City will hold a strategic planning session on corporate financing in the fall.
In a 11-3 vote, Calgary council shot down a motion at its June 23 meeting that would have seen city administration compile a report on the implications of raising the city’s debt servicing limits.
Currently, the debt servicing limit is at about 28 per cent, which is 80 per cent of the acceptable debt-servicing limit of 35 per cent determined by the Municipal Government Act (MGA).
Couns. Ward Sutherland and Andre Chabot sponsored the bid to have the city consider increasing its debt-servicing limit. Coun. Jim Stevenson was the third vote that was in favour of increasing the debt-servicing limit.
“The fact that we have self-imposed a further limitation ourselves to reduce that amount to 28 per cent is very prudent and cautious,” said Chabot. “However, the transfer of the funds on MSI (Municipal Sustainability Initiative) has been delayed and we have incurred some short-term debt.
“By virtue (of) paying down our debt, so rapidly over the next four years, it has limited our ability to take on any additional debt. “
Chabot mentioned that to be able to take on more debt could help the city with short-term projects and any emergent issues the city might face. Chabot mentioned raising the debt servicing limit can help with a project such as the Calgary Transit Green Line.
This notice of motion drew heavy fire from other councillors for different reasons.
Photo courtesy of Flickr user Duckie Monster
Coun. Peter Demong was not in favour of the motion because it has “the implication of changing the 80 per cent self-imposed limit.”
Similarly, Coun. Druh Farrell did not support the motion because she said it offered no compelling reason to change the current debt-servicing limit.
“We have a boom-bust economy so our debt strategy allows us some flexibility to spend when we need to, when opportunities arise or issues arise,” said Farrell. “It also gives us the flexibility to weather storms.
“It’s been mentioned that we are far below what a private corporation can take on as debt,” she continued. “We are not a private corporation, we’re not a business and we cannot increase our revenue source in the same way. Each capital project comes with operating and the city is not a banker.”
Coun. Evan Woolley viewed the effort to compile this report as a waste of time.
“I think we already know the answers to all of this here and I pretty much encourage my colleagues not to support this,” said Woolley.”I think it’s not smart.”
Ultimately, while the notice of motion was not successful the entire council agreed that it is necessary to hold a strategic session to talk about the city’s corporate finance situation, including a discussion about the debt-servicing limit. This session will take place in either September or October.