Tuesday, March 23, 2010

Another day older and deeper in debt

Financial advisers will tell you there is good debt and bad debt. In essence good debt would be a mortgage to buy a home if you can afford it. Bad debt would be running up your credit cards on frivolous spending. The problem with debt is, whether it be good times or bad, it must be paid. So I am concerned about the prospect of the city enlarging on its debt capacity up to $400 million dollars (SP Mar. 23/10).

The city comptroller says there is a pretty solid revenue stream to service the debt, being gas tax, utility rates and assessment growth.

Last year after an extremely wet summer city administration reported low revenue from water sales and wanted an increase. Then when we received the last water/sewer increase it was supposedly a way to have people conserve on water. Now we see it is going to service debt.

Whenever a new area is introduced the city needs more money to develop it. I thought that infrastructure money for new development came from the sale of land from the previous development. I also thought that an expanded tax base meant more tax payers to share the load for services. However, it is the revenue stream for debt.

And recently the provincial government had to stay its contribution to the municipalities as a result of its budget woes. In reality the only solid revenue stream is property tax.

I am back to my mantra of wants and needs. We may need a new bridge and this debt may be a good debt. I'm not sure at these times of uncertainty that capital spending on wants, being public facilities, and the ensuing operating costs, is good debt. Perhaps this spending should be put on hold for now.

I like the idea of a proactive council. I appreciate vision. I also appreciate the consequences of excessive debt. I also appreciate common sense. We need balance - and it is a difficult act.

1 comment:

  1. Debt servicing was projected to be around $11 million for 2009 - increased from $4.5 million in 2007. That's about 4.3% of the total Operational Budget (according to the 2009 report).


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