In the agenda package for the April 1, 2014 council meeting there is a draft Debt Management Policy (agenda item 8.6 FS08-2014).

It’s common sense to, among other things, get the best interest rate possible, conform to provincial statute debt limits, and limit amortization period to 25 years. As far as I know, this type of common sense guidance has been well followed. There are no problems, and I see no threat of any breach. So an official written policy covering these things is not really necessary.

But if TSBP Financial Officer Michael Humble feels better with an official written policy, then by all means he should do it, as there is nothing wrong with having a formal written debt management policy for minimizing the tax burden on residents of the town related to capital expenditure.

My concern is about all the stuff in the draft policy that has nothing to do with debt policy.

It appears to me that the policy has been drafted not to benefit the residents of TSBP, but rather to provide detours around the proper capital expenditures decision process, and to provide detours around the capital budgeting process, and to shut the public out of both of those processes. It appears to me that the draft debt policy is made to serve someone’s private agenda, at the expense of the public interest.

Is taking on debt a Federal and Provincial Requirement?

The report says:

“debt will continue to be an ongoing component of the town’s capital financing structure, as identified and required by Federal and Provincial Infrastructure initiatives.” (emphasis added by C. Gammie)

I cannot find any provincial or federal document that says that debt finance is a “requirement”. And it doesn’t make any sense.

Council currently has flexibility to pay for the unsubsidized part of capital projects using reserves or debt or some combination. That flexibility must be retained. The policy as drafted require at least some use of debt financing, and as such would remove that flexibility. I have no idea why anyone would want to do that. It would certainly not benefit the residents. The policy must be changed.

Should/can developments be subsidized with taxpayer dollars?

The draft policy seems to suggest that current residents should pay for infrastructure for new development. This is wrong. And regardless of whether new development infrastructure (e.g. sewage plant expansion) is paid for by debt or reserves or reserve funds or other sources, the burden should not be put on all current residents of TSBP.

The hidden agenda here seems to be to get all TSBP taxpayers to pay for water and sewer infrastructure for one or more new developments.

Should any part of any user-pay system capital expenditures be paid by all taxpayers?

The draft policy suggests that user pay system expenditures can be covered by general taxes, that is taxes on users and non-users of the system.

This practice is wrong and it is illegal.

The hidden agenda here may be to justify putting the cost of Wiarton sewer system repairs on all TSBP taxpayers, in order to limit complaints about costs from those actually on the Wiarton system.

Another hidden agenda may be to reissue the Sauble sewers proposal and put the cost on all TSBP taxpayers, for the sole purpose of making the project appear more palatable, so that the project can be rammed through.

Both would be grossly unfair, especially to those neither in Sauble nor in Wiarton.

“Benefit to community” insufficient grounds

The draft policy implies that if someone claims that there is a benefit to the community related to a capital expenditure then the project should proceed.

That’s nutty.

Council must consider not only the benefits of any particular capital expenditure project, but also the costs. And much more should be considered in the decision process too.

I believe the policy is proposed to justify Sauble sewers, airport runway repairs, and any other pet projects being pushed by certain staff and certain council members, projects that simply would not make sense when put through a proper decision process, projects that would be rejected if put through a proper decision process.

“Strategic priorities” insufficient grounds

The draft policy implies that capital projects that are “strategic priorities” should proceed.

The policy even suggests that “strategic priority” projects be discussed and approved outside the budget process.
That’s nutty too. Each capital project proposal must be decided separately. It matters not whether it’s on someone’s “strategic priority” list.

Again the draft policy seems to be made to push pet projects through that would fail a proper decision process.

The policy even suggests that “strategic priority” projects be discussed and approved outside the budget process.

That simply shuts taxpayers out of the discussion. That’s unacceptable.

A Proper debt policy

Whether capital projects are financed by debt or by reserves is not as big a deal as Mr. Humble indicates. Furthermore, the decision of whether to proceed with any capital project should be made independent of a decision of whether to finance the municipality or user portion using debt or a reserve or reserve fund. The debt or reserve/reserve-fund issue should not enter the decision process until after the decision of whether to proceed with the capital expenditure project is made.

The debt policy might suggest what part of the financing should be from debt and what part from reserve funds, and these may vary for different kinds of projects, but the policy should not be suggesting and evaluating criteria for deciding what capital projects should proceed and which should not.

All considered, it sure looks like most of the draft debt policy was put forward not for the public interest, but rather to advance someone’s private agenda.

We thought Mr. Humble would be immune to the influence of individual council members, and that he would be resistant to these kinds of shenanigans. So from my perspective the draft policy, coming from Mr. Humble, is a huge disappointment.

It would be very wrong for council to accept the draft debt policy.

Craig