City borrowing and its effect on taxpayers

LETTERS

Over the last five plus decades, we have witnessed a number of incredible advancements with the way humans understand and interact with each other and the world around us. These advancements come in a variety of forms with technology being the most obvious, but medicine, social science and mathematics have also enlightened human kind.

Advancements in finance and the production of money from mortgages, bundled securities (structured finance) and derivatives along with some accounting standards that are questionable have arguably created a potential problem as evidenced by the 2008 financial crisis.

Recently city council announced a borrowing of $32 million for the distribution and improvement of the annual program to provide electrical connections. Basically the electric department borrowed $32 million. The money will be borrowed from the Alberta government via the ACFA. We the taxpayers are on the hook for paying for this borrowing (normal procedure); however, with each borrowing the cost of operating the city increases, ergo so do your property taxes and those little/big fees on your electric bill.

Over the past 20 years or more, City department surpluses from the electric department (and others) get transferred out and into an account called the Municipal Revenue Stabilization Reserve (MRSR). This procedure effectively zeros out the department from an accounting perspective, creating the same tax burden the following year, multiplied by whatever budgetary increases the city administration has built in.

By way of accounting, expenses like amortization and depreciation (non-cash expenses) are subtracted from the operations of the business unit (the electric department) creating huge cash-flow surplus that ultimately get diverted into the MRSR to fund (by way of loan) special-interest projects. The real atrocity is the fact that many of these “loans” are made with interest, meaning that we are loaning our own money to ourselves and paying interest on it (ever wonder why our operating costs grow at such an alarming rate?).

Maybe when council finally decides to hire a city manager, the one criteria that should be the most important is to hire one with a social conscience and not one who will attempt to extract as much money as they can from each and every taxpayer.

Blake Babki

Lethbridge