Taking another step toward budget deliberations, the city’s elected officials were provided with an update on city debt and reserve funding on Monday.
A report on city debt and reserve funding was presented to city council, with city finance director Joe Day clarifying things for the new council.
Although city reserve funds totalled almost $14.4 million at the close of last year on paper, only $4.76 million is currently funding the reserves.
The shortfall between the on-paper reserve fund amount and reserve bank account total came as a result of the city borrowing against itself, Day explained.
“If everything works in the end, we should have enough money in that general bank account to completely fund all those reserves,” he told council.
Although the city has historically held only one bank account, creating one lump sum from which the city is able to borrow from, a separate bank account for city reserves was created in July.
By creating a separate bank account, reserve funds will be compartmentalized, adding a layer of protection from borrowing, Day explained.
Although only $4.76 million of the $14.4 million in reserve funding is available, Day noted after the meeting that this is common practice among municipalities.
“It’s very unlikely that we’re going to spend all of the reserve cash at one time,” he said of the shortfall.
With the separate bank account, reserve funds will be more easily accessed, and available at a moment’s notice.
“I think that would be a much more transparent exercise,” Coun. Lee Atkinson said during Monday’s meeting.
Coun. Don Cody, who requested administration prepare the report, pledged prior to the meeting that he would get to the bottom of the city’s reserves -- something he followed through on during Monday’s meeting by asking a series of questions.
“We never know when the funds you receive are going to dry up on you,” he said before the meeting, outlining the importance of a strong city reserves system.
I think that would be a much more transparent exercise. - Coun. Lee Atkinson, on the city creating a separate bank account for reserves
“Taxation, of course, will continue, but certainly external funds could dry up.”
“We’re going to continue on, I hope, putting more money away in these reserves so that should there become a time where you want to do something that’s quite important and totally necessary, that you have the money to do it.”
The city’s external debt, as of Nov. 1, totalled $16.05 million, though sometime this month, Danny’s Golf Shop is set to have the final $7,975 of its debt paid off via golf course user fees.
This leaves external debt spread between five lenders, most of which are classified under what Cody refers to as “not bad” debt, and a total debt load significantly shy of the city’s total allowable $40 million.
“If you have debt in the utilities, that isn’t bad debt, because the utilities basically pay for that debt, but if you have debt for other things that don’t pay you, where you have to pay, then that’s not good debt,” he said.
A loan of about $613,000 is set to be paid by 2016 for the city’s new parking meters, paid for by ticket revenue.
About $4.3 million of debt for the development of the west hill area is set to be refinanced next year, with land sales covering 90 per cent of the cost, and the city’s general fund covering the remaining 10 per cent.
Almost $62,000 of the debt set to be paid by 2015 is technically a lease price for exercise equipment at the Alfred Jenkins Fieldhouse, paid for through facility revenues.
Two large chunks of debt are to be paid for through user fees, including $6.75 million for water treatment plant upgrades and $4.29 million for the pollution control centre.