Long-term Debt Limits in Saskatchewan - Nipawin

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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