City’s $173M debt will take decades to pay off

The City of Brandon is facing decades of paying off debt for large infrastructure projects approved in recent years to support the city’s growth.

The city, which is expected to have more than $173 million of authorized debt by the end of the year, won’t pay off the total until around 2058, according to an estimate by Troy Tripp, the city’s director of finance.

While city council has approved $163,394,794 in borrowing for work on several projects, only $45,017,439 has actually been borrowed and is outstanding — which means interest isn’t currently being paid on the rest.

Council is in the process of approving another $10 million in borrowing, which will be added to the $163 million.

“I would say that we are acting sustainably right now,” Tripp said. “Our debt is well within the provincial limits.”

The city is spending $5,061,000 on servicing debt this year. That number is projected to jump to $6,416,437 next year.

Tripp said the recent investments in long-lasting infrastructure are ones that improve the quality of life in the community.

Those major projects include the water treatment facility upgrade, southeast drainage improvements and southwest wastewater expansion.

Most of the debt on those projects, along with smaller ones like the Sportsplex upgrade, will be issued “over the next two to four years,” and money will only be officially borrowed when it’s needed, Tripp said.

“We’re borrowing for tomorrow’s needs so we’re not acting on impulse or borrowing for today’s wants,” Tripp said. “We’re being responsible with it and planning for the needs of tomorrow.”

The borrowing for the projects vary with 10-, 20- and 30-year terms, which is why the total amount will take so long to be paid off.

He said the more than $45 million currently outstanding “will definitely increase as we start to borrow some of this money,” he said, adding that the entire $173 million won’t increase when that happens, unless council invests in other projects and more money is borrowed.

“If there are additional needs or requirements that are identified in future years, then those will have to be accounted for as well.”

The city’s debt total has shot up from $28.5 million just 10 years ago, Tripp said in an email.

“If we’re managing (debt) properly, it is not a problem. It’s more of a tool or strategy that we use to invest in the community and ensure long-term value for the residents.”

Tripp said only borrowing some of the money the city needs right away is helping residents in the long term, ensuring costs are spread over time.

In the city’s current assessment from the Manitoba Municipal Board, the debt ceiling, which is “more of a recommendation,” sits at $231.6 million, he said. That means the city is only at three-quarters of its borrowing capacity.

The debt ceiling five years ago was at $199.9 million, Tripp said. The city then had $51.4 million in total debt, 26 per cent of the debt ceiling.

“I don’t think it’s worrisome. It’s something that we’ve been planning for,” Tripp said. “It’s not something that’s come out of the blue for us. We’ve known for some time now that a lot of these (infrastructure) upgrades were required.”

Aaron Moore, a political science professor at the University of Winnipeg, said the $173-million total isn’t the main number to be fixated on. The key figure, he said, is the $45 million that the city is currently dealing with.

Moore said the investments probably won’t change too much for the city, financially speaking.

“I don’t think it’s going to put that much pressure on their budget,” Moore said. “If they’re paying less than five per cent of their total budget on servicing their debt, it’s quite low.”

He said municipalities should be paying five per cent or less of its revenue on servicing debt.

Brandon is currently spending 4.5 per cent of its revenue on debt, Tripp said.

He said next year, “it will probably go up slightly from the 4.5,” although he couldn’t provide a more concrete number as council hasn’t drafted its budget.

Moore compared it to people with mortgages who spend a lot more of their revenue on personal debt.

“You think about somebody with a mortgage — we’re talking about 30 per cent, some people paying 40 per cent of their income each year in servicing debt.”

Brandon Mayor Jeff Fawcett emphasized that the additional borrowing is about the city’s future.

“Either we stop growing or we build the community like they did the 1940s and again in the 1960s, and we haven’t done anything like that since then,” Fawcett said. “We are the generation that’s doing this again so that we can continue to grow this city.”

Fawcett noted that the city is in discussions with other levels of government and has applied to them for grants and requests for assistance for some projects.

Major projects that will be completely paid off in the next five years include repairs to the Keystone Centre roof, the police station renovation and the construction of the No. 1 Fire Hall at 120 19th St. North that was completed in 2010.

» alambert@brandonsun.com