City’s debt limit increases by $15M

The board’s local government committee decided that increasing the debt limit by only $15 million would provide the City with “sufficient room” to finance all of the projects the City could potentially undertake within the next five years. However, the committee recognized that the City may have “significant debt requirements” for projects in 2020.

“The Committee believes it would be prudent to consider an increased debt limit request to support these projects closer to when the additional debt may be required,” director Cathy Moberly wrote in a letter to the City.

The municipal debt limit has been likened to a personal line of credit, and the ceiling is the maximum amount the City could borrow. However, a debt limit increase doesn’t mean the City is borrowing more money or plans to – just that it can if it needs to.

As it stands, the City has only borrowed about a fifth of what is available. According to the City’s unaudited financial statements, as of Dec. 31, 2014, the City had about $12.7 million in outstanding external long-term debt. It will cost an estimated $2.3 million to service that debt in 2015.

In September 2014, the board informed the City that its $40 million debt limit was expiring and it would have to apply for a new debt limit.

The City looked at comparable municipalities’ debt limits and some of the “rules of thumb” applied for establishing debt limits, Day said. He said the City simply asked for $70 million, and there wasn’t a specific need the City needed the increase for at the time.

“But it just gives us that little bit of a cushion that, you know, then it gives the authority to council and the citizens of Prince Albert to borrow the money if and when we need to without having to go through the process of having to go to the municipal board each time,” Day said.

If the City needs to borrow funds in excess of the debt limit, it would need to provide information about the project it seeks to fund. The information would include the cost/benefit of the project, as well as where the revenues to pay for the project would come from.

Right now, the City has room to undertake projects using the debt available and won’t bring the City close to the $55 million debt limit, Day said.

“So, it would take a fairly big project for the City to have to go back to the Saskatchewan Municipal Board and have it reviewed. So, we’re OK with the level where it’s at right now.”

tjames@panow.com

On Twitter: @thiajames

by Thia James

City’s debt limit increases by $15M

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