lieve that we need to see prop­erty taxes in­crease over the next six years to cover off our de­pen­dence on Light and Power, but we’re still go­ing to be among the low­est, if not the low­est place in Saskatchewan in terms of prop­erty tax.”

And while Budd ad­mits he may re­ceive some crit­i­cism, Coun­cil does need to set the right di­rec­tion for the fi­nan­cial fu­ture of the com­mu­nity.

“My think­ing on this is this is the right thing to do, and we have to do it for to­day. But not even so much for to­day, but for the fu­ture of our City.”

Coun­cil­lor Ryan Plewis was con­cerned that Swift Cur­rent res­i­dents would read be­tween the lines of the pol­icy pa­per and wrongly pre­sume that the city is in trou­ble with debt.

“I’m per­son­ally not trou­bled by our level of debt for the City. It’s fi­nanced, it’s funded. It’s quite rea­son­able ac­tu­ally con­sid­er­ing where we’re at from a fi­nan­cial pic­ture in terms of our sources of rev­enue, but whether we’re go­ing to fund things by debt or whether we’re go­ing to fund things by us­ing the tax rev­enues,” he said.

“I’m not per­son­ally trou­bled by our level of debt, but I am, and I be­lieve that a num­ber of us on coun­cil are con­cerned about our re­liance on the need for us­ing debt to fi­nance the projects that we look at pur­su­ing within this com­mu­nity,” Plewis added.

“I like this re­port be­cause I think it gives us a strat­egy or a plan for do­ing some­thing about that con­cern that I have about our re­liance on fi­nanc­ing,” he said. “I think that we need to de­crease our re­liance on tak­ing debt to fund the things that make us a com­pet­i­tive place or makes Swift Cur­rent a great place to live and work and do busi­ness.”

plan, long term vi­a­bil­ity.

“Quite frankly it’s not plau­si­ble for us to con­tinue re­ly­ing on debt fi­nanc­ing to fund the things that we need to do that makes Swift Cur­rent a great place to live. The Light and Power div­i­dend is, in my mind, the key to read­just­ing this im­bal­ance that we’re cur­rently ex­pe­ri­enc­ing.”

debt or tax funded fi­nanc­ing.

“We need to get bet­ter at be­ing less re­liant on bor­row­ing and to be bet­ter at fund­ing things out of our op­er­a­tions in that par­tic­u­lar tax year.”

Coun­cil­lor De­nis Per­rault high­lighted that at the cur­rent tax­a­tion level, Swift Cur­rent res­i­dents are get­ting an im­pres­sive ar­ray of ser­vices rang­ing from a pro­fes­sional Fire Depart­ment, RCMP, park­way, parks, fa­cil­i­ties, bus ser­vice, 80 kilo­me­tres of roads, snow re­moval, plus other in­fra­struc­ture.

“Our res­i­dents are get­ting great value, great ser­vices, in a great, grow­ing and vi­brant city, and we’re go­ing to con­tinue to en­joy th­ese ser­vices for a fair and af­ford­able price, long into our fu­ture, even with the changes that we’re talk­ing about to­day.”

“Our Coun­cil sat to­gether and we set a strat­egy that we were not go­ing to rely on the Light and Power div­i­dend for op­er­a­tions any more, but rather use it for cap­i­tal projects like our ex­cit­ing In­te­grated Fa­cil­ity, and I’m very hope­ful we’re go­ing to be see­ing de­vel­op­ment on it in the com­ing years.”

Coun­cil­lor Ge­orge Bowditch felt that the City needed to have a stronger plan for the fu­ture, and bet­ter po­si­tion the com­mu­nity for growth.

“You’ve got to plan for the fu­ture. We’ve got to do it in a re­spon­si­ble way. And one of the ways that we have to do it is to re­duce our re­liance on debt to fund a lot of th­ese things. Our Light and Power should be used for that.”

Coun­cil­lor Pat Friesen also ex­pressed that she was not con­cerned with the city’s level of debt, bur rather the im­pact high lev­els of debt and low taxes would have on long term loan re­pay­ments.

“It could be­come quite a bur­den if you con­tinue to ac­cu­mu­late debt, you have to pay the in­ter­est on that debt, and it could be­come a prob­lem in the years to come.”

She noted that high lev­els of debt re­pay­ment in­ter­est would take away from their abil­ity to pay for in­fra­struc­ture and build­ing bet­ter fa­cil­i­ties. In­stead, the city should kept debt at a rea­son­able level, and bet­ter po­si­tioned for growth and re­plac­ing in­fra­struc­ture in the fu­ture.

Coun­cil­lor Ron Toles agreed that Coun­cil needs to change the way the city op­er­ates. As one of two first- term coun­cil mem­bers, Toles has a bet­ter ap­pre­ci­a­tion of the bud­get­ing and fi­nanc­ing of the city than he did be­fore join­ing coun­cil.

“My feel­ing of debt now is not nearly as fright­en­ing as it was maybe be­fore I be­came more knowl­edge­able this,” he said.

Toles ap­pre­ci­ated the doc­u­ment’s goal of en­hanc­ing the city’s abil­ity to gain and main­tain a com­pet­i­tive ad­van­tage over other com­mu­ni­ties.

“I think we need to change the way we’ve done things in the past. If we don’t change, we con­tinue to do things the way we are, debt is go­ing to con­tinue to grow. It has to. Or, things have to stop grow­ing. We ei­ther have to stop grow­ing or we have to stop bor­row­ing, and I don’t see good in ei­ther one of those. So if we don’t make that change now, we’re go­ing to con­tinue to add to our debt. I don’t see how we can stop grow­ing and build­ing. We’re a grow­ing com­mu­nity, a vi­brant com­mu­nity.”

“I for one am proud to be a part of a coun­cil that’s will­ing to say we need to change. The time to change is now and we can’t con­tinue to go the way we’re go­ing.”

Mayor Schafer said all coun­cil mem­bers are hop­ing to hear di­rectly from mu­nic­i­pal tax­pay­ers on the mat­ter in or­der to have an open dis­cus­sion on how to pro­ceed as they head into a new city bud­get year.

“One of the things that this dis­cus­sion, and that we want to have res­onat­ing out in the com­mu­nity is: a) get­ting to a point were our com­mu­nity knows that the rea­son why our debt is at a cer­tain level is be­cause we en­joy this in­cred­i­ble tax sit­u­a­tion. And one of the things that we’re look­ing at is sim­ply in­creas­ing the amount of tax rev­enue to get us com­pa­ra­ble.”

“We’re not even talk­ing about, and this re­port doesn’t men­tion match­ing other com­mu­ni­ties, it’s sim­ply talk­ing about end­ing the re­liance of this par­tic­u­lar sub­sidy. That would elim­i­nate a sig­nif­i­cant amount of debt that we have ac­cu­mu­lated.”

“We are in a very en­vi­able po­si­tion. We’ve got a very strong bal­ance sheet. We’re in very good shape. And I think this is a great dis­cus­sion to have mov­ing for­ward.”


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