City of Swift Current adding $14.9 million in debt

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City of Swift Current adding $14.9 million in debt

Swift Current City Council has approved a motion to borrow an additional $14.99 million to pay for a series of capital investments and make payments to the RM of Swift Current following the Municipal Boundary Committee annexation decision earlier this year.

With the City beginning the year owing $61.3 million in outstanding debt, and with $3.27 million to be repaid this year, Swift Current's overall debt level will sit at $73 million.

During Monday's City Council meeting, City administration explained they are not concerned with the level of debt, as a large portion of the debt is fully funded, and the remaining debt level is being repaid over  terms of five, 10 and 20 years as a method to better fund long lived assets.

Mayor Jerrod Schafer said the need to add just shy of $15 million in debt results from Swift Current's low taxation rate.

"One of the discussions that we have to have as a community, because we always have this debate about tax increases versus debt, is do we want to be a community that has a little bit higher taxes and therefore significantly less debt. Or do we want to be a community that has a little bit more debt because we rely on having such low taxes. And that's an important question for our residents to start debating," Schafer said following Monday's council meeting.

He noted council was comfortable with approaching the city's existing $75 million debt level.

"Very comfortable. There's no risk in any of that to our community. The reality of it is is we're fortunate," Schafer said. "The main benefit of the tax situation that we have is we are very affordable. A lot of the investments we've made are investments that are recoverable."

"The limit isn't as much. I think more than anything it's the ability to make the payments, and obviously we're very secure in that regard."

Administration highlighted that a large portion of the existing debt is fully funded. The City had borrowed $22.7 million to fund a new Waste Water Treatment Plan and expand the Water Treatment Plant, but that entire debt amount will be repaid through customer water rates. An approved series of increases to city water rates have been approved in order to repay this outstanding debt. Swift Current also made a commitment to fund $3.4 million in debt for the Cypress Regional Hospital, and the remaining funds owed will be paid through the continuation of an existing annual hospital levy.

In order to meet the growth demands of the community, the city's Property Development Fund borrowed $14.3 million. This debt total is being repaid through property purchases on the developed properties in the Highland, Saskatchewan Valley Springs and Munroe Industrial sub divisions. Interest payments on this debt have been made through the Saskatchewan Infrastructure Growth Initiative, a program which has saved the City $887,000 in interest costs since 2008.

Part of the existing $61.3 million in debt helped pay for infrastructure investments in relocating City Hall and the Swift Current Museum, along with expansion of the iPlex and the upgrade to the Fairview Arena.

The new borrowing will include $11.8 million to complete Swift Current's 2012/2013 capital infrastructure investment budget. This includes $3.69 million for transportation network projects, $1.8 million in equipment purchases, $1.68 million in outdoor facility improvements, and $1.1 million in facility improvements. Thee is also $1.5 million in additional borrowing for the Water/Wastewater Utility, plus $834,000 for the solid waste utility.

Schafer argued that because of Swift Current tax advantage, they have to take on debt in order to keep taxes low.

"The reason why we have more debt is because we have less revenue. The way that you reduce debt, or not become so dependent on debt to build your community out, is to have more revenue," he said.

The City of Swift Current's 2013 budget shows that the city was expecting to generate approximately $9.8 million in revenue through taxation, compared to $19.5 million in taxation collected by the City of Yorkton and $15.6 million generated by taxes in North Battleford.

"As we often talk about, and what I think we really have to start focussing on is taxes in the City of Swift Current are significantly cheaper than they are in any other community in this province, and it's a very big reason why we've accumulated debt. As I've said, our revenues are significantly less than the City of Yorkton, and if you take into account that difference of about $4 million a year, over the last 10 years, if we had that revenue and kept up with the same services residents demanded, our debt would be about half of what it is today."

Schafer noted that a direct comparison to Yorkton is an easy comparison because of the nearly identical size of communities.

"When illustrating the points that we're trying to make, the information's pretty accurate and the math is pretty simple and straight forward."

Schafer explained Swift Current's affordable taxation advantage will not disappear even with the city now needed to pay off more debt.

"I understand the percentage shock that our residents and businesses have heard over the last number of years when we've had some significant increases. But in relative terms, our numbers are significantly short of what they are in communities. If our tax increase matched, percentage wise, what the City of Yorkton was, we'd only generate maybe half of the revenue that they're generating to fund the same amount of services that our residents are demanding," he said.

"So we're still very affordable by a long shot. In fact our taxes could increase a lot and we'd still be the most affordable city in the province. That's not necessarily the goal."

He noted Swift Current is faced with having to provide the same level of service to a growing amount of citizens and a physically expanding community.

"Very bluntly, the greatest feedback that we've heard from residents the last number of years is a demand for services and a demand for growth. I think our residents want to see us continuing to invest in property development, and continue to invest in things like our water and wastewater treatment plants for both environmental and health reasons. I think they appreciate the type of facilities that we have and whatnot.

"But people aren't O.K. with mediocre snow removal. And people don't want to drive around on potholes. And we have to continue to keep up with those demands. And if we're going to be asked to take in such significantly less revenue than other communities, then it's services that would suffer."

The City of Swift Current is also borrowing $3.17 million to fund the compensation to be payed to the RM of Swift Current following the Municipal Boundary Committee's boundary alteration decision. Swift Current is required to pay $453,000 annually for the next seven years to the RM to complete this compensation. The City will be repaying this debt over a 15 year period, utilizing the taxation revenues received from the annexed lands.

Swift Current's Chief Financial Officer Tim Marcus noted that despite the debt, the City is in a good position as they move towards their future plans.

"I'll say, to maintain what we have, it's the only position we can be in. Heading into any thing that's in our future plans, we'll have to determine how we're going to deal with those at the time they come forward. But, at the end of the day, everything that we have currently will be funded through a revenue stream that's directed towards it. So that it's not like there'd be some shortfall going forward."

Organizations: Swift Current City Council, City of Swift Current

Geographic location: Swift Current, Yorkton, North Battleford

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  • Lynn Chipley
    March 21, 2014 - 15:18

    I am a former Councilor with the City of Estevan. We chose to travel down that dangerous road of adding debt and holding the line on taxes. We bragged about having some of the lowest residential and commercial property taxes in the province. The result is a City that is now playing a tough game of catch up, has reached their debt ceiling and is increasing user fees and reducing services (or finding efficiencies) to stay afloat. We are all experiencing growth pressures and demands from our taxpayers for a certain level of services. Don't think for a moment that some of the so called "wants" aren't really needs. Our young generation is highly educated, and often well paid. They are looking for a a community that provides a great quality of life as they embark on their careers. As communities, we have create opportunities for recreation and leisure that meets those demands or they will choose to live in the larger cities that have more to offer. As they say, pay now or pay later. There always comes a time of reckoning. It would seem for both communities, the time is now. Lynn Chipley Century 21 Border Real Estate Service Estevan, SK.

  • Bert
    November 02, 2013 - 14:58

    Yorkton,Yorkton,Yorkton ,,, Give it a break Mr. Mayor. Yes maybe their taxes are higher but look at their city! Streets are well maintained as well as the rest of the city. Unlike our sorry excuse for for a city. I don't think anyone has a problem with the odd tax hike but as Craig mentioned, you guy's spend it on wants instead of needs. I think it should be mandatory from this point on that every city counsel member be able to balance their own check-book before running for council.

  • Craig
    November 01, 2013 - 14:07

    Or the mayor could go with the little used third option which is cut costs which means less of a tax hit each year and less debt. Of course that means that all those "wants" need to be cut back so the "needs" can be taken care of first. I'm sure the majority of tax payers would have preferred seeing more street repairs instead of a running track that very few will ever use.