By Leah Murray

Concerns raised at Council over city debt limits

Mar 20, 2017 | 10:12 PM

MEDICINE HAT, AB — Some concerns were raised at Monday night’s City Council meeting about Medicine Hat’s current debt levels.

Council approved borrowing money to complete renovations on some city owned buildings including the Electric Distribution building and the Animal Pound And Rescue Centre building.

Those add to the city’s debt bringing the total to $304,020,459.25 or 49.68 per cent of the debt limit under the Municipal Government Act.

The debt limit is calculated by taking the yearly unaudited revenue and multiplying it by two, so the limit based on 2016 revenues is $611,964,000.00.

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However, there is also $205,992,740.00 in approved borrowing bylaws that have not been drawn.

If those bylaws were borrowed it would bring the total outstanding debt to $509,943,199.25 or 83.33 per cent of the debt limit.

Councillor Les Pearson said that is concerning to him.

“When you see 83% then it becomes a kind of issue for me,” he said.

With oil prices still hovering around or below the $50US per barrel mark Pearson said he’s worried the percentage of the debt limit could increase.

“In terms of the fact oil and gas is providing no revenue to our city, and our debt is calculated based on the revenues we’re making,” said Pearson.

City staff say commodity prices do affect the city revenues and in turn affect the debt limit.

If commodity prices improve, the debt limit will increase and that percentage will decrease.

Commissioner Brian Mastel said when factoring in the budget for the next two years, including predictions for oil being around $50US per barrel, he expects to see the debt limit rise, but doesn’t expect it will get close to 83 per cent.

“I would expect that we’ll be in the 60 per cent to 70 per cent range of drawn borrowing based on our debt limit calculation,” said Mastel.

Mayor Ted Clugston said some of the $205,992,740.00 in undrawn borrowing bylaws stem from projects previously approved and never done, or that came in under budget but were never rescinded.

“We’ve passed a lot of borrowing bylaws over the years that never get exercised, be they capital projects, be they roads that don’t get built, or different utility projects that we don’t follow through on,” he said.

“That [83 per cent] is if we executed every borrowing bylaw over the last ten years and we haven’t,” said Clugston. “So I always say that is not a real number.”

Clugston said he’s recommended city staff look into removing old borrowing bylaws to more accurately reflect the debt levels of the city.

“What we’ve talked to our staff about doing is rescinding all those borrowing bylaws to get those numbers back down.” said Clugston.