2006 Budget - Debt
Published January 4, 2006
Last December saw the passage of the Strathcona County 2006 Budget. A controversial part of the budget was the approval of significant additional borrowings to increase the overall debt to a projected 87.5 million dollars. In view of this Council's strong commitment to fiscal responsibility, I believe that a review of the different types of debt and their relative impacts upon the taxpayer may be in order.
A municipality's debt can be divided into roughly three categories: tax-supported debt, non tax-supported debt and utility debt. Tax-supported debt is very much like personal consumer debt. This is money borrowed to fund services desired by the municipality for which no direct financial return is expected. This might include recreation facilities and county buildings, for instance. One hundred percent of the principal and interest must be repaid out of the pockets of the taxpayer, whether or not he or she derives a direct benefit from these items. As might be expected, this type of debt is of great concern to those of us who pay taxes, so it is gratifying to be able to report that tax-supported debt has been further reduced in the current budget from 34.1 million dollars in 2005 to 33.7 million dollars in 2006. This is not a huge reduction; however, this trend of decline is anticipated to continue to at least 2010.
Non tax-supported debt is incurred for business reasons. The expectation is that this will be repaid by cash flow from an external source. Usually this is from developer levies and similar charges to be collected in the future to support development. The county borrows the money now to fund infrastructure such as roads, sewer and other services required for new development and repays with money collected as the development proceeds. While both interest and principal are in theory fully recoverable, the county still bears the risk should the developer default or the development not proceed to completion for whatever reason. This type of debt is a function of growth and therefore is unavoidable as long as growth continues. At an increase of 18.0 million dollars to 25.5 million dollars or 42%, this is the largest source of debt increase this year.
Utility supported debt pays for capital projects related to water and waste disposal. These are services paid for proportionally by users of the service through fees and charges, usually billed monthly. Increase this year is planned to be from 22.9 million dollars in 2005 to 28.3 million dollars in 2006. These costs reflect both growth and upgrading of existing infrastructure.
These types of debt have one thing in common in that they all fund capital projects. Strathcona County never uses debt financing to support operational expenses.
Alan Dunn
Councillor, Ward 6
780-464-8206
dunn@strathcona.ab.ca
Last updated: Wednesday, March 10, 2010
Page ID: 2061