Should we be worried about municipal debt escalating?
Regional taxpayers already owe a billion dollars –
Few of us love to talk about debt – that dreaded four-letter word – in our capital region of 378,000. There’s property taxes, utility bills, assets, operating costs and so on, but usually debt is little understood nor does it catch the public eye until it becomes unmanageable.
The Community Charter, the legislation governing municipal jurisdictions in BC, requires that an audited annual report must be prepared and made available to the public before June 30th each year. Reports providing information on the jurisdiction’s financial position, services and operations of the 13 municipalities, the Capital Regional District which includes the Capital Regional Housing Corp., and the Capital Regional Hospital District (CRHD) were recently released.
While some argue local debt is still manageable, the scale of accumulated debt has now caught public attention. Cumulative municipal debt in the Victoria region including the CRD, CRHD and the 13 municipalities as of Dec. 31, 2015 is a princely $989,380,426.
Let’s call it a billion dollars, since we’re already six months into 2016.
Context is important here as there are limitations to the raw numbers: The debts reflect the total liabilities and consolidated debt of the various jurisdiction including long-term debt for the year-end 2015. It does not reflect the wealth, assets, or ability of the jurisdiction to manage that debt. It does not reflect any population loss or tax base growth in a municipality (Four regional municipalities, including Saanich, actually saw their populations slightly decrease from 2011-15). Typically, larger jurisdictions can assume more debt, and smaller jurisdictions less, and debt repayment can be stretched to decades.
Most of the debt in the region has been assumed by the CRD ($425-million), the CRHD ($150.9-million), and the municipalities of Langford ($51.7-million), Saanich ($84.7-million), and the City of Victoria ($135.7-million).
Of note, the consolidated debt of the CRD has parabolically increased from $250.6-million in 2005 to $352.7-million in 2010, and is now $425-million at the end of Dec. 31, 2015 (Financial Statements, 2005, 2010, 2015). Some of the debt increase is attributable to this local government delivering more programs, the latest count is 210 across the region.
The consolidated debt includes operating and capital expenditures of the CRD’s and Capital Region Housing Authority’s (CRHA) budgets, now amounts to about 58 per cent of the total debt of the entire region.
Now we come to the parts that worry many taxpayers.
City of Victoria taxpayers will soon start taking on debt to pay for its share of the new $105-million bridge. The municipalities of Colwood, Oak Bay, Saanich, Victoria, Esquimalt, View Royal, Langford will start taking on their share of a $1-billion plus debt for sewage treatment system.
In both mega projects – of major concern with the sewer treatment project – the municipal governments will pay for cost overruns if the projects don’t come in on budget.
To date, about $70-million has been spent on the sewer treatment project with little progress on the project to date. The CRD Capital Expenditure Plan Bylaw projects expenditures to total $931,721,250 on sewer-related projects from 2016-20 (Bylaw No – 4082). That’s also nearly a billion dollars.
Of note, annual operating costs are unknown and undiscussed in the case of the $1-billion plus sewer treatment project. However, any high operating costs have the potential to dramatically impact the finances of the seven jurisdictions involved in the project.
Granted, a billion dollars in accumulated debt is a revealing (but imperfect) measure of municipal debt obligations. But keep in mind, the cost of carrying debt is also at historical lows, and interest rates will not be a bargain forever.
The bottom line: With regional debt and taxes set to balloon dramatically, the questions are critical, ‘How much will our debt load increase?’, ‘Which regional services can be integrated to save precious tax dollars?,‘ and ‘Can the debt be managed without burying the taxpayer?’
The Victoria regional debt clock is now ticking louder.
Stan Bartlett, Chairperson, Grumpy Taxpayer$ of Greater Victoria
CRD Financial Statements, 2005, 2010, 2015.
BC Stats, Regional and sub regional population estimates 2011-15,Table 3.
Annual Financial Statements Dec. 31, 2015, all 13 regional municipalities.
Capital Regional Hospital District, Financial Statement, Dec. 31, 2015.
CRD Capital Expenditure Plan Bylaw No – 4082, 2016-20.