OUR CITY DEBT

The Truth About Our Debt

   Let's get one thing straight at the outset - I don't like debt, and I don't believe anyone else likes debt, but like life, it happens!

   I've read numerous opinions about the City's debt, including some erroneous facts. Unfortunately, too many people accept those opinions rather than checking against reliable sources. If you should doubt me, please do corroborate what I state against City Annual Reports and provincial ministry stats (where most of my information comes from).

                             http://www.cscd.gov.bc.ca/lgd/infra/statistics_index.htm

   Abbotsford and Matsqui amalgamated into one municipality in 1995; my data includes the years 1997 to present, so when I say Abbotsford has never been debt-free, I am assuming it had a debt in the two years immediately following amalgamation.

   It is has been publicly stated that Abbotsford was debt-free in 2006, which simply is not true. The City had a debt of $38.4m. The closest the City came to being debt-free was 2004 ($16m.). Of course that debt was greatly increased as a result of the elector-approved capital projects (Plan 'A'), resulting in a maximum debt, in 2008, of $104.8m. Today, the City's long-term debt stands at $78.4m. as of December, 2014. I need to acknowledge an error in an earlier post, on this topic, in that I stated debt figures that are not in agreement with the data I cite here.

   The debt has decreased by 25% over the last six years, which correlates with the fact that part of it has been amortized over 25 years (The Reach portion was amortized over 20 years). Like any homeowner, one always considers capacity for carrying debt and how much debt is reasonable to carry. In the City's case, debt principle and interest costs amount to less than 5%, annually, of the City's total budget.

   At the end of 2013, Abbotsford's per capita debt was $625, and will be approximately $525 at the end of this fiscal year. How does this compare with other municipalities? Twenty other municipalities have higher debt burdens, with most of those in excess of $1000. As I said at the outset, I am not advocating for continued debt. What I am trying to convey here is that we have never been debt free; we have a debt resulting from elector-approved capital projects; we have a plan to pay it down (called a mortgage); and that the debt is not more than Abbotsford has the capacity to carry.

Assessed Value, Tax Rates, and Total Tax Revenue

Comparing Tax Rates

Tax rates are not a direct indicator of comparative tax costs between cities. They must be interpreted in conjunction with average assessed values, which vary significantly between cities. Without that reference point, they are meaningless.

Comparing Total Taxes and Charges on Representative Properties

The Province of BC publishes a listing of “Taxes and Charges on a Representative House”. This is the closest data comparison available to compare relative tax burdens between cities for residential properties. It shows what a typical house in each city pays annually in total taxes and charges (both municipal and non-municipal).

Assessed Values are a Useful Tool for Allocating Tax Charges

Assessed values are a good tool for allocating the city’s tax requirement across properties. More expensive properties (those with conceivably greater ability to pay) pay higher taxes. Less expensive properties (those with conceivably lesser ability to pay) pay lower taxes.

Assessed values are not a good tool for dictating the city’s total tax requirement. Assessed values have virtually no relationship to municipal expenses, so it follows that they should not drive tax revenues. Why, for example, should the city increase its tax revenues by 10% in a given year, simply because land values have risen? Similarly, does the fact that Abbotsford has lower land values than Vancouver or Surrey automatically mean that it has lower costs of doing business? With very limited exceptions (e.g. land purchase for road right of way), the answer is no.

How Abbotsford Calculates Tax Charges on Specific Properties

1. Council approves a total tax revenue requirement, separate from any market movement in assessed value (which has no impact)

2. The tax rate is set such that the total required tax revenues will be collected from properties, given their current assessed values. (Council has the option to choose to allocate tax charges in varying proportions to each class of properties.)

3. The total tax charge per property class is allocated to specific properties in proportion to their relative assessed values.

AN INDEPENDENT VOICE

The Strength of Local Government

   Democracy has its roots in Ancient Greece, dating back approximately 2500 years. One of the distinguishing features of Athenian democracy was a legislative assenbly consisting of all Athenian citizens. They practiced direct democracy; their individual voices were heard and not subject to the directives or control of a body of individuals. They may not have had their "rights" secured by the Athenian constitution, but enjoyed their liberties nonetheless. These liberties were exercised and enjoyed by not being subjects themselves to the rule of another body or person.

   Canadians have become increasingly cynical about the political process and about politics in general. This growing mood has become evident in the shrinking turnout at election time. Many citizens don't feel and experience that same level of direct democracy that Athenian society once exercised. Party politics, so evident at the federal and provincial levels, is to a great extent, responsible for this pessimistic mood. Individuals elected by their constituencies find it difficult, at best, to represent the views of their constituents.

   Local government has for the most part, been able to avoid the pitfalls of party politics. That individuals elected to office can exercise independence of mind and reflect the values of a body of citizens without restraint from a party leader, remains one of the greatest strengths of local government. Furthermore, I have come to appreciate that through the process of testing my ideas against the challenges of eight other Council members, I have become more thorough and confident in my decision-making. Instead of two or three contending viewpoints, we may each be faced by as many as eight views on any given issue, and in the back and forth discussions that ensue, better decisions are more likely to be made.

   Last week I heard Rex Murphy refer to communities as the "texture of the nation". I would then add that diversity of independent thought and opinion in local government represents the diversity of the community, which defines that texture.

  When nine men and women exercise independent decision-making in what each believes to be in the best interests of the community, the "texture" of that community can only be enriched and strengthened.