City of SC to fund 2018 capital projects with added borrowing
The City of Swift Current will use debt to fund some of the projects in the 2018 capital investment budget.
Councillors approved a motion at a regular council meeting on Aug. 27 to advise the public of council's intention to consider a borrowing bylaw for financing within general government and utility operations.
The borrowing bylaw will result in the creation of an additional $1,267,692 in debt. Kathy Hopfner, the City's General Manager of Corporate Services, said this borrowed amount is fully funded in the 2018 budget.
“When council worked on the 2018 capital budget, part of approving every project is it's determined how it's going to be paid for,” she said after the meeting. “Some projects will be paid for through surpluses in our utilities and other projects are paid for through debt. So it's determined at budget time. When council approves the budget, they also approve how they're paying for it.”
A $495,000 portion of the debt will be funded through solid waste utility revenue and $772,692 of the debt is covered by income received in the general government fund as a result of the 2018 tax increase.
“General government of $772,692 is funded through the tax increase that you received on your 2018 tax notice,” she said. “That one-time increase will make the interest and principal payments through the term of the debt.”
The borrowed money will be used to fund different projects in the City's 2018 capital budget. A portion will be used for the construction of a storm water retention pond and slope grading at the East landfill, as well as the construction of a scale house at this landfill site.
Another part of the borrowed money will be allocated to the general government portion of the budget for the purchase of an additional hydrovac truck and to fund the design of the new fire hall.
The City will repay debt over a 10 or 20-year period, depending on the useful life of an asset that is funded with borrowed money.
“Some of the assets that are funded through debt have a life expectancy more than 20 years, but that's the maximum term we'll take out on debt,” she explained. “The debt that's funded through 10 years is our chargeable equipment, which has a life expectancy of 10 years.”
In the document that was presented to council it is mentioned that if debt is used to finance infrastructure investments, it will distribute the cost of long-term assets across generations of residents who will use these assets.
“It's a good tool to use to pay for assets,” she said. “It's not a lot different than when you take out a mortgage on your home. You pay for your home over a portion of the period that you live in your home.”
The document also provided details to councillors about the City's current debt situation. The principal amount of debt for general government and utility operations was $64,383,097 on Dec. 31, 2017.
Despite taking on this additional debt of over $1.2 million in 2018, the City will still be reducing its outstanding debt by the end of 2018. The general government and utility operations debt is scheduled to decrease by an amount of $3,599,027 and the outstanding debt will be $60,784,070 on Dec. 31, 2018.
“In this particular year we paid off more debt than what we took out,” she said. “Annually we have debt payments, principal payments of around $4 million. So because we paid down our debt by $4 million and took out $1.2 million and we're taking the debt out later in the year, our debt will decrease by $3.5 million.”
Even though the City's 2018 capital budget was already approved at the start of the year, it only takes out the additional debt of $1.2 million when the work is done.
“We take the debt out when we start actually spending the money,” she said. “So the capital budget is approved early in the year, but a lot of the capital projects don't get going until the middle of the year. So we don't take out that debt in January if we're not going to use it until August or September.”
The City has scheduled a special council meeting for Sept. 19 to give three readings to the borrowing bylaw.