Red Deer's debt not as scary as people make it sound

While the heavy equipment grinds away at the end of my street, closing off access from that end of the road for the rest of the summer, I'm reminded of why I'm glad Red Deer is so easily able to finance capital projects with debt.

Alongside the the new concrete water pipes being piled up to be put into place, stands a pile of 60-year-old existing line that's been torn out so far. A much smaller calibre of line, which homeowners on my street know is leaking.

You can follow the connections of the sewer line leading to the houses on my street, either by the slumps and cracks in the pavement where the subsoil has been washed out by leaky lines, or by the new pavement, where one by one, the connections have been replaced.

Projects paid for, I expect, by debt.

In fact, were it not for my ability to take on debt far in excess of my annual income, I would not be living in my own home. Nor would most of you be living in yours.

So I'm wondering about the irrational fears people have been whipping up in Red Deer over the past few years about our city's capital debt.

The matter arises because City Council passed a motion limiting Red Deer's ability to borrow money for capital projects, from the provincial standard of 90 per cent of projected annual income, to 75 per cent.

For as long as I've lived in Red Deer, I can't recall us being anywhere near either limit. That's despite fear-mongering during the past election campaign that we would reach the provincial limit this year.

Back in 2013, the city's audit committee (chaired by then-councillor Tara Veer) warned that Red Deer had been on track to reach the 90-per-cent limit this year. In 2013, city debt was about 46 per cent of the limit.

One web site I found, StatTracker, compared the debt loads of several Alberta cities over the past six years. Red Deer's debt was well in the low range for these cities, peaking at 48.85 per cent of the provincial limit in 2011 (the year I believe we began some heavy construction in water treatment and wastewater treatment and carried on with the north side ring road project).

Since then, our debt load has declined steadily — all while some council candidates were declaring we were on the road to Greek-style ruin. StatTracker said Red Deer's portion of allowable debt was 39.63 per cent by 2013.

By way of comparison, in those same years, Grande Prairie — a city experiencing its own unique growth pains — had a debt load of 75.29 per cent in 2011 and 59.73 per cent in 2013.

I wonder: do they fear the future as much as we seem to? Hard to say. But their new Eastlink recreation centre is a thing of beauty and utility, and also contains a 50-meter swimming pool. Built with debt, to be repaid over the years that the city grows and people come to use it.

Today, we carry 44 per cent of our provincial debt limit, while paying a large fleet of heavy equipment to dig up the street near our house for months, a major traffic circle project on 67^th Street that will provide a barrier to guests at Discovery Park and Riverbend Golf Course  well into next spring, and the next phase of the north side road project.

Plus, paying down whatever we've borrowed for water treatment projects, laying a big new power line and reinventing our downtown.

That's a pretty good record of investment, I'd say.

People who want us to fear the future say the debt Red Deer takes on today is like stealing from our children. We're getting services today that our children will pay for.

Not so. Ask our children. Ask them if they would even be living here if Red Deer did not take on debt for capital infrastructure, such as roads, water projects recreation facilities, and culture. Ask yourself if you would be.

As far as I understand the system, we're not taking debt for services. That's all pay-as-you-go. We're taking on debt for sewer pipes people will make use of on my street (and in the new Riverlands development) long after I'm dead and gone. Shouldn't they pay for their share of it?

I prefer to be fear-averse, but here's my fear over the motion our council passed this week: the artificially-lowered limit automatically raises the number which people can quote as to how near we are to reaching it.

Right now our provincial debt ceiling is $501million. Our actual debt is $222 million, around 46 per cent of that. Now, we're suddenly closer to 60 per cent of the new limit. Sounds much more scary.

The debt limit reduction passed this week doesn't raise the actual debt, but it does raise the percentage of allowable debt substantially, making it substantially easier for fear-mongers to try to make us afraid of the future.

Under the new bylaw, our debt limit will be around $376 million, assuming our revenues do not rise. That means that as long as we're building a ring road or some other major pavement or pipeline project, we will never build a new rec centre or major parks project. Too close to the debt limit, you know. Gotta leave some some borrowing room for unforeseen things, like a big flood.

This motion hasn't saved taxpayers one dime, but it has made it much more difficult for future city councils to spend a dime, in order to save a dollar. Or just to make Red Deer more welcoming to growth.