The 2015 decision to build the Aquatic and Curling Multisport Facility provides an exceptional teaching moment for people who don’t get the concept of debt and the long-term impact it has on finances. The draft 2017 Town budget is now available for perusal and in it some of the ramifications of that decision are coming to light in a sobering way.
To help finance this facility, in 2014 the Town of Cochrane took out a five-year loan of $19 million at 1.178% interest. Over five years the town repays the principal of $19 million, but there is an annual cost of roughly $326,000 in addition to the principal. This interest needs to be taken out of operating funds. The $6.2 million earmarked for principal repayment in years 2017, 2018, and 2019, and the interest on that debt means that other, more important things cannot be undertaken.
This includes things such as the reserve fund, that is commented on in the 2017 draft budget: “Town of Cochrane reserves are a vital part of fiscal health. Council adopted Operating Reserves Policy 1705-01which requires a minimum level of savings in case of an operating emergency. The minimum is 5 per cent of the current year budgeted expenditures. The Town has 11.8 per cent. Although this is above the policy minimum, it is below the Government Finance Officers recommended two months or 17 per cent of total operating expenditures. Given the current economic climate, no increase to operating reserve savings is planned in 2017.” So we can’t fund the reserve to the degree it should be in case of emergencies like a flood or wildfire. But we can have a wave pool.
It also includes not being able to improve traffic flow through Cochrane as noted in the 10-year Capital Financial Strategy: “… the $28 million Centre Avenue grade separated rail crossing was deferred to 2026.” So, no funds for having the trains play less havoc with your daily commute into and out of downtown Cochrane. But we can have a wave pool.
There is a proposed increase in property taxes of 0.88 per cent in the budget that could have been avoided if we did not have this debt service and were able to utilize the Municipal Sustainability Initiative (MSI) grant money from the Alberta Government to cover the costs of other infrastructure projects such as the Bow River Bridge crossing, dog park, storm sewer upgrades, and a host of others mentioned in the budget instead of having it go to the wave pool.
There is a slavish adherence to the notion of this Facility as the most important issue. The number one Strategic Priority in the 2017 budget for this council is to: “Focus attention and resources towards the completion of Aquatic Centre & Curling/Multi Sport Centre;” a Centre that will serve the few. Buried in the second priority are some (by no means all) of the traffic problems that plague visitors and residents on a daily basis. The magnitude of the cost of the facility is driving council and the budget.
Our overall debt as a community is alarming. As pointed out in the budget: “The town is estimated to be at 53 per cent of its council-approved debt limit at the end of 2017. At the end of 2025, the town is estimated to be at 61 per cent of the council approved debt limit; the median MGA debt limit of comparable municipalities is 33 per cent.”
This debt belongs to us, the taxpayers. We will have to pay the money back, and we will have to pay the interest on it. Property taxes will rise to accommodate this requirement. Ironically, the budget also states: “Future debt levels could be reduced through lower project costs, higher capital revenues or deferring projects.”
Council should have taken the last piece of advice “deferring projects” (or eliminating them altogether) when making that fateful decision to tie a $48 million (over 10 years) millstone around the necks of Cochrane taxpayers.
Theresa Kline
