Despite current financing rates sitting lower than they have been in a century, the City of Moose Jaw has approved adding an infrastructure levy to taxpayers' bills, on top of a municipal tax increase, to pay for castiron watermain replacements. 

The City currently holds over $107 million in reserve funds and $63.5 million in debt. That means the City’s reserve to debt ratio is 168 percent. That is compared to Prince Albert, Regina, and Swift Current, which are all lower than 70, showing 64, 68, and 24 percent, respectively. 

According to a report by Greg McIntyre, senior commercial account manager for RBC Moose Jaw, the City's debt to reserve ratio and low financing rates have created the perfect climate for the City to realistically borrow up to $75 million. 

“If the message from council is: ‘we don't want to take on any more debt,’ then it becomes a situation where the City's going to have to say ‘well, if we're not going to take on any more debt, the only other place we can go is start pulling it out of our operating revenue. To do that, we need to have levies and more taxes.'”

The basic rationale for maintaining the City’s reserve system and taking on as little financing as possible is that it is better to save and earn interest for regular capital projects than it is to borrow and pay interest for those projects.

McIntyre said while it might have made sense in the past to pay down debt before borrowing more, for right now, the opposite is prudent. 

“That kitchen table economics doesn't quite translate well to the City's style of economics,” said McIntyre. “You and I as individuals, we can't lock in our debt for 15, 20 or 25 years for this exact same interest rate. The City can do that. The investments the City can access with their reserves, we would benchmark somewhere between three to five percent, and they can borrow money right now [for] less than three.” 

The City’s financial director, Brian Acker, said the reserves are essential to the financial health of the City since they currently generate between $3.7 and $3.8 million dollars in interest and investment revenue per year. 

The City is hoping to make up a loss of $1.6 million dollars a year for a portion of the castiron watermain replacement project with the increased infrastructure levy. 

“To do a bunch of hand wringing and teeth-gnashing over an extra 15 or 30 million.... The actual borrowing capacity of the City is well, well in excess of that before we'd ever have any concerns with the City being in distress or in jeopardy, just to put things into perspective,” said McIntyre. 

The report by McIntyre and associates was not paid for by the City of Moose Jaw. Its findings are based on the ratios between operating surplus (or deficit) to operating revenue, debt burden (annual payments) to operating revenue, and reserves to operating revenue. The City is above average and at least stable, it not very stable, in all three categories.

For more information about the City's reserves, click here.