Monday, April 21, 2014

How Bad is Abbotsford's Debt?


In a column published in Abbotsford Today (April 21, 2014), Jordan Bateman calls for an independent audit of Abbotsford’s finances, believing that the whole “story” has not been revealed, specifically with respect to the Heat contract. I too, would be curious to know if such an audit would vary from that of the annual audits done by KPMG, which are reported to the public.

The point Mr. Bateman makes, in his article, about Abbotsford’s debt is what attracted my attention and provoked me into returning to the provincial data (which Mr. Bateman chose not to do for reasons I do not know), doing some basic research related to municipal debt loads throughout the province, and in particular, the Lower Mainland.

Abbotsford’s ‘Total Long-Term Debt’ at end of 2012 was $87,663.00 and at the end of 2013, it was approximately $79,000.00. Mr. Bateman quotes my article of a year ago in which 2011 stats were applied. Since then, Abbotsford’s status has changed to 6th highest debt.

What is of more importance and interest is the per capita debt one finds when doing some basic sleuthing and math calculations. The following table highlights only 38 municipalities, which represent most of the municipalities with significant debt. With a little more time and effort, I could have produced a table that would have included the entire province. This table, however, will suffice to make the point that debt expressed in terms of dollar value only, is a very small part of the entire picture. The table provides some comparison in terms of capacity to carry a particular debt.

601.1 - Long-term Debt and Debt Charges as at December 31, 2012
Rank
Long-Term Debt
POP. 2013
Per Capita Debt
Northern Rockies
1
24,339,342
$4,118.33
Whistler
2
37,865,997
10,620
$3,565.54
Revelstoke
3
20,129,067
7,277
$2,766.12
Summerland
4
29,197,689
10,855
$2,689.79
Dawson Creek
5
29,058,370
12,475
$2,329.33
Nelson
6
20,148,186
9,810
$2,053.84
Penticton
7
67,599,365
33,318
$2,028.91
Cranbrook
8
37,404,453
19,125
$1,955.79
Salmon Arm
9
29,781,543
17,129
$1,738.66
Squamish
10
31,010,855
19,252
$1,610.79
Vancouver
11
1,060,667,000
666,517
$1,591.36
Fort St. John
12
33,081,338
20,992
$1,575.90
Prince George
13
109,221,000
76,286
$1,431.73
West Kelowna
14
32,055,028
27,661
$1,158.85
Kelowna
15
136,398,273
122,455
$1,113.86
Kamloops
16
95,782,075
87,647
$1,092.82
Langford
17
30,208,040
31,195
$968.36
Vernon
18
33,122,000
39,139
$846.27
Courtenay
19
20,415,836
25,116
$812.86
North Cowichan
20
21,503,802
30,168
$712.80
Abbotsford
21
87,663,000
140,235
$625.11
Victoria
22
52,363,439
84,360
$620.71
New Westminster
23
42,192,287
68,534
$615.64
Esquimalt
24
9,568,653
17,639
$542.47
Maple Ridge
25
42,115,768
78,124
$539.09
Mission
26
16,213,167
37,614
$431.04
Langley
27
43,700,000
107,505
$406.49
Port Coquitlam
28
23,608,539
58,517
$403.45
Pitt Meadows
29
7,426,052
18,604
$399.16
Nanaimo
30
33,152,899
87,515
$378.83
Surrey
31
175,478,000
482,725
$363.52
North Vancouver
32
18,850,523
51,870
$363.42
Port Moody
33
11,896,266
34,567
$344.15
Coquitlam
34
27,240,426
129,716
$210.00
Saanich
35
23,717,112
114,013
$208.02
West Vancouver
36
9,160,877
44,284
$206.87
Chilliwack
37
8,058,860
79,617
$101.22
Delta
38
9,969,816
100,337
$99.36

The Ministry data tells only one part of the Lower Mainland Municipal Debt story. In addition to the debt figures provided by the Ministry, each of the Metro Vancouver municipalities carry additional debt that is not represented in this data, which leads to the question, how is Metro Vancouver funded?

The operating budget of the Metro Vancouver Districts is paid for by six main sources:
  1. Tax Requisitions
  2. Sewer Levy
  3. Solid Waste Tipping Fee
  4. Water Sales
  5. Housing Rents
  6. External Revenues, Reserves and Other
These revenue sources support four separate legal entities: the Greater Vancouver Regional District (GVRD) is funded primarily through tax requisitions of member municipalities, the Greater Vancouver Sewerage & Drainage District (GVS&DD) through a sewer levy for liquid waste and user fees for the solid waste function, the Greater Vancouver Water District (GVWD) through the sale of water to participating member municipalities, and the Metro Vancouver Housing Corporation (GVHC) through property rentals.

It is Metro Vancouver’s debt-load, however, which is of particular interest here. The following information is a year old, however, for purposes of comparison and for making my point, is useful. Each figure provided represents debt carried by Metro Vancouver for each respective departments:

Water Debt - $97M.
Water, Capital Programs & Projects - $156M.
Liquid Waste - $33.5 M.
Liquid Waste, Capital Programs & Projects - $47.8M.
Solid Waste - $3.8M
Solid Waste, Capital Programs & Projects - $14.5M.
Housing - $15.5M.
Corporate Programs - $1.5M.

Total debt of $370 M.

This debt is shared by all Metro Vancouver property-tax payers, through the requisitions made annually. Needless to say, the Ministry information that places Abbotsford at 6th largest debt is misleading in that the Metro portion is not included.

As for Abbotsford’s long-term debt, the Plan ‘A’ portion was amortized over 20 and 25 years, depending on the project, at very competitive interest rates. All other long-term debt will be paid by 2016. In 2006, Abbotsford’s total, long-term debt was $123,401,000; at end of 2013, it was $78,760,000 – a decrease of 36% over 7 years.


As noted earlier, not all municipalities were included in the table. Some, in fact, have a higher per capita debt than many in the list. If all were included, Abbotsford would fall even further down the list; here the City sits at 21st. I am not advocating for burdening taxpayers with large debts, however, I am realistic enough to know that some debt is often to be expected, and if the interest rates are competitive, and the tax base wide enough, the burden to taxpayers can be tolerable. Presently, debt payment (principle and interest) constitutes approximately 2% of Abbotsford’s Operating Budget.

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