Long-term Debt Limits in Saskatchewan - Nipawin

THE POLICY SHOP 

Long-term Debt Limits in Saskatchewan 

CHALLENGES AND OPPORTUNITIES 

Kristopher Schmaltz, Sara McPhee-Knowles, Travis Reynolds, 

Cody Sharpe, Mike Veltri & Andrew Coffin 

photo courtesy of BriYYZ on flickr.com

The Policy Shop is a student-managed consulting firm run by the Johnson-Shoyama Graduate Students’ 

Association at the University of Saskatchewan. Graduate student volunteers deliver research and analytic 

services to non-profits and charities on a pro-bono basis, which allows those organizations to receive policy 

expertise they would not otherwise have access to. At the same time, students build practical policy skills 

and gain valuable hands-on experience. This project was the first completed by the Policy Shop. It was 

presented to SUMA in June 2012.

Executive Summary 

This report explains the policies and processes that 

comprise debt regulation of urban governments. Initially, 

the report was organized around answering the question 

of why the utilities-based debt is included in the debt-limit 

calculation. Analyzing the policy and speaking to municipal 

stakeholders, made it clear that municipal concerns about 

debt-limits are much broader in nature. 

To gain a thorough understanding of the municipal 

perspective, a series of in-depth interviews were completed 

with municipal administrators, mayors, and senior staff. In 

addition, a survey was sent to members of SUMA to provide 

the research team with a larger sample, allowing for more 

reliable generalizations. 

The current policy on debt-limits is as follows. Municipal 

Affairs regulates municipal debt through the Saskatchewan 

Municipal Board (SMB). The formula bases debt-limits 

on municipal revenues. Some urban governments have 

suggested that utilities-based debt should be excluded from 

the formula; since utilities are funded through user fees, they 

are self-funding and do not need to be regulated by the SMB. 

The SMB’s perspective is that they need to include utilitiesbased 

debt in the formula because they include revenue 

from utilities. Moreover, by including utilities-based debt in 

the formula, the SMB is better able to monitor municipal 

finances and ensure sustainability. Many municipalities 

believe that by excluding utilities-debt from the formula, they 

would have greater flexibility to access debt. In practice, it 

seems that the SMB is able to provide that flexibility so long 

as the municipality has a sustainable business plan. There are, 

however, a number of other important policy and process 

issues related to municipal debt among stakeholders: 

• n Policy Clarity: Urban governments are not clear on why 

the policy is the way it is, how it functions, and what they can 

expect from the province. There seems to be a lot of anxiety 

around debt-limits because urban governments are not 

convinced that they will be able to access sufficient debt in 

the future. 

• n Debt Capacity for Growth: Many municipalities do not 

have adequate debt capacity to accommodate the costs of 

growth. In many cases, municipalities rely heavily on grants. 

Moreover, they are experiencing an infrastructure deficit 

in key areas such as water and sewer, and roads. Many are 

concerned that without grants, they will not be able to 

maintain and upgrade key infrastructure, particularly as 

other levels of government change regulations and increase 

standards. 

• n Lack of Flexibility: Many respondents were convinced 

that the current regulatory environment is inflexible, and 

that municipalities are missing out on opportunities to take 

advantage of more flexible, lower-cost debt options. 

• n Process Issues: Many respondents believed that processes 

of the SMB could be improved to serve them better, such as 

quicker turn-around times. 

In addition to diagnosing some of the key concerns, 

the report provides an analysis of comparative policies 

on debt-regulation for municipalities in the provinces of 

Alberta, Manitoba, and Nova Scotia. The most interesting 

policy option was found in Alberta where utility services are 

often delivered through regionalized bodies called Regional 

Service Commissions (RSC). These organizations are able 

to take on debt that is separate from municipal debt, and 

are able to reduce utility costs for municipalities, as well 

as provide higher quality services by operating regionally. 

The applicability of findings in other provinces was found 

to be minimal to moderate, with the most useful example 

of innovation being the RSC, which could potentially be 

emulated in Saskatchewan. In fact, there are examples of 

regional municipal service-delivery partnerships taking place 

in Saskatchewan around water. 

The following recommendations were included in the 

report, and are for SUMA to consider in determining its stance 

in negotiations with the province around policy and program 

changes that would serve urban municipalities, which 

currently have to respond to major challenges created by 

a growing economy. 

Key Issues 

Recommendations 

We recommend that SUMA consider the following 

alternatives to rectify the above policy and process issues: 

1) Debt Capacity Issues 

A. Work with the SMB to Develop Guidelines for 

Municipalities: Municipalities were very concerned about 

the lack of clarity on debt limit policy, and would like to see 

clear guidelines to help them plan for their interactions with 

the SMB. 

B. Request that the Province Develop a More Substantive 

Policy: Many municipalities consider the current debt-limit 

policy to be a “one-size-fits-all” approach. It is recommended 

that the province be encouraged to consider ways in which 

it could re-design debt limit policy so that municipalities of 

greater capacity are given more freedom, while still providing 

oversight and assistance to those municipalities that need it. 

C. Request that the Province Consider Removing Utilities 

Debt from Calculation: This option should be considered. It 

is unlikely that this alone would address the issues above, but 

it may, in some cases, provide additional flexibility to some 

municipalities. 

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D. Advocate for a Province-wide Solution to Infrastructure 

Needs: Infrastructure challenges are the single most 

important issue driving the concern over debt-limits, and a 

provincial strategy around infrastructure may alleviate some 

of these concerns. 

2) Infrastructure Challenges 

A. Survey Members about Interest in Regional Service 

Delivery Options: SUMA should survey members to 

determine if there is an interest in creating partnerships 

around service delivery. 

B. Communicate with Municipal Partners: Organizations 

such as SARM and other municipal partners should be 

approached about their interest in an initiative to increase 

regionalized service delivery. 

C. Approach Province about Funding: If there is 

an appetite for this, SUMA and interested partners should 

approach the provincial and federal governments about 

targeted funding for setting up and implementing regional 

service delivery groups. It is clear from our research that 

regional service delivery arrangements require funding 

to be developed. 

3) Process Challenges 

A. Approach SMB about reviewing borrowing options: 

Municipalities have suggested that they are missing out 

on short-term borrowing options that would decrease 

interest costs. SUMA should request that the SMB examine its 

current policies to determine if this is the case, and if so, 

if changes could be made to increase flexibility and lower 

costs for municipalities. 

B. Legislated Processing Times: The SMB should institute 

maximum application turn-around times. 

C. Review Application Process: It was noted by the SMB 

that processing times are often lengthy due to incomplete 

applications. The application process should be reviewed 

to determine the reason for this so that it may be resolved 

through process changes, building municipal capacity, or both. 

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Introduction 

In Saskatchewan, many municipalities are taking on 

debt to finance the costs associated with development 

and a growing provincial economy. One issue that has 

recently become more important for urban municipalities 

in Saskatchewan is the legislation surrounding municipal 

long-term debt. At its 107th Annual Convention, SUMA 

passed a resolution to work with the Ministry of Municipal 

Affairs to initiate a review of the criteria for establishing longterm 

debt limits. This report is an analysis of long-term-debt 

legislation in Saskatchewan, as well as a stakeholder analysis 

of the issues and concerns surrounding this policy. The report 

contains four main sections: 

1. An analysis of municipal long-term debt legislation in 

Saskatchewan: This section examines the legislation governing 

municipal long-term debt in the province of Saskatchewan. 

2. A stakeholder analysis: To gain an adequate 

understanding of the perspective of municipalities on longterm 

debt policy, a stakeholder consultation and analysis 

was performed utilizing a survey and a number of interviews. 

Several urban governments were interviewed, and over 100 

were surveyed. The purpose of this section is to construct 

a definition of the problems that municipalities are facing 

with regard to financial capacity and long-term debt issues. 

3. A comparative perspective on long-term debt policy: 

This section provides a comparative assessment of 

the policies and regulations surrounding municipal longterm 

debt in other provinces. The purpose of this section is 

to provide examples of alternative policies used elsewhere 

that could inform discussions on potential modifications to 

Saskatchewan policies. 

4. Recommendations: This section provides some 

recommendations on how policies and processes might 

be improved. 

An Overview of Municipal Borrowing 

Municipal expenses are generally funded in two ways: 

internal and external revenue sources. Internal revenue 

sources include: operating revenues; earmarked taxes, 

reserves and reserve funds, special charges (improvement 

charges or levies, lot levies, and other special fees), and 

development charges. External revenue sources fall into 

two basic categories: grants and borrowing. Grants are 

transfers from the provincial or federal levels of government. 

Borrowing is when the municipality accesses capital through 

borrowing arrangements, and this practice has become 

much more common as municipalities are expected to 

deliver a greater level of services (Kitchen 2002, 193–202). 

Municipal Borrowing: 

Short-term Borrowing: 

Short-term borrowing can be used to finance capital 

expenditures or cover short-term deficits in general operating 

budgets (Kitchen 2002, 202). 

Long-term Borrowing: 

Long-term borrowing is used for capital expenditures 

only, and “is justified if one can reasonably expect the benefits 

from the project to fall on future users, so that the financing 

term will match the asset’s lifespan. The project is financed 

by borrowed funds and the principle and interest charges are 

repaid out of future operating revenues. This policy attempts 

to make sure that future beneficiaries are also those who 

bear the costs” (Kitchen 2002, 202). Borrowing is typically 

controlled by provincial regulations. The reason for provincial 

limits being placed on municipalities is that “municipalities 

are creatures of the province and the provinces do not wish 

to be responsible for unlimited municipal borrowing and 

possible repayment of municipal debt” (Kitchen 2002, 202). 

Borrowing is controlled through regulations such as those 

that limit borrowing to: 

• n Capital projects 

• n Tax payer approved debt 

• n Debt approved by provincial regulatory body 

• n A specified percentage of revenue for financing debt 

• n Limiting borrowing to a provincially controlled 

“municipal fund” (Kitchen 2002, 202–203) 

Every province, with the exception of Ontario, makes use 

of a provincially-organized body that assists municipalities 

with undertaking long-term borrowing. In these provinces, 

municipalities “apply for funds through the province-wide 

authority which totals up all of the requests for local funds 

and issues long-term debentures against the authority itself. 

. . When the authority receives the proceeds from the sale of 

the debentures, it distributes the funds among the requesting 

municipalities, usually on the basis of a loan agreement with 

the municipality” (Kitchen 2002, 203). 

Decisions on financing instruments, whether to borrow 

in the short-term or long-term, and whether to take 

on debt of any kind are largely made based on the needs 

of the municipality, taking into account financial capacity, 

interest-rates, level of growth, and other factors. Many 

municipalities in Saskatchewan are experiencing growth, 

and thus are making large investments in major capital 

projects such as recreational facilities, sub-division 

expansions, water and sewer, waste disposal, etc. 

With relatively low interest rates, coupled with the recent 

availability of federal and provincial stimulus funding that 

provided matched funding for infrastructure projects, 

municipalities in the province have been increasing their 

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long-term debt to take advantage of these opportunities. 

Municipalities are also having to deal with aging 

infrastructure and are looking for additional financial 

capacity to maintain and upgrade their infrastructure. 

Constitutional Background 

A few points of constitutional background 

are important for framing the relationship between 

municipalities and the federal and provincial governments. 

The municipalities are “creatures” of the provinces; all 

municipal powers are conferred by provincial legislation. 

This has two important implications: 

• n Firstly, municipal powers cannot exceed those of 

the provinces, an issue that has become more pressing 

as certain large, metropolitan cities’ populations have 

far exceeded that of the smaller provinces. 

• n Secondly, municipalities cannot introduce bylaws 

that intrude into areas of exclusive federal jurisdiction 

(Stefaniuk 2007, 54). 

A further important point, now contained 

in the Interpretation Act, is that federal and provincial 

governments are not bound to comply with municipal 

bylaws, although they will generally make efforts to do 

so as a means of ensuring positive relations. Municipalities, 

however, are bound to comply with all federal and provincial 

legislation (Stefaniuk 2007). 

Municipalities are in the difficult position of having 

to provide basic services to urban residents, without having 

the autonomy to do a number of things, such as increase their 

debt thresholds without permission from the province. Urban 

governments vary in size and capacity, and some of these 

governments in Saskatchewan have voiced concerns that 

the current policy is not meeting their needs. It is not 

plausible, nor constitutionally possible, for the province to stop 

regulating municipal debt, and so it is essential that the policies 

and processes around debt-limits be designed to meet the 

needs of municipalities within these jurisdictional restrictions. 

Current Saskatchewan Policy 

Summary 

Debt limits in Saskatchewan are regulated by both 

legislation, and by an administrative body called the 

Saskatchewan Municipal Board (SMB). While debt limits in 

Saskatchewan are legislated, municipalities are expected 

to work very closely with the SMB to establish debt-limits 

consistent with their operational plans. Thus, many of the 

decisions around debt-limits are ad hoc and depend upon 

the ability of the municipality to work with the SMB to 

establish adequate financial plans. 

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Legislation and Regulations 

In Saskatchewan, three pieces of legislation and the 

Saskatchewan Municipal Board form the legislative foundation 

for long-term debt limits. Municipalities in Saskatchewan are 

governed by one of three pieces of legislation, depending on 

the municipality’s particular characteristics: 

1. The Cities Act: governs municipalities with populations 

greater than 5,000. 

2. The Municipalities Act: governs towns, villages, 

and rural municipalities. 

Populations range from: 

• n Towns: generally range from 500 to 5,000. 

• n Villages and resort villages: populations under 500. 

• n Rural municipalities: established on the basis of area, 

not population, and include any unincorporated 

communities (hamlets and organized hamlets) that fall 

within their boundaries. 

3. The Northern Municipalities Act, 2010: governs towns, 

villages, and hamlets and other unincorporated northern 

settlements located in northern Saskatchewan. 

These pieces of legislation also spell out the requirements 

for long-term debt limits. For the purposes of this report, we 

will focus on urban governments regulated by the Cities Act 

and the Municipalities Act. Under the Cities Act, debt limits 

are determined by the Saskatchewan Municipal Board (The 

Province of Saskatchewan 2002). The board is responsible for 

reviewing applications and establishing the debt limits for 

cities, which are renewed every three years. If a city wishes to 

have a debt limit established, or its current limit exceeded, the 

SMB requires a resolution or bylaw be passed by city council 

indicating the size of the debt limit desired, or the amount of 

excess borrowing. As per the Municipalities Act, a municipality’s 

debt limit is equal to the total amount of own-source revenue 

for the previous year (The Province of Saskatchewan 2005). 

Determining debt limits falls under the jurisdiction of 

the Saskatchewan Municipal Board, which was established 

on October 1st, 1988. The SMB’s mandate is to decide on 

regulatory and judicial issues surrounding local authorities, 

including municipalities and school boards. The regulatory 

function of the SMB is to review debt obligations and provide 

oversight, particularly with respect to the financial health of 

municipalities. The Board’s judicial function is to adjudicate, 

at the provincial level, appeals from the general public in 

municipal matters relating to property tax, assessments, 

planning and development issues, and municipal orders 

(for example, property maintenance orders). Specific to 

municipal debt, the SMB reviews local authorities’ long term 

debt applications, which are subject to approval. This review 

process is intended to ensure the municipality’s financial 

stability, which provides assurance to taxpayers and lenders 

(Saskatchewan Municipal Board).

Within the SMB, the Local Government Committee is 

responsible for the review and approval of a number specific 

issues. Borrowing by a town, village, resort village, or rural 

municipality must be approved if it: 

• n causes the municipality to exceed its debt limit; 

• n is not repayable within a three year term; or 

• n is secured by a debenture issue. 

Also subject to approval are cases where the above 

municipal governments: 

• n lend money or guarantee a loan in an amount that 

causes the municipality to exceed its debt limit; 

• n enter into an agreement to purchase or lease capital 

property, if the term exceed five years; or 

• n share in the operating losses of a service, facility 

or project, if the term exceeds five years. 

In addition to this, the SMB is also responsible for approving: 

• n water and sewer utility rates for towns, villages, resort 

villages, rural municipalities and northern municipalities; 

• n investments made by the above local governments in 

certain securities not listed in the Municipalities Act; and 

• n local improvement projects pursuant to the Local 

Improvements Act, 1993. 

Finally, the SMB has the general authority to inquire 

into the financial, and other, affairs of a city, urban, or rural 

municipality when the local authority’s financial position 

warrants such an action. 

Challenges and Concerns 

To identify challenges and areas of concern among 

urban governments regarding Long-Term Debt (LTD) policy, a 

number of interviews were conducted with six municipalities, 

which will be identified here as Municipalities A, B, C, D, E and 

F, a representative from the SMB, and representatives from 

Municipal Affairs. 

The first municipality, Municipality A, indicated that a 

previous provincial government program, the Saskatchewan 

Infrastructure Growth Initiative, was very helpful for 

municipalities experiencing infrastructure needs related to 

growth. This municipality was experiencing increased costs 

due to a growing population, but was limiting risk by building 

smaller subdivisions to account for peaks and valleys in 

growth. A larger city, Municipality B, specifically mentioned 

cash-flow issues due to high growth in four sectors around 

the city all at once. However, this municipality indicated 

that they would not be interested in borrowing beyond the 

debt limit because of credit rating concerns. Specifically, 

the representatives mentioned developing innovative 

opportunities for revenue to lessen the need for additional 

debt. In particular, this municipality mentioned focusing 

on mill rate supported debt, rather than debt supported by 

federal gas taxes or utility rates, since mill rate supported debt 

is the prime concern for the city’s taxpayers. 

Municipality C noted that they were experiencing 

exceptional growth in both population and business, and 

that debt limits had held back their potential for growth. This 

municipality’s debt has increased significantly in the last ten 

years, in part due to a lack of provincial funding. Two projects 

have contributed to the debt limit cap: a water treatment 

plant and a health centre, even though these projects are 

both fully funded through own-source revenues. The water 

treatment plant is funded through utility rates and the health 

centre from the leases paid by medical professionals, such 

as dentists and optometrists. One recommendation from 

this municipality was to remove projects funded through 

own-source revenues from the debt limit calculation. This 

recommendation was also echoed by Municipality F; these 

officials felt that the current system is limiting, and would 

appreciate more clarity from the province as to how ownsource 

revenue is currently used in calculations. 

The final municipality we interviewed, Municipality F, is 

experiencing major resource related growth. This municipality 

has seen its debt level double in recent years. The municipal 

officials were most concerned about the potential for debtlimits 

to constrain future growth. Currently, the municipality 

is able to access sufficient capital through debt arrangements 

approved by the SMB. However, there is a concern that the 

SMB could inhibit growth by not permitting extensions in 

the future. The municipality expressed an explicit desire to be 

treated more autonomously and given more flexibility. For 

example, in the future there will likely be more infrastructure 

spending programs from the federal government, and 

the municipality needs to be ready to match those funds 

when they come available, otherwise it might miss out on 

an important opportunity. This point was also reflected 

by Municipality A. In terms of utility-related debt, it was 

suggested that perhaps the SMB should classify utility debt 

separately from regular debt; this would give the municipality 

more flexibility to grow. Utility debt can be larger since it is 

paid by service fees. 

All municipalities mentioned their dealings with the 

SMB. One representative noted that dealings with the 

SMB had been overwhelmingly positive, and that their 

administrators had received help making a debt plan and 

felt well-supported. One other representative noted that the 

municipality had not dealt with the SMB during her tenure. 

Three of the six noted that the time taken to 

complete debt limit increases was longer than expected. 

Representatives from the largest municipality, Municipality B, 

indicated that, since they had planned in advance, this delay 

was not a problem and that the whole process seemed quite 

smooth. Officials from Municipality A expressed that the time 

delay was a concern that could result in lost opportunities 

for growth. A potential policy recommendation mentioned 

by those from the larger municipality was that it would 

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make sense to have debt limits indexed to the municipality’s 

revenue, so that as revenue increases the debt limit would 

increase automatically rather than the municipality needing 

to constantly re-apply for debt limit increases. Municipality 

C’s respondent mentioned that the SMB had been difficult to 

work with, as it provides an unwanted layer of redundancy 

and bureaucracy. This representative mentioned that they 

have a professional staff for planning and accounting that 

prepare applications, and although the application was 

eventually approved, the work the professional staff did 

to prepare the business plan was sent back multiple times 

with minute detail changes to ultimately arrive at the same 

conclusion. This municipality mentioned that the SMB should 

take into account the larger municipalities’ ability to handle 

their own affairs, particularly when those municipalities have 

professional staff capacity. The SMB could then take on more 

of a partnership or resource role for those able to prepare 

their own debt plans, while providing additional oversight for 

municipalities that lack capacity and need more assistance 

with application preparation. 

Officials from two of the other municipalities (D and E) 

were concerned about other levels of government imposing 

regulations on municipalities, leading to increased costs. For 

example, the federal government has recently changed water 

standards, requiring the municipalities to make expensive 

upgrades. No additional support for municipalities has been 

provided. One municipality’s representative noted that 

simpler grants would be greatly appreciated, as the current 

applications are complex and require either a professional 

grant writer or multiple rejections and revisions – both of 

these entail high costs. 

A number of municipal officials mentioned the concern 

that utilities-related debt is included in LTD calculations. The 

general perspective of these municipalities is that utilitiesrelated 

debt does not impact general financial capacity 

of municipalities because utilities are paid for by user fees, 

which rise as costs increase. For example, if a municipality 

makes upgrades to its water and sewer system, the costs 

associated with servicing debt and paying for the upgrades is 

paid for by user fees; the municipality’s ability to service debt 

for other purposes is not impacted. For this reason, many 

urban governments would prefer to see the policy around 

LTD calculation modified to remove utilities-based debt from 

the formula. 

In summary, the main themes raised by the 

municipalities were centred on autonomy, flexibility, and 

preserving growth. These municipalities raised concerns 

around the current “one size fits all” policy of SMB oversight, 

and recommended additional flexibility so that municipalities 

that have sufficient capacity can be autonomous and 

those that need more assistance with applications and 

financial monitoring can receive the support they need. 

By introducing more flexibility into the current system, the 

municipalities will have access to the resources they need 

during times of growth. 

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SMB Response 

The legislation does not clearly outline a rationale for the 

inclusion of utility debt in the formula for calculating LTD for 

municipalities. SMB was able to provide a basic explanation 

of the practice. First, utility debt is included in the LTD limit 

calculation as are revenues from the utility. Second, SMB is 

responsible for approving sewer and water rates, and 

it is important for them to be able to see that utility debt is 

supported by utility rates. The perspective of the SMB was that 

whether utilities are included or excluded from the formula 

should not be an issue; under the current system, it will 

not make a difference to the SMB when making a decision 

about debt extensions. The primary issue for SMB is that the 

municipality has a business plan for supporting the debt when 

they are asking for a debt extension. If the business plan for 

utilities-based debt shows that utilities debt is covered by 

utility fees, then the SMB will take this into consideration in 

determining whether to approve a debt limit increase. 

In response to the issue of lengthy approval times, the 

representative from the SMB indicated that it does take some 

time for the SMB to assess applications, in part because of 

efforts to undertake a comprehensive review that assesses 

all relevant factors. The SMB representative also noted that, in 

many cases, the received applications are incomplete and this 

results in further delays. The SMB works with municipalities to 

revise applications and repayment plans to ensure they meet 

all of the regulations. 

The representative from Municipal Affairs indicated 

that debt limit calculation is an area that they have flagged 

as potentially requiring review, and they are quite open to 

considering potential amendments to the relevant legislation. 

The representative mentioned that the department has also 

conducted some comparative work and may be open to 

sharing some of their research in this area. 

Survey Findings 

In order to gain an adequate understanding of the 

perspective of urban governments on the issues surrounding 

LTD policy in Saskatchewan, a survey was conducted. The 

survey was sent to all urban governments in Saskatchewan 

that had not already been interviewed or surveyed by other 

means. The survey highlighted further issues and challenges. 

The majority (127 of 135) of respondents represented 

towns and villages. Moreover, a majority of respondents 

represented communities of less than 1000 residents. A 

number of interviews were conducted with larger urban 

centers, and thus the number of small urban municipalities 

that responded to the survey was helpful in providing the 

research team with a better understanding of the issues 

facing urban governments of all sizes. 

Of the 135 urban governments surveyed, 91 reported 

that their population had been increasing. Growth rates were 

varied with 31.8% of respondents reporting a growth rate of 

less than 10%, 27.4% reporting growth of 10-24%, and 4.4%

Table 1.0 

Very 

dissatisfied 

Somewhat 

dissatisfied 

Neither 

satisfied or 

dissatisfied 

Somewhat 

satisfied 

Very 

satisfied 

Responsiveness to your needs 11% (6) 6% (3) 15% (8) 20% (11) 48% (26) 

Timely service 11% (6) 20% (11) 17% (9) 20% (11) 31% (17) 

Clear communication 7% (4) 9% (5) 17% (9) 22% (12) 44% (24) 

Understandable decision-making process 9% (5) 6% (3) 15% (8) 28% (15) 43% (23) 

Simplicity of applications 9% (5) 20% (11) 17% (9) 28% (15) 26% (14) 

reporting a growth rate of 25-50%. Growth is a common 

factor among the urban governments in this province. 

Policy Clarity 

During the interviews, responsiveness to municipal 

requests for debt-limit re-calculations and clarity of rationale 

for debt-allocation were reported as challenges in the process 

for obtaining debt approval through the SMB. To gain a better 

understanding of the urban government perspective on the 

SMB, respondents were asked to rate their satisfaction with 

the SMB based on past experiences: 

As can be seen in Table 1.0, no apparent trends emerged, 

with respondents reporting a mixed level of satisfaction. 

On average it should be noted that more respondents were 

satisfied than were dissatisfied, which suggests that the 

interactions between the SMB and urban governments are 

generally positive. However, the mixed level of satisfaction 

does suggest that there are areas for improvement according 

to urban governments interviewed. For example, timely 

service and clear communication were two areas where 

urban governments would like to see the SMB improve. 

Perspectives on Utilities Debt 

The issue of utilities debt has been mentioned as 

problematic by some municipalities. To better appreciate 

the level of utilities-related debt in urban governments in 

Saskatchewan, respondents were asked to provide a rough 

estimate on the level of municipal debt currently used for 

utilities purposes. Over 58% or respondents reported that 

less than 25% of debt is currently associated with utilities. 

Utilities-related debt does appear to play a significant role in 

the debt of urban governments in Saskatchewan, but it does 

not comprise total debt capacity for the majority of urban 

governments: only 27% of respondents reporting utilities 

related debt of 50% or greater. However, 20% of respondents 

did note that utilities-related debt accounted for nearly 100%. 

In some cases, utilities debt does appear to be a significant 

factor, and this warrants closer investigation into the reasons 

behind these abnormally high utilities debt levels. 

Debt Capacity and Growth 

Respondents were asked the following question: Based 

on your expectations for growth, and any planned projects 

that you know about, do you believe that the current debt 

limit formula for your urban government is sufficient to 

meet borrowing needs over the next five years? A number of 

important issues and challenges arose from this question. 

Reliance on Grants: 

Many smaller communities are not eligible for loans to 

increase major infrastructure because they cannot service 

the debt. These small communities are heavily dependent 

upon infrastructure grants to make any improvements to 

infrastructure. Some of these municipalities are experiencing 

declining populations, or have already seen their populations 

shrink considerably. 

Infrastructure: Water, Sewer, Roads, and Recreation 

The most significant infrastructure need reported is 

water and sewer infrastructure. Most respondents raised the 

concern that water and sewer upgrades were very costly, and 

would far exceed their municipality’s current debt threshold. 

Most of these municipalities would not be able to proceed 

with necessary upgrades without increased debt, grant 

funding, or both. The second largest infrastructure challenge 

is the maintenance of roads, followed by recreational 

infrastructure. Both are a challenge, especially for smaller 

municipalities. 

The Challenges of Growth: 

Some municipalities reported that growth in 

population and size of the municipality has placed pressure 

on the municipal governments to increase capacity in 

utilities such as water and sewer. One municipality was 

experiencing growth of over 400 lots, and needed to upgrade 

infrastructure to accommodate; entailing a debt increase 

beyond current limits. 

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Debt-Limit is Too Low: 

Over twenty respondents (out of the 39 responses) 

reported that the debt-limit is too low to accommodate 

growth in the municipality. Some reported that even if their 

debt-limit were increased, they do not have the ability to 

service and repay increased debt. Of these respondents, 

many noted that their projects will not proceed if they are 

unable to access more capital. Moreover, many of these 

respondents mentioned that they are counting on federal, 

provincial, or other types of grants to assist with infrastructure 

costs. In addition to the general need to upgrade out-of-date 

infrastructure, many municipalities mentioned that increased 

lot development was creating significant pressure in terms of 

utilities services. 

Other Comments: 

Some municipalities noted that the debt-limits were 

currently sufficient to accommodate municipal needs. Others 

were unsure of what their debt limit was. They were also 

unsure of how debt-limits are calculated, pointing to a lack of 

policy and process clarity, as well as municipal capacity. 

Suggested Changes to LTD Policy 

If you were given the authority to make changes to current 

legislation, regulation and process relating to the issue of 

municipal debt limits, what changes would you make? 

The above question was asked of municipalities to 

provide them with an opportunity to concisely outline what, 

in their opinion, should be changed about current long-term 

debt policies. This section is not meant to serve as a list of 

formal recommendations. Rather, it serves as a list of possible 

alternatives given by practitioners in the field of municipal 

administration, and should form the basis of an informed 

discussion on how to improve current process and policy 

according to an important group of municipal stakeholders. 

Abolish or Limit Role of SMB 

in Setting Debt Limits: 

Some municipalities suggested that the SMB should 

be removed altogether, whereas others suggested that 

it needed to be reformed. In general, municipalities fell 

into two camps with regard to the SMB. 

1. Local governments are autonomous and accountable 

to their residents, and thus the function of provincial 

oversight is not necessary. 

2. Municipalities are financially responsible, and should 

only have to report on their financial status and business 

plans to the SMB, but should not have to ask for their 

permission (see above section on constitutional limitations 

on municipal governments). 

8 

Distinguish Between Utilities-Related Debt 

and Other Debt: 

Many municipal representatives believed that utilities 

related debt should be separated from general borrowing 

because utilities are self-funded, and do not actually impact 

the municipalities’ overall financial capacity if the fee 

structure is sustainable and does not require subsidization 

by the municipality. 

Permit Greater Flexibility 

One municipality mentioned that permitting 

municipalities to include income from community-owned 

businesses would increase debt-capacity. It was believed 

that this practice would not only make infrastructure selfsustaining, 

but also profitable in some cases. 

The Importance of Growth 

Many respondents mentioned that growth is an important 

factor in their municipalities, and that there was an immediate 

need for greater levels of infrastructure grants to ensure that 

they can move forward and prepare for future growth. 

Improvements to SMB 

and Debt Regulation Process 

Respondents recommended that the SMB be improved 

in the following ways: 

1. Simplify the process: make applications and interactions 

with the SMB much simpler. 

2. Increase the transparency of SMB operations. 

3. Clarity: Provide clear explanations of how debt-limits are 

calculated, as this was unclear for many municipalities. Some 

municipalities were concerned that the lack of clarity as to 

how debt-limits are arrived at makes planning difficult. 

a. Some municipalities find terminology, such as “own 

source revenue,” unclear. 

b. Another municipality was confused about whether 

the ownership of municipal controlled corporations 

affects municipal debt levels. 

4. Capital Expenditures: Some municipalities would like 

to see the SMB allow capital expenditures to be over the debtlimits 

and restrict operating borrowing to current legislation 

and regulations. It was suggested that capital expenditures 

should be linked to capital asset management, and maintained 

separately from the operating side of the equation. 

5. Turnaround Time Standards: Many respondents 

reported a lengthy turnaround time, and suggested that 

the SMB have legislated turn-around times and that the 

province should increase staffing of the SMB.

6. Maintain Regulation While Increasing Flexibility: 

While a number of municipalities noted their preference for 

the SMB to be abolished entirely, others noted a preference 

for the maintenance of the SMB as an important oversight 

mechanism. However, these respondents did note that the 

SMB’s policies and processes need to be changed to permit 

more discretion for municipalities to increase or decrease 

debt-limits when necessary. It was also suggested that more 

flexibility needs to be given to municipalities to allow them 

to take advantage of short-term borrowing options and lower 

interest rates. 

7. Problem is larger than LTD: There was the general sense 

that the smaller municipalities are able to borrow more money 

than what they can afford to pay back, which is not enough 

to cover their infrastructure needs – thus, increasing debt-limits 

is not viewed as the answer, but rather increasing revenue 

streams and improving sustainability of infrastructure. 

Comparative Policies 

In addition to interviews and the survey, we conducted 

a comparative analysis of policies in Nova Scotia, Manitoba, 

and Alberta to gain a better understanding of how other 

provinces have approached municipal governance and 

long-term debt calculations. These provinces were chosen 

for a number of reasons: Nova Scotia does not include utility 

debt in long-term debt calculations, Manitoba has a similar 

population, and Alberta has led growth and implemented 

some interesting policies to cope with regional growth. The 

section to follow describes the current policy environment in 

these three provinces, and provides an overview of potential 

lessons to be drawn from them. 

Nova Scotia 

Legislative and Regulatory Environment 

Rules surrounding municipal borrowing in Nova Scotia are 

the responsibility of three bodies and one piece of legislation: 

the Minister of Housing and Municipal Affairs; Service Nova 

Scotia and Municipal Relations (SNSMR); the Nova Scotia 

Municipal Finance Corporation (NSMFC); and the Municipal 

Governance Act, 1998. The roles of each of these entities and 

how they interact with one another will be discussed in turn. 

The Minister of Housing and Municipal Affairs has control 

over whether or not a municipality is allowed to borrow for 

capital projects. Section 86 of the Municipal Governance Act, 

1998 gives the Minister the power to establish borrowing limits 

for each municipality; Section 87 prevents him from setting 

such limits or approving any borrowing if the municipality has 

not filed its annual capital budget with SNSMR; and Section 

88 gives him the power of final approval over a municipality’s 

borrowing request (The Province of Nova Scotia 1998). 

Service Nova Scotia and Municipal Relations (SNSMR) is 

the line department responsible for enforcing the borrowing 

limits set by the Minister and reviewing the municipal capital 

budgets required under the Municipal Governance Act. At 

present, the policy of SNSMR is that municipalities should not 

have a debt service ratio in excess of 30% (Service Nova Scotia 

and Municipal Relations 2010, sec. 3.5) . Two points ought to 

be made about this rate. First, it is a flat rate which applies 

to every municipality without modification, regardless of its 

specific financial context. While the Municipal Governance 

Act does allow the Minister to set rates on a case-by-case 

basis, this power is apparently not exercised in Nova Scotia. 

Second, SNSMR’s 30% debt service ratio does not include the 

debt carried by municipalities which are attributable to water 

and electrical utilities, including transmission infrastructure. 

Ministerial approval is still required when municipalities 

attempt to borrow for utility capital projects, as well as approval 

from the province’s Utility and Review Board. 

The Nova Scotia Municipal Finance Corporation (NSMFC) is 

responsible for issuing debentures on behalf of municipalities; 

two issues are produced per year. The Corporation also reviews 

the borrowing plans produced by municipalities – suggesting 

some administrative overlap with SNSMR – and uses a 15% debt 

service ratio as a benchmark to evaluate each municipality’s 

fiscal situation. This 15% does not have the same standing 

in policy as SNSMR’s 30% ratio, but nor does it include debt 

attributable to water and electrical utilities. The Corporation 

provides additional services to municipalities, including financial 

training for municipal employees involved in the borrowing 

process, assistance with long-term financial planning and 

a short-term borrowing program for municipalities which 

have received approval to borrow but are still awaiting the 

next debenture issue(Service Nova Scotia and Municipal 

Relations 2010, sec. 3.4). Finally, the Corporation monitors 

its own performance with annual satisfaction surveys of the 

municipalities which participated in the borrowing process that 

year (Nova Scotia Municipal Finance Corporation 2011). 

Finally, the role of the Municipal Governance Act, 1998 

has been mentioned, but two more sections ought to be 

highlighted. First, Section 91 gives municipalities the right 

to set rates, repayment schedules and issue debentures on 

their own, without going through the NSMFC. To date, no 

municipality in Nova Scotia has taken advantage of this option, 

suggesting that the quality of service and administrative 

savings offered by the NSMFC are significant. Second, Section 

99 grants that municipalities may borrow from their own 

capital reserve funds to pay for capital projects at the same 

interest rate the municipality would pay if it accessed outside 

sources of funding. Interestingly, this borrowing may be done 

by resolution of the council alone, and does not require the 

approval of the Minister (The Province of Nova Scotia 1998). 

Finally, while the Regional Municipality of Halifax does have its 

own Charter, similar to Ontario’s City of Toronto Act, its sections 

on municipal borrowing are lifted verbatim from the Municipal 

Governance Act, 1998 and contain no special provisions or 

processes (Government of Nova Scotia 2008). 

9

Manitoba 


All borrowing by urban governments in Manitoba is 

conducted in accordance with the Municipal Board Act, 

the Municipal Act, the City of Winnipeg Charter Act, and the 

Debt Management Policy of the City of Winnipeg. The City 

of Winnipeg Charter Act applies only to that City, while the 

Municipal Board Act and Municipal Act apply to the remainder 

of Manitoba’s urban governments. The two provide largely 

similar methods and requirements regarding municipal 

borrowing and debt limits. 

The Municipal Board Act provides the legislative framework 

for the province’s twenty-five member Municipal Board, and 

charges it with the duty of reviewing all bylaws that include 

capital borrowing in municipalities other than Winnipeg. As 

a quasi-judicial body, the Municipal Board is empowered to 

reject, amend or accept all proposed capital borrowing bylaws; 

they do so according to a legislated series of considerations, 

including “the nature of the work, undertaking or proposed 

project,” “the necessity or expediency thereof,” and “the financial 

position of the local authority.” The Board has some scope for 

discretion and further investigation, and may consider “any 

other relevant matter” (The Province of Manitoba 2011). 

In passing judgment, the Municipal Board may conduct 

public hearings as well as require urban governments to 

submit five-year capital forecasts. Furthermore, Section 69 of 

the Municipal Board Act states that the Board may “require the 

municipality to submit the by-law or contract for the sanction 

of the voters or ratepayers …” Municipal governments are not 

bound by the approval of the Municipal Board for any debts 

that are repayable within the year (Amborski 1998, 19–20). 

Neither the Municipal Board Act nor the Municipal Act set 

a statutory limit to debt for urban governments. However, 

the ratio of debt to municipal assessment is often used by 

the Board to determine whether taking on additional debt 

is advisable. Amborski’s qualitative study of the Municipal 

Board’s actions showed that the Municipal Board often took 

population trends and economic growth potential into 

consideration (1998, 20). In of the 33 applications made to 

the Board in 2008 and 2009, 9 were accepted, 10 dismissed 

and 14 withdrawn (Tyler 2011, 72). Unless the Board can be 

shown to be applying the law incorrectly or acting beyond its 

jurisdiction, its decisions cannot be appealed. 

The City of Winnipeg Charter Act requires that City to 

submit its borrowing plans to the Minister of Finance for 

approval. The Minister may, at his discretion, forward the 

application to the Municipal Board for review, though the 

Minister is not bound by the Board’s advice. Like Manitoba’s 

other urban governments, no statutory limit on debt exists. 

However, Winnipeg does regulate debt according to the 

guidelines established in an internal document, the Debt 

Management Policy; this self-imposed policy was intended to 

shift the City toward pay-as-you-go financing for tax-supported 

capital works. In 1996, City Council established an annual 

debt limit of $61 million on both internally and externallyraised 

financing for tax-supported capital projects. The Debt 

Management Policy is the only document that imposes a limit 

on capital borrowing and reports “no new external borrowing 

for tax-supported capital expenditures has been approved 

since 1998” (The City of Winnipeg n.d., 2) The policy also 

imposes a restriction on the length of financing periods. Under 

normal circumstances, the repayment period will not exceed 

the useful life of the asset being financed. 

All urban governments in Manitoba are free to pursue 

loans in the private sector. The City of Winnipeg does not 

have a specific objective to maintaining relationships with 

rating agencies but does note in the Debt Management Policy 

that a high rating is desirable as it determines interest rates 

and may be used as a comparative measure of general wellbeing. 

Winnipeg is currently rated by Standard and Poor’s and 

Moody’s. The City of Brandon also maintains a relationship 

with Moody’s. 

None of the acts, regulations or policies explicitly mentions 

utility debt, or any other type of specific debt. 

Municipal Stakeholder Perspectives 

City administrators who agreed to be interviewed 

reported that their ability to grow was not inhibited by the 

decisions of Manitoba’s Municipal Board. An administrator 

of one smaller urban government confided that the amount 

of debt that they had been cleared for exceeded what he 

deemed to be fiscally responsible. 

One emerging trend involves financing utility projects 

through ratepayer or user fees rather than taxes. Though 

loans are still required, these schemes are based on utility 

revenue forecasts and allow for increased security for the 

province, which is ultimately responsible for insolvent 

municipalities. The administrator who brought this trend to 

light noted that their upcoming capital project will be funded 

by taxpayers but that passing the debt on to ratepayers 

entirely was considered more politically legitimate. 

The Association of Manitoba Municipalities is currently 

arguing in favour of development fees – one-time levies on 

developers to finance the costs associated with development 

– to fund projects such as extending utility services to new 

housing projects. Their argument is that it is unfair to burden 

existing taxpayers with the expenses of municipal expansion. 

The Association argues instead that development expenses 

ought to be transferred to buyers of new homes, commercial, 

and industrial properties (Slack 2011, 40). 

Alberta 


Municipal debt-limits are regulated in Alberta through 

the Municipal Government Act. The Act outlines how debtlimits 

are determined, including a basic formula. Alberta is 

unique in that it has legislation governing debt-limits for 

regional service commissions – corporate structures that 

are owned by municipalities and provide utility services on 

a regional basis. Municipalities in Alberta have established 

10

commissions for various reasons: the commission’s debt 

may be calculated separately from the municipality’s debt, 

commissions have higher debt-ceilings, and commissions 

create regional economies of scale because they are owned 

by several municipalities. 

Long-term Debt Limits for Municipalities in Alberta 

Debt-limits for municipalities in Alberta are determined via 

two basic formulas. For most municipalities, total debt cannot 

exceed 150% of total municipal revenue, and their debt-service 

ratio cannot exceed 25% of municipal revenue (The Province 

of Alberta, sec. 2). The figures applied to Calgary, Edmonton, 

Medicine Hat, and the Regional Municipality of Wood Buffalo 

are different, however. The debt of these municipalities cannot 

exceed 200% of the revenue of the municipality, while their 

debt-service ratio may not exceed 35% of the same. (See 

Appendix for outline of formulas). 

Municipal Stakeholder Perspectives On Municipal Debt 

Representatives from The City of Calgary suggested that 

the bulk of impediments to municipal borrowing were selfimposed; 

they cited the City’s internal debt ceiling, internal 

debt-service ratio limit and the desire of both elected and 

bureaucratic officials to maintain the City’s AAA credit rating 

as examples of such self-imposed financial choke-points 

(Amborski 1998, 41). This latter goal also influences current 

behaviour in Saskatchewan, where cities such as Saskatoon 

want to maintain their AAA credit rating and restrain their 

borrowing activity accordingly. 

The Town of Okotoks, a town of approximately 25,000 

which is located 20km south of Calgary, is currently debating 

how to handle its long-term municipal debt. The town was 

one of the ten fastest growing communities in Canada 

between 2006 and 2011, and serves as a good comparator 

to small-and-medium sized Saskatchewan cities because 

of this sustained growth. The town operates under a selfimposed 

debt limit that is only 75% of the limit that the town 

is legally permitted to assume under provincial legislation. 

Since 2007, municipal debt has risen dramatically and 

both councillors and residents have been openly asking 

whether or not Okotoks will change its internal debt-limit 

to cope with the costs of growth. The current municipal 

government is committed to remaining fiscally conservative 

while simultaneously accessing as many grants as possible 

for infrastructure upgrades, and monitoring whether debt 

increases are actually tied to growth. In short, the municipality 

does not find provincial debt limits to be problematic. Rather, 

the municipality is being challenged by the costs of growth, 

and is examining whether its own internal fiscal policies are 

exacerbating this stress (Patterson 2011). 

Okotoks is not alone in operating under this kind of 

self-imposed fiscal responsibility. One of the fastest growing 

municipalities in Canada, the Regional Municipality of Wood 

Buffalo, has also imposed strict limitations on itself. As noted 

above, Wood Buffalo – along with the Cities of Edmonton, 

Calgary, and Medicine Hat – has a total debt-limit of 200% 

of municipal revenue and a debt-service ratio limit of 35%. 

However, the RM has chosen to further restrain their debt 

obligations by setting their municipal debt-limit at 75% of 

total revenues (Regional Municipality of Wood Buffalo 2012). 

This limitation is rooted in a belief that each generation should 

pay into the cost of infrastructure, resulting in a pay-as-you-go 

approach to building and maintaining infrastructure. 

There was no evidence that Albertan municipalities 

would like to see utilities based debt calculated separately 

from other municipal debt. However, this may have more 

to do with the common use of alternative regional service 

delivery mechanisms in Alberta, such as Regional Service 

Commissions, regional partnerships, or Municipal Controlled 

Corporations (as is the case in Calgary and Edmonton). 

The Role of Corporate Structures in Utilities Service 

Delivery: Regional Service Commissions (RSC) 

and Other Arrangements 

In Alberta, many municipalities are utilizing corporate 

structures to own/operate/maintain infrastructure and to 

provide municipal services on a regional basis. These entities 

range from simple inter-municipal partnerships to Regional 

Services Commissions to municipal-controlled corporations. 

These more complex structures, such as RSCs, enable 

municipalities to borrow more money from the Alberta 

Capital Finance Authority, because the debt limits for these 

bodies are recorded separately from the municipality and 

are larger as a percentage of revenue (200% for RSCs vs. 150% 

for municipalities). 

Regional Service Commissions play a major role in the 

delivery of services to municipalities. They lower the cost and/ 

or increase the quality of utilities services for municipalities 

by delivering these services on a regional basis through 

a regional administrative body. The use of RSCs allows 

Albertan municipalities to increase the quality of drinking 

water, something that is often a challenge for small urban 

and rural municipalities. 

RSCs are very significant in terms of their role in 

constructing and managing regional water and sewer 

infrastructure in Alberta. There are 69 RSCs, and the majority of 

these are in the water/wastewater/waste management service 

areas. In an interview, an official from the Ministry of Municipal 

Affairs was not able to provide a precise measure to quantify 

the significance of RSCs in terms of their role in municipal 

debt, but the official did note that the majority of debt limit 

extension approvals made by the province are for RSCs that 

require start-up capital for the construction of infrastructure for 

water/waste water utilities. In terms of administration, having 

utilities managed by a separate entity frees up administrative 

capacity for other initiatives. Moreover, RSCs have a higher 

debt-limit ratio as a percentage of revenue. 

RSCs have become increasingly important in Alberta 

for the delivery of potable water. Several years ago the 

government initiated the Water for Life Strategy, which came 

from a policy that high quality water should be available 

for all residents of Alberta, no matter where they live in the 

11

province (Government of Alberta). The province has been 

providing up to 90% grants to municipalities to set-up RSCs 

to deliver water on a regional basis because this increases 

the quality and reduces the costs of infrastructure for 

municipalities, thereby reducing demand on the province 

for infrastructure dollars. Although costs for the municipality 

have been reduced, municipal residents have seen their 

water costs rise because they are now paying the true 

cost of water. This has been somewhat problematic in 

that some residents are upset with cost increases. In some 

cases, water bills may have increased by as much as 500%, 

which is incredibly difficult for those customers that were 

not prepared for the increase, nor given time to adjust their 

water consumption habits. However, in the long-term, the 

municipalities and residents will benefit in that infrastructure 

will be sustainable and consumption will be curbed. 

RSCs are not just used for water services. They are 

also utilized for the delivery of sewer, waste management 

(recycling and solid waste), community planning, and even 

public transportation. Wherever there is a public service 

that a number of municipalities within a region perceive as 

a benefit, and where these municipalities are interested in 

working together, an RSC may be utilized. Water, sewer, and 

waste management are the most common forms of RSC. 

Why are Regional Service Commissions so Common 

in Alberta? 

Government grants have incentivized the development 

of RSCs. The official with Alberta Municipal Affairs noted that 

many of the RSCs would probably not have been created if 

it were not for significant provincial grants to assist with setup 

costs. For example, the Water For Life Strategy included 

up to 90% grants for the set-up of water service delivery 

RSCs. Other grants have been made available for sewer, and 

waste management infrastructure. Organizing the delivery 

of services in this way has made possible for some fairly 

significant achievements in terms of service delivery. For 

example, one major infrastructure project involves the piping 

of water from Edmonton, several hundred kilometres away 

to Vermillion, servicing many jurisdictions along the way 

through a modernized web of service commissions. However, 

it is important to note that these would not likely have taken 

place without major provincial support. 

Benefits and Challenges of Regional Arrangements 

When asked about whether regional bodies such as 

RSCs, or other such regional partnerships for the delivery 

of utilities services in Saskatchewan would be beneficial, 

one official with the Ministry of Municipal Affairs in Alberta 

noted that some kind of regional service mechanism is likely 

a good idea, but the key is to provide an incentive, such as 

covering start-up costs, to develop them regionally and to 

make them competitive. This official thought that it was quite 

likely that many municipalities would fear the loss of control 

over regional entities, as well as the loss of jobs within their 

community, or even the idea that water or some other service 

12 

would potentially come from a facility in another community. 

These challenges would need to be overcome before a 

regional service delivery option could be feasible. This official 

suggested that regardless of the challenges and hurdles, the 

benefits far outweigh the costs for smaller municipalities 

that would be able to access higher quality services for their 

residents, and reduce infrastructure costs through some 

form of regionalized service delivery mechanism. This official 

emphasized that though RSCs are a useful tool, they should 

only be one tool in the arsenal of municipalities experiencing 

growth, and that there are other options. The key point is that 

municipalities need to build capacity. 

RSCs provide for greater utility debt flexibility in the longterm 

because they have a larger debt threshold. Alberta’s 

legislation says that RSCs are entitled to a debt limit of 200% 

of revenue. But since RSCs do not have revenue when 

they begin operating, they require provincial approval of 

a debt-limit extension to give them time to set-up and begin 

delivering services to earn revenue. Only those municipalities 

that have the capacity to set up an RSC with a solid business 

plan, including 5 year projections on operating a capital 

budgets, will be granted base-extensions for up to five years 

to get them operational. Thus, the ability of municipalities to 

take advantage of this type of mechanism largely contingent 

upon financial and development capacity. Regardless of what 

the debt-limit is in legislation, the government of Alberta 

works with municipalities and RSCs to ensure that they have 

solid business plans and organizational capacity. The Alberta 

Government is examining options to give municipalities 

more autonomy, such as greater debt limits, but would likely 

increase reporting requirements, such as quarterly reporting. 

An important feature of this method of service delivery is 

increased operational capacity. Many of the RSCs have their 

own dedicated staff including a chief administrative officer 

(CAO). It was noted by one official that these RSCs were the 

most effective because they had the management capacity 

to operate as an effective business. 

Another regional mechanism that may become more 

common as growth pressures increase is the Municipal 

Controlled Corporation. Many municipalities would like to 

convert their RSCs into municipal controlled corporations. 

RSCs are not permitted to make a profit, whereas Municipal 

Controlled Corporations are. Examples of this are Enmax 

in Calgary. Municipal Controlled Corporations are over 

50% owned by a municipality. Although regulated, these 

corporations can raise funds, and sell-stocks, so long as 

the municipality maintains control of them. This could be 

problematic for the province if a significant number of 

municipalities created municipal controlled corporations, 

and if those corporations experienced significant financial 

hardships, as the province could potentially be liable for any 

losses. The province has much better capacity to regulate the 

use of RSCs than it does Municipal Controlled Corporations.

Table 2.0 Comparison with Saskatchewan 

Who approves 

borrowing 

What are the restrictions on borrowing? 

What is the turnaround time 

on applications to borrow? 

Province Minister Board Restrictions Turnaround 

Nova Scotia Yes 1 n/a 

• n 30% debt-service limit 

• n 15% debt-service limit used as 

a benchmark by NSMFC 

• n utilities debt not included in calculation 

2-4 weeks 

Manitoba Yes 2 Yes 3 $61 million in debt on tax-funded capital 

expenditures, and is presently moving 

• n Winnipeg may carry no more than 

to pay-as-you-go financing 

10-30 days 

Alberta Yes 4 n/a 

Saskatchewan No Yes 

• n Calgary, Edmonton, Medicine Hat 

& RM of Wood Buffalo: maximum debt load 

of 2 times municipal revenues; debt service 

ratio of 35% 

• n all other municipal governments: 

maximum debt load of 1.5 times municipal 

revenues; debt service ratio of 25% 

• n Municipalities: 100 % of previous years 

revenue 

• n Cities: Determined in consultation with 

SMB and expressed as a percentage of 

revenue (very ad hoc in nature). 

1-4 weeks 

Varies 

Notes 

1) Save for borrowing from capital reserve fund 

2) For the City of Winnipeg 

3) For all other urban areas 

4) For debt limits that exceed legislated limits. 

Summary of Alternative Service Delivery Arrangements: 

An Alberta Perspective 

The use of alternative service delivery arrangements in 

Alberta has proved useful to both municipalities and for the 

province. For the province it has created a venue through 

which to standardize the delivery of certain services, including 

potable water, among municipalities. It has also created 

service delivery capacity among municipalities, which could 

potentially reduce the demand for grants in the future, 

especially among self-sustaining RSCs. For municipalities, 

the adoption of RSCs has improved the quality of some 

services, reduced infrastructure costs for the municipalities, 

and created regional economies of scale. Success in this 

area was only possible because of a willingness on behalf 

of municipalities to work together, as well as leadership and 

support from the province in the provision of grants for 

the creation of RSCs. Some RSCs have been challenged by 

financial capacity, administrative capacity, and other issues. 

Others have been hugely successful, and some have even 

created an administrative identity that has become separate 

from that of the municipality. It is important to note that RSCs 

are only useful insofar as municipalities are committed to 

investing in their administrative capacity, and if the province 

is willing to support their development. They may be a 

potential opportunity for reducing utilities-related costs for 

municipalities in Saskatchewan, but they will only be part of 

the solution. 

Comparison with Saskatchewan 

The table above compares municipal debt policy in 

Saskatchewan with the three comparator provinces. It is 

interesting to note that a municipal board that regulates 

municipal debt is only present in Saskatchewan and 

Manitoba. In Nova Scotia debt is regulated by the Ministry 

responsible for municipal government, and in Alberta, only 

municipalities seeking debt-level extensions above legislated 

limits require ministerial approval. Each province differs on 

their debt-limit calculation formula. Nova Scotia is the only 

province we analyzed where utility debt differentiated from 

other municipal debt. As well, in Nova Scotia, debt-limits 

are regulated largely by a service limit as a percentage of 

revenues, rather than by a total debt limit as a percentage 

of revenue as is the case in the other provinces. 

13

Recommendations 

Below are potential changes to policy and process that 

could be beneficial to urban governments in Canada. These 

recommendations have been informed by our understanding 

of long-term debt policy in Saskatchewan, in other provinces, 

and from surveys and interviews conducted with urban 

governments and stakeholders in Saskatchewan. These 

recommendations are meant to focus the attention of SUMA 

on specific issues and options that, in our view, would address 

the issues that we uncovered over the course this project. 

Policy Problem 1: 

A significant number of municipalities interviewed noted 

that their debt capacity is insufficient to accommodate 

future needs and growth. 

Analysis: 

In our discussions with municipalities and municipal 

stakeholders, a number of issues arose that are related to 

the concern over debt, and that inform our recommendation: 

1. SMB in Practice: Under the current system, 

municipalities must work with SMB to establish a debt-limit 

when the debt-limit exceeds their current limit. The current 

practice of the SMB is to work with the municipality to ensure 

that a sound business plan is in place to ensure that the 

financing of the municipality is sustainable. So long as debt 

is sustainable as outlined in the municipality’s business plan, 

the SMB will likely grant a debt extension. There were no 

examples of municipalities being refused debt extensions 

from the interviews and surveys, so this system, while 

unpopular with some municipalities, appears to be providing 

urban governments with adequate debt capacity on average. 

Some municipalities suggested that including utilities-based 

debt in the debt-limit formula is inappropriate because 

utilities-based debt is funded by user fees, not mill rates, and 

by excluding this type of debt, municipalities would have 

greater capacity to access debt for non-utilities purposes 

without having to approach the SMB for an extension. 

a. The SMB approach to regulating debt is very ad hoc. 

Municipalities can count on receiving a review of their 

debt-management plans, and being granted a debt-level 

extension so long as a plan is in place. Thus, the system is 

ad hoc and flexible. Some municipalities were comfortable 

with this, while others were concerned that the system 

is unclear and potentially unpredictable, as they worried 

about missing opportunities in the future if the SMB 

decided not to grant the municipality an extension. 

2. Infrastructure Needs and Additional Debt Capacity: 

Concern over insufficient debt-capacity is most often 

associated with the need for major infrastructure upgrades for 

utilities such as water and sewer. However, in most cases it was 

suggested that the municipality would not be able to afford 

these upgrades without significant provincial or federal grants. 

14 

3. Responsiveness: Some of the larger municipalities 

were of the opinion that the current policy is a “one size 

fits all” approach providing the same level of oversight to 

larger municipalities with adequate professional staff as to 

smaller municipalities without adequate capacity. These 

municipalities would like to see the policy and practice of 

debt-regulation reformed to recognize the various levels of 

capacity among municipalities. 

Recommendations: 

It does not appear that the current system has reduced 

the capacity of municipalities to access sufficient debt. So 

long as an adequate business plan is in place, the SMB works 

with municipalities to ensure that they can access debt. Thus, 

the inclusion of utility debt is more of annoyance for some 

municipalities than it is a hindrance to growth. What seems 

to be the bigger concern among municipalities is the lack of 

clarity around how debt-levels are determined, the rationale 

for the inclusion of utility debt, and generally, the policies of 

the SMB. Moreover, in cases where debt-levels are insufficient, 

the municipality is often unable to service additional debt, 

and thus is in need of additional municipal grants for 

infrastructure rather than additional debt-capacity. 

In order to address the above concerns, SUMA should 

consider the following actions: 

A. Work with the SMB to Develop Guidelines for 

Municipalities: Approach the SMB about developing 

a comprehensive guide to municipal debt to provide 

municipalities with a thorough explanation of how debt 

levels are calculated, application criteria, key terms such 

as “own source revenue” and other factors that they should 

consider. This could help alleviate some of the concerns that 

municipalities have about obtaining adequate debt. Currently 

there seems to be a high level of uncertainty among 

municipalities about how the SMB works. 

B. Request that the Province Develop a More Substantive 

Policy: The survey data indicated that there are some 

municipalities that are growing and will continue to require 

additional debt capacity; they can handle additional debt. 

However, there are others that cannot service additional debt. 

The current system permits the SMB work with municipalities 

in an ad hoc manner to determine if an extension should 

be granted. If SUMA would like to advocate on behalf of 

municipalities that are frustrated by this process, it should 

consider requesting that the province change its policy 

to provide greater long-term debt limits to municipalities 

that demonstrate a capacity to manage greater debt, and 

that are growing. The SMB could utilize a tier system, where 

different tiers of municipalities are granted different levels of 

debt automatically, and only need to approach the SMB for 

maintenance of that status periodically. This system could 

preserve the oversight and financial regulation of smaller 

municipalities that cannot accommodate greater debt, 

while providing greater capacity and flexibility to growing 

municipalities. The current policy allows the province to 

ensure that small municipalities maintain reasonable levels

of debt, while permitting the province the flexibility 

to increase debt where feasible. If this is too ad hoc for 

municipalities, then a more precise policy needs to be 

developed so that municipalities can plan. 

C. Request that the Province Consider Removing Utilities 

Debt from Calculation: As mentioned above, Nova Scotia 

does not include water and electrical utilities debt in debtlimit 

calculations. Debt for these utilities is still regulated by 

province. Saskatchewan could do the same, and continue 

to regulate municipal debt through the SMB, which would 

ensure oversight maintained. However, this may, in some 

cases, provide greater flexibility to municipalities. 

D. Advocate for a Province-wide Solution to Infrastructure 

Needs: Many municipalities mentioned that they need to 

make major upgrades to water and sewer system, as per 

new federal regulations. Many of these municipalities cannot 

afford to make these upgrades without increasing their debt 

load, but cannot feasibly service debt at the levels needed to 

meet the new requirements . Thus, it appears that there is 

a need for a strategy to assist municipalities with developing 

sustainable infrastructure. 

Policy Problem 2: 

A number of municipalities are facing infrastructure 

challenges, and cannot afford to replace necessary utilities 

infrastructure such as water and sewer. 

Analysis: 

Our comparative research on Alberta’s RSC models, 

as well as our discussions with municipal officials in 

Saskatchewan highlighted the option of regionalized service 

delivery, which may make replacing infrastructure feasible 

for some municipalities. This is especially true for smaller 

municipalities in rural areas where it may not be possible for 

one municipality to build its own water treatment plant, but 

where collaboration on a regional scale might be achievable. 

It may also be easier for municipalities to access grant 

funding to build regional infrastructure, as was the case 

with the Sask Landing Regional Water Pipeline Utility. 

To summarize, the two options we examined are: 

1. RSCs: As mentioned, municipalities in Alberta engage in 

RSCs to deliver services on a regional basis. This is potentially 

beneficial because it removes some utilities-based debt from 

the municipality to the RSC, creates efficiencies in service 

deliver, reduces costs, and allows some municipalities to 

access grants for service delivery through RSCs. With RSCs the 

municipality frees up administrative capacity for other activities. 

2. Regional Service Delivery in Saskatchewan: One 

group of municipalities has regionalized the delivery of water 

purification and transportation. The Sask Landing Regional 

Water Pipeline Utility, which was created by a group of towns 

and RMs including the Towns of Kyle and Elrose, will treat and 

deliver potable water to the Towns of Kyle and Elrose, 

as well as to the residents of the surrounding RMs, and some 

major customers such as nearby Hutterite colonies and large 

farm operations (Infrastructure Canada). The Sask Landing 

Regional Water Pipeline Utility was set up because water 

quality was poor, and it was a solution that was recommended 

by SaskWater. The municipalities were able to develop this 

because of grant funding available from the federal and 

provincial governments, and funding costs worked out to 

roughly 1/3 municipal, 1/3 provincial, and 1/3 federal dollars. 

In the long run, because the utility is separate from the 

municipality, and because the costs are recovered on a fee for 

service basis, this should shift utilities related debt away from 

the municipalities, freeing debt capacity for other needs. One 

municipal partner suggested that this type of initiative, while it 

is innovative and has proved successful, would not have been 

possible without grant funding. Moreover, the willingness 

to work together with neighbours and create a third party 

organization was imperative to the success of this initiative, 

which is now shovel ready with pipes being laid in some areas. 


The above two examples are options for Saskatchewan 

municipalities to consider in addressing infrastructure 

challenges, especially water and sewer, which appear to 

be significant challenges in Saskatchewan. 

In order to address the above concerns, SUMA should 

consider the following actions: 

A. Survey Members About Regional Service Delivery: 

Survey members about their interest in engaging in regional 

service delivery arrangements. Determine the level of interest, 

as well as the perspective of members on how such 

an arrangement ought to be designed. 

B. Communicate with Municipal Partners: If there is 

an appetite among members, SARM should be approached 

to determine if their members have an interest in this. 

C. Approach Province about Funding: If there is 

an appetite for this, approach the province and federal 

government about targeted funding for setting up and 

implementing regional service delivery groups. It is clear 

from our research that regional service delivery arrangements 

require funding to be developed. 

Process Problem 3: 

A number of municipalities mentioned that the processes 

of the SMB could be improved and streamlined to better 

serve municipalities. 

Analysis: 

The municipalities we interviewed mentioned that 

streamlining and simplifying the application process would 

improve efficiency. This was also reflected in the survey data. 

Municipalities suggested that the SMB could be improved in 

the following areas: 

15

1. Flexibility: Many municipalities suggested that they 

would benefit from greater flexibility in order to take 

advantage of short-term borrowing options and lower 

interest rates, particularly with the historic low interest rates 

currently available. 

2. Speed: Most municipalities suggested that the SMB 

could improve the speed at which applications are reviewed. 

Some municipalities believed that in the future they might 

miss important opportunities while awaiting approval of 

debt-limit extensions. One suggestion revealed in the survey 

data was for the SMB to legislate turnaround times, which 

would require additional staff resources from the province. 


In order to address the above issues, the following policy 

solutions should be examined: 

A. Approach SMB about reviewing borrowing options: 

Municipalities have suggested that they are missing out on 

short-term borrowing options that would decrease interest 

costs. SUMA should request that the SMB examine its current 

policies to determine if this is the case, and if so, if changes 

could be made to increase flexibility and lower costs 

for municipalities. 

B. Legislated Processing Times: Many municipalities were 

concerned that processing times for applications to the SMB 

were too lengthy. The province should be encouraged to 

legislate standards in this area. 

C. Review Application Process: It was noted by the SMB 

that processing times are often lengthy due to incomplete 

applications. The application process should be reviewed 

to determine the reason for this so that it may be resolved 

through process changes, building municipal capacity, or both. 

Appendix 

Alberta Debt-Limit Formula 

Debt limits are calculated by determining revenue, 

total debt, and debt service costs: 

Revenue = 

“the total revenue reported in the last audited annual 

financial statement of the municipality prepared before 

the calculation time, less transfers from the governments 

of Alberta and Canada for the purposes of a capital property 

reported in that statement if those transfers are included in 

the total revenue, and less amounts reported as contributed 

or donated tangible capital assets if those amounts are 

included in the total revenue” (The Province of Alberta, sec. 3) 

Total debt is calculated in the following way: 

TD = (a + b) – c 

TD = total debt 

a = “the principle outstanding at the calculation time 

on borrowings made by the municipality;” 

b = “the principle outstanding at the calculation time 

of loans in good standing that have been guaranteed by 

the municipality, plus the amount that the municipality 

is liable to pay at the calculation time under loans not in good 

standing that have been guaranteed by the municipality;” 

(The Province of Alberta, sec. 4) 

c = “the amount of a and b that the municipality is entitled 

to recover from another municipality at the calculation time” 

(The Province of Alberta, sec. 4) 

To summarize, total debt is the principle outstanding at 

the time of calculation, plus the principle outstanding at the 

calculation time for loans in good standing, and that have been 

guaranteed by the municipality in addition to the amount 

of money the municipality is liable for on loans not in good 

standing minus the amount of a and b that the municipality 

is owed by other municipalities at the calculation time. 

Debt servicing limits are calculated as follows: 

DS = (a + b) – C 

a = the sum of: 

i) The total amount of the principle and interest that 

the municipality is required to pay for those debts where 

the municipality is required to pay principle during the 12 

months after the calculation time; and 

ii) For those debts where the municipality is not required to 

pay any of principle during the 12 months after calculation, 

the total of the pro rata amounts for those 12 months. 

b = the total amount that the council estimates 

“on reasonable grounds” that the municipality will be liable 

for during the 12 months after calculation time for loans 

not in good standing but that have been guaranteed by 

the municipality. 

c = the amount of a and b that the municipality is entitled 

to recover from another municipality during the 12 month 

16

period after calculation time (The Province of Alberta, sec. 5). 

Debt Limit calculations may or may not include regional 

service commission debt. A municipality “may choose to 

calculate its revenue, total debt and debt service as though 

one or more of the controlled corporations are part of 

the municipality” (The Province of Alberta, sec. 6.1). If the 

municipality chooses to do this, then all of that corporation’s 

“revenue, borrowings, guarantees and loans must be included 

in those calculations except” (The Province of Alberta, sec. 6.2) 

for the following conditions: 

Debt service is calculated as follows: 

Debt service = the sum of the total interest and principle 

the RSC will have to pay for debts that will be serviced during 

the 12 months after calculation time plus the pro rata amounts 

on debts for which the municipality does not pay principle 

during the 12 months following the calculation time, minus 

the amount the RSC is entitled to recover from another RSC 

or municipality (The Province of Alberta 2000, sec. 5). 

• n Revenues that arise from transactions between the 

municipality and the corporation, or between the corporation 

and another municipal controlled corporation are not to be 

included in the combined revenues. 

• n Guarantees and loans between the municipality and 

controlled corporations or between municipal controlled 

corporations are not to be included in combined total debt 

or debt service calculation. 

Regional Service Commissions (RSCs) Debt Limits 

Debt limits for regional service commissions 

are separate from municipal long-term debt regulations. 

Both are covered by the Municipal Government Act, 

but appear in separate sections. 

RSC Providing Public Utilities 

For regional service commissions authorized to provide 

public utility services to municipalities, total debt must not 

exceed 2 times revenue of the regional service commission. 

Debt service must not exceed 0.35 times revenue of 

the regional service commission (The Province of Alberta 

2000, sec. 1). 

RSC Providing Non-Utility Related Services 

For regional service commissions that are authorized 

to provide services other than public utilities, total debt must 

not exceed 0.5 times the total revenue, and debt service must 

not exceed 0.1 times the revenue (The Province of Alberta 

2000, sec. 2). 

Debt-Limit Calculation Formula 

Revenue for Regional Service Commissions is calculated 

similar to municipalities. Revenue is “the total of all revenue 

reported in the most recent audited financial statement of 

the commission, excluding transfers from the governments 

of Alberta and Canada for the purposes of a capital property 

reported in that statement if those transfers are included 

in the total revenue, and before expenses are deducted” 

(The Province of Alberta 2000, sec. 3). Debt of regional service 

commissions is quite simply the total principle outstanding 

at calculation time, minus the amount of principle 

the commission is entitled to recover from another RSC 

or municipality at that time. 

17

References 

Amborski, David P. 1998. “Review of the Regulatory Environment of Municipal Capital Borrowing”. ICURR Press. http://www. 

muniscope.ca/_files/file.php?fileid=fileZOMcseGaEn&filename=file_Review_of_the_regulatory.pdf. 

Government of Alberta. “Water for Life.” http://www.waterforlife.alberta.ca/. 

Government of Nova Scotia. 2008. Halifax Regional Municipality Charter: An Act Respecting the Halifax Regional Municipality. 

Infrastructure Canada. “Grant and Contribution Awards Over $25,000.” http://www.infrastructure.gc.ca/pd-dp/gc-sc/reportsrapports-eng.php?type=c&ref=83&p=2008&q=3. 

Kitchen, Harry M. 2002. Muncipal Revenue and Expenditure Issues in Canada. Canadian Tax Paper. Toronto, ONT: 

Canadian Tax Foundation. 

Nova Scotia Municipal Finance Corporation. 2011. “Crown Corporation Business Plans for the Fiscal Year 2011-2012”. 

Government of Nova Scotia. 

Patterson, Don. 2011. “Town Debt Rising Close to Limit.” Okotoks Western Wheel, August 3. 

Regional Municipality of Wood Buffalo. 2012. “Debt and Debt Management Summaries, 2008-2012.” http://www.woodbuffalo. 

ab.ca/Assets/Departments/Financial+Services/2012+Proposed+Budget+$!26+Financial+Plans/2012+Proposed+Budget/ 

Debt+$!26+Debt+Management+Summaries.pdf. 

Saskatchewan Municipal Board. “Saskatchewan Municipal Board: About the Board.” http://www.smb.gov.sk.ca/. 

Service Nova Scotia and Municipal Relations. 2010. “Local Government Resource Handbook”. Government of Nova Scotia. 

Slack, Enid. 2011. “Roles and Responsibilities of Government in Funding Municipal Infrastructure.” Municipal Leader. 

Stefaniuk, John D. 2007. “Municipalities and the Constitution Part 1: Powers and Paramountcy.” Municipal Leader. 

The City of Winnipeg. n.d. “Debt Management Policy.” http://www.winnipeg.ca/finance/files/approved_debt_management_ 

policy.pdf. 

The Province of Alberta. 2000. Municipal Government Act: Regional Services Commission. 

———. Municipal Government Act. Chapter M - 26. 

———. Municipal Government Act - Debt Limit Regulation. 255/2000. 

The Province of Manitoba. 2011. The Municipal Board Act. CCSM C. M240. http://web2.gov.mb.ca/laws/statutes/ccsm/m240e.php. 

The Province of Nova Scotia. 1998. Municipal Governance Act. 

The Province of Saskatchewan. 2002. The Cities Act. Chapter C-11.1. 

———. 2005. The Municipalities Act. Chapter M-36.1. 

Tyler, Robert L. 2011. “The Manitoba Municipal Board.” Municipal Leader. 

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Long-term Debt Limits in Saskatchewan - Nipawin

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