District of Squamish officials last week released details of a plan to ensure that local government achieves long-term financial stability.
"This policy in the future will ensure the financial health of Squamish," chief administrative officer Kevin Ramsay told councillors at their Committee of the Whole meeting on Tuesday (Oct. 11).
After last week's presentation, lawmakers also had a chance to discuss the long-term financial plan at this week's (Oct. 18) meeting.
The Committee of the Whole presentation highlighted some of the major challenges ahead. The district has inadequate monetary reserves for water, sewer, solid waste and roads, said John Weninger, the principal of Urban Systems, which was hired to compile the plan. Reserve funds are necessary to smooth out rate spikes when investment is needed, he said.
Some of the district's assets, such as water mains, are already experiencing accelerated rates of failure, Weninger said. Overall, the district anticipates $420 million worth of future infrastructure upgrades. Weninger suggested the district create a reserve for emergencies, to be accessed for unexpected utility problems, and build up capital reserves to fund future infrastructure upgrades. The district should aim to deposit a minimum balance of one year's average capital requirement into the fund each year, he said.
If the district borrowed everything that was authorized, the municipality would carry a debt of approximately $30 million. Excluding the Squamish Oceanfront Development Corp. (SODC), the district holds a debt-servicing ratio of less than nine per cent, which leaves an advised borrowing capacity of 16 per cent - roughly $40 million - Weninger said.
Even though the SODC carries a debt, it's not the district's debt; the subsidiary company's debt is offset by land values and that debt is still taken into account when calculating the district's borrowing capacity. The SODC's loan guarantees currently consume a third of the allowable borrowing capacity, Weninger said, adding that this will rise to more than 100 per cent by 2014 if no changes to the district's strategy are made. Restructuring the SODC could free up additional borrowing capacity, he said.
Moving forward, council will have to decide how it wants to deal with the SODC loan guarantees, Mayor Greg Gardner said.
"There are a number of ways to address that issue and it will be council's decision of how to address it," he said.
The SODC could retire its debt, remove the loan guarantee, amortize the guarantee over a 20-year time period or the district could borrow directly over a longer amortization period, Gardner said.
If the district internalized the SODC loan guarantees and amortized them over 20 years, it would bump the district up to 12 per cent of its 20 per cent advised borrowing capacity, Gardner said, giving the district ample borrowing room in the future.
"It is significant that on the current course, we would reach the cap of borrowing capacity by 2014," he told The Chief.
The long-term financial plan also outlined a recommended business tax multiplier of between 2.5 to 2.8 times higher than the residential rate to encourage new business investment in Squamish. The current ratio is approximately 2.7. A sharp decrease in the industrial tax base over the past decade has resulted in business and residential customers paying a larger share of the total tax bill than they had previously, Weninger said. However, a balance needs to be struck between encouraging economic development and ensuring equitable allocation of taxes, he said.
"You are currently around the provincial average and you are quite attractive compared to Vancouver and Whistler," he said, referring to the business tax multiplier.
