City Council looking to change strategy away from debt financing to fund operations
A financial discussion paper was received by Swift Current City Council at their Dec. 9 meeting opening the topic of exploring an end to the city's strategy of debt financing in order to keep property taxes low.
Swift Current City Council recently 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 at the end of the year.
After incurring addition debt, the City is now exploring their current tax minimization model which utilizes debt to fund capital expenditures in order to provide higher service levels in the community.
"That's the reality even when somebody suggests why does Swift Current have higher debt levels than other communities our size, or why would we. We're not spending our money any differently. We're not spending our money frivolously. We're not investing in things that our community doesn't need or aren't essential. For the basic services that our residents require, but also for a high quality of life. We just don't have the cash-flow that other communities do," Mayor Jerrod Schafer said during Monday's Council meeting.
The financial strategy discussion paper looks at increased property taxes as a way to eliminate debt and provide a better revenue stream to fund the amenities, services and equipment necessary in the City.
"We hear from our public that they want no debt, or little debt, or there's concern about debt. That they want low taxes, and that's a demand, they don't want to see their taxes grow. But yet they want a high level of services. So as you can see those are three expectations that we face that create a very challenging environment," Schafer said. "I can't emphasize enough how good of a deal our residents are getting in this particular community compared to everywhere else. Now that's a great thing, and that's something that we've enjoyed for a long time, but it also poses a challenge for us as well."
"The reality of it is is part of the reason why our residents continue to enjoy such low taxes is because debt has been our tool to rely on to fund many of the capital projects that other communities do simply through cash flow or through their higher revenues."
All council members weighed in on the topic, voicing their unanimous support of reducing debt levels though higher revenue from property taxes.
Councillor Gord Budd admitted that the prevalent feeling from previous councils even a decade ago was to hold the line on tax increases, as the feeling was that even a one per cent property tax increase would not be acceptable to ratepayers. He admitted that the City has not benefited fully from utilizing the benefits of the Light and Power dividend for growth purposes.
"I feel it's important that we wean ourselves off the Light and Power dividend by increasing property taxes at a reasonable rate. The profits from Light and Power can be used to fund those projects in our community that not all taxpayers use," Budd said.
"The bottom line here folks, I believe that we need to see property taxes increase over the next six years to cover off our dependence on Light and Power, but we're still going to be among the lowest, if not the lowest place in Saskatchewan in terms of property tax."
And while Budd admits he may receive some criticism, Council does need to set the right direction for the financial future of the community.
"My thinking on this is this is the right thing to do, and we have to do it for today. But not even so much for today, but for the future of our City."
Councillor Ryan Plewis was concerned that Swift Current residents would read between the lines of the policy paper and wrongly presume that the city is in trouble with debt.
"I'm personally not troubled by our level of debt for the City. It's financed, it's funded. It's quite reasonable actually considering where we're at from a financial picture in terms of our sources of revenue, but whether we're going to fund things by debt or whether we're going to fund things by using the tax revenues," he said.
"I'm not personally troubled by our level of debt, but I am, and I believe that a number of us on council are concerned about our reliance on the need for using debt to finance the projects that we look at pursuing within this community," Plewis added.
"I like this report because I think it gives us a strategy or a plan for doing something about that concern that I have about our reliance on financing," he said. "I think that we need to decrease our reliance on taking debt to fund the things that make us a competitive place or makes Swift Current a great place to live and work and do business."
"Quite frankly it's not plausible for us to continue relying on debt financing to fund the things that we need to do that makes Swift Current a great place to live. The Light and Power dividend is, in my mind, the key to readjusting this imbalance that we're currently experiencing."
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