An employee explains the debt of the city of Powell River

Financial Services Manager provides information on short-term and long-term financing

Powell River council members were briefed on the city’s current and projected short-term and long-term financial positions.

At the Finance Committee meeting Jan. 26, Financial Services Manager Ryan Youngman said municipalities incur long-term debt for construction or capital investments. He said annual debt service costs, which are annual interest and principal payments, must be within the statutory annual debt service limit.

“This limit prevents municipalities from incurring unsustainable debt,” Youngman said. “The BC City Treasury is issuing long-term debt for all BC local governments. There is short-term borrowing with variable interest rates and a maximum term of five years. There is also long-term debt with fixed interest rates and maturities of between five and 30 years.”

Youngman said looking at the projected short-term debt as of Dec. 31, 2022, it was $480,000, which accounts for a small portion of the city’s debt. He said there will be a downward trend from 2021 to 2025 as the Powell River Waterfront Development Corporation land purchase is paid off and the resource reclamation center road loan is repaid.

Youngman outlined long-term debt, excluding the consolidated sewage treatment plant. He said it totaled $8.9 million as of December 31, 2022, accounting for 31 percent of the total outstanding debt. He said 51 percent of that debt was accounted for by the north port, which is self-financing based on the revenue it generates. He said that debt will decline from 2021 to 2024, when the $7.5 million for the new fire and rescue facility is expected to be borrowed.

“This project is still in its early stages, so the $7.5 million is just a placeholder and does not commit the council to assuming this debt in 2025,” Youngman said.

He said the bulk of the city’s debt is related to the sewage treatment plant. As of December 31, 2022, it was $19.3 million, representing 67 percent of the total outstanding debt, and total debt financing for the plant is $30.7 million, divided into five issuances between 2020 and 2023.

“This approach diversifies interest rate risk and allows the city to assume the debt as needed for construction,” Youngman added.

He said the province is releasing data on outstanding long-term debt. He had figures as of December 31, 2021, which is the most recent data available. He said the comparison is not “apples to apples” as in many areas the regional counties would bear the cost of major infrastructure so it would be on the regional counts’ books and they benefit from economies of scale as multiple communities contribute afford.

“If you look at that, the city of Powell River ranks 130 out of 153 communities that shared their data,” Youngman said. The list is summed up in such a way that community number 153 would have the highest debt.

Youngman said the city can borrow up to an additional $92.8 million before reaching its annual liability limit.

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