Long-term Debt Limits in Saskatchewan - Nipawin

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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
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
Page 1 and 2: THE POLICY SHOP Long-term Debt Limi
Page 3 and 4: Executive Summary This report expla
Page 5 and 6: Introduction In Saskatchewan, many
Page 7 and 8: Within the SMB, the Local Governmen
Page 9 and 10: Table 1.0 Very dissatisfied Somewha
Page 11 and 12: 6. Maintain Regulation While Increa
Page 13 and 14: commissions for various reasons: th
Page 15 and 16: Table 2.0 Comparison with Saskatche
Page 17: of debt, while permitting the provi

Long-term Debt Limits in Saskatchewan - Nipawin

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