City moves ahead with new policy to manage debt
By Joel Wittnebel/The Oshawa Express
A new approach to the city’s debt management practices is set to bring a collection of city policies under one roof in order to make spending and saving decisions much easier moving forward.
During council’s final regular meeting ahead of summer recess, councillors approved a new debt management policy, which brings several of the city’s pre-existing policies concerning debt into one codified document.
The new policy manages all forms of city debt, and the rules councillors must follow when it comes to making spending decisions. Many of these policies are also mandated by the province under the Municipal Act.
Included among these polices are the limits on the amount of debt the city is able to hold at one time, which stipulates the principle and interest payments on the city’s debt can not exceed 25 per cent of the city’s source revenues (which includes government grants, development charges, and land sales). The city also has a limit set for its internal debt, with the payment amounts not to exceed 15 per cent of taxation revenues.
The new policy also deals with the terms surrounding short-term and long-term debt, and the particular items the city is allowed to issue debt for, which include: infrastructure, programs and facilities, and “intergenerational projects” which will see future generations paying for the debt through their property taxes.
As it stands, the city is looking at substantial debt payments over the coming years. In terms of external debt, at the end of 2017 the city owed approximately $79.2 million, with main items being dollars owing for the construction of the Tribute Communities Centre, UOIT, the redevelopment of 199 Wentworth Street East for the Consolidated Operations Depot, and most recently, the 2017 decision to debenture $8.4 million to convert the city’s streetlights to LED. For internal debt, the end of 2017 saw approximately $13.7 million still owing for items like the city hall rejuvenation project, Fire Hall 6, and the runway redevelopment at the Oshawa Executive Airport.
With that said, according to data from the city, large gains have been made in recent years when it comes to paying down existing debts. Over the last four years, the city has managed to pay down approximately $26 million in principle payments and reduce its internal debt by more than $10 million. At the same time, the city has managed approximately $105 million in infrastructure investments and poured nearly $20 million into reserves.
Following the new debt policy will prove critical in the areas of reserves and infrastructure in the coming years, as the city stares down an infrastructure deficit of approximately $448 million. As well, a previous report from Stephanie Sinnott, the city’s commissioner of finance, noted that without strict adherence to pouring money into reserves, the city’s capital reserves could sink to $100 million in debt by 2026.
The new policy was welcomed by councillors on the city’s Finance Committee, who also praised the city’s recent efforts to pay down its debts.
“These numbers are very impressive in my opinion,” says Councillor John Shields. “I think it’s tremendously important that we continue down this path of paying down debt the city was previously burdened with, and any new debt is done so in a responsible way.”