Charlottetown’s finance committee continues to work on a strategy to address how it wants to reduce its capital debt.
The city’s debt stands around $74 million but only increased $1.5 million over a four-year period between 2007 and 2011.
The city’s finance committee and staff in the department are trying to come up with a set of guidelines. In 2006, the city launched its capital debt reduction strategy which took a pay-as-you-go approach but that wasn’t sustainable or practical in their eyes.
Charlottetown Mayor Clifford Lee says they’re brainstorming new ways to address the debt.
“We’re looking at things such as the percentage of revenue from the city that should not be exceeded in regards to capital debt retirement,’’ Lee said.
They’re also taking a closer look at what constitutes a capital expense from an operational one.
“No decisions (have been) made and our finance committee has gone back to look at some other issues that were raised during our discussion at the meeting,’’ the mayor said, eluding to a brief public council meeting recently.
Coun. Cecil Villard, chairman of administrative services, said the city needs a concrete plan.
“We need to have certain principles that we use in terms of making decisions related to the budget, as it relates to both the city corporation and the utility,’’ Villard said. “The lack of a debt strategy means you are simply constantly spending.’’
“We’re looking at things such as the percentage of revenue from the city that should not be exceeded in regards to capital debt retirement,’’ Charlottetown Mayor Clifford Lee
Those principles will be designed to guide the city through the entire year, not just when it comes time to putting the annual budget together.
Lee said that’s hard to do considering they don’t know from one year to the next how much money they’re getting from the province. Rather that the tax credit system the province used to base the formula on, where municipalities received a fixed amount of dollars, they now use a grant system, where the amount can go up or down.
Lee said there is no stability to that system, making it challenging for the city to assign a ceiling of, say, 15-17 per cent of its revenue going to pay off the debt annually.
Former provincial court judge Ralph Thompson agrees with Lee, recommending the province go back to the tax credit system in the Report of the Commission of Land and Local Governance in 2010.
“Until your revenue sources are locked in it’s going to be pretty challenging to look at locking in what percentage of your revenue should be going to capital debt,’’ the mayor said.
Talks between the province and the Federation of P.E.I. Municipalities continue on the matter.