Long-term Debt Limits in Saskatchewan - Nipawin

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.
Recommendations:
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