It may not have been the most exciting issue on Canmore council’s agenda at the end of May, but an updated debt management policy was clearly an important one for the community’s elected officials.
During one of its regular business meetings in May, council approved unanimously an updated debt management policy as presented by manager of financial services Katherine Van Keimpema.
While first approved in 2013, Van Keimpema said she undertook a review of the policy and compared it with recommendations by the Government Finance Officers Association and best practices used by other municipalities.
“We have been doing work on our long term financial policies and one direction council provided to administration to undertake is to review our policies and bring them up to date,” she said. “As we have learned with the tax policy, it is very helpful for administration to have guidance from council in terms of policy.”
The 2013 policy, said Van Keimpema, did not include language around managing debt and that is important to include because managing the Town’s debt contributes to its financial sustainability and flexibility.
The best practices recommended for government budgets based on the GFOA recognizes that debt commits government revenues into the future and may limit the way in which a governing body can respond to changing priorities, revenue sources or circumstances. A debt policy, as recommended by the GFOA, helps ensure that debt is issued and managed prudently “in order to maintain a sound fiscal position and protect credit quality.”
The review of Canmore’s policy found it lacked several elements that Van Keimpema presented as part of the newly approved policy. Those elements include the purposes for which debt may be issued; matching the useful life of an asset with the maturity of the debt, limitations on outstanding debt and structural features like payment of debt servicing fees.
Van Keimpema said the new policy also separates debt into tax supported and self supporting debt – an important distinction for council to communicate and understand.
The Municipal Government Act sets out debt limits for a municipality and stipulates a community may not borrow beyond those limits without ministerial approval. The newly approved Canmore policy, meanwhile, sets out debt servicing considerations in addition to overall debt limits. It states Canmore shall not exceed 70 per cent of the total debt limit and shall not exceed a total debt servicing cost of 70 per cent of the Town’s debt servicing limit for tax supported debt.
For self supporting utility project debt, servicing costs shall not exceed 22 per cent of utility user fees and levies.
A copy of the policy and other financial policies approved by council is available at canmore.ca.
For its part, council was enthusiastically supportive of having strong financial policies based on industry best practices set out for administration to follow.
“I am thrilled with this policy,” said Councillor Sean Krausert. “It is comprehensive, it is smart, it is responsible and an excellent example of why our finances as characterized by our auditors are getting better year after year.”
