Red Deer City council voted in favour of lowering its allowable debt limit to 75%.
Council’s former policy limits the debt level of the municipality to 90% of the maximum level established by the provincial regulation.
Councillor Tanya Handley presented a Notice of Motion on Monday stating the debt level of the City be amended to not exceed 75% of the maximum level established by the provincial regulation.
“Debt as a municipality is always something that I have been concerned about,” said Handley. “To me it’s just really about sending a message to the community that we are serious about financial leadership and we are concerned about debt and the use of debt in our municipality. It’s a good reminder to us that we have this limit and that we have to be careful when we use debt.
“We also wouldn’t be tying the hands of future councils if there happens to be a natural disaster or a major emergency where we did have to go into major debt to repair something – policies can be changed by a future council to do that so there is nothing to fear that we’re going to be stuck should an emergency occur.”
Originally, Handley was going to suggest the City revise its policy to a not exceed 80% of the maximum debt level, but after doing some research, she discovered reporting requirements with the Alberta Capital Finance Authority become more complex once debt reaches the 75% range.
“You have to actually get permission to exceed 75 per cent of the debt limit and there is quite a bit of administrative time and cost involved. If we can avoid all of that extra work for administration, it would make sense.”
She added the City’s debt limit was an issue during the election campaign and continues to be discussed among residents.
“Debit limit was one of the biggest things I heard during the campaign when I was running for election. There were many citizens that were concerned about rising debt in the municipality. That was what initially spurred this as well as my own concerns as well.”
As of the end of March the City’s debt was at $222 million – 44% of the allowable debt limit.
The City is projected to stay below the proposed 75% debt limit as per the 10-year capital plan. However, in 2024 it is anticipated the City will reach 70% of that allowable debt limit if the 10-year capital plan is fully implemented.
The province bases the amount of allowable debt on a municipality’s total revenues for the year. The City’s total revenues reach $330 million annually.
The province calculates an allowable debt limit by 1.5 times the total annual revenues.