Here is a scenario.
You want to buy a house. You don’t like to borrow money because debt scares you and so you start saving money instead. It takes you 25years to save the money. When you finally save enough, you go to buy that house and find out it costs twice as much. Doesn’t sound likeyou thought that through, does it?
I say you should have gone into debt and moved out of your parents’ basement.
The City of Castlegar is currently in an enviable financial position. Thanks to many years of solid management and leadership we havezero long-term debt. Not many other municipalities can boast of the same. The city is not paying any interest, except for short-termequipment financing and we are saving for future projects by way of reserves.
Projects such as City Hall built in 2007, the Millennium Ponds built in 2014, and other upgrades were all, remarkably, paid for in cash. Butis this the best way?
Being so fiscally conservative as to object to borrowing any money doesn’t make business sense, especially considering that the city canborrow for as low as 1.37 per cent. While saving for a project may avoid some interest, the inflationary pressure on prices would surelynegate any savings and ultimately, the project could cost much more.
We have been conditioned by politics and the media to believe that all public debt is bad. But there are different kinds of debt used fordifferent purposes and lumping it into one pile is misleading. For example, credit card debt used to buy consumables is a lot differentthan mortgage debt to purchase your house. In the same vein, debt used to pay for municipal daily operations could be considered as baddebt but debt used to finance new infrastructure, such as upgrades to a water or sewer plant, would be beneficial and could actually savedollars.
Some people say you should run city hall like you run your household budget and to a large degree this is true. Common sense tells us wecan’t sustainably carry credit card debt to pay for groceries, nor should we ever borrow more than we can afford to repay. But on theother hand, most of us also could never enjoy the benefits of owning a house if long-term mortgage financing was not available.
One could argue that City Hall should not be in the business of accumulating cash surpluses in excess of a prudent reserve. Cashsurpluses represent taxes collected from past taxpayers in excess of the operational needs of the city.
One could also argue that not using debt to fund large capital projects penalizes past and current taxpayers to the benefit of futuretaxpayers. Why should future taxpayers avoid paying a fair share of the cost of the benefits they are enjoying from a previous capitalproject?
So, saving to invest in infrastructure and build other projects with long-term benefits to the community puts some current taxpayers atrisk. It is possible that those taxpayers will never benefit from the very projects they pre-fund, if let’s say they move or even pass away.That is why I have always believed in user pay; that is, the people who benefit pay for the costs through taxes that service capital projectdebt.
I’m not advocating here for freewheeling spending, but I do believe we shouldn’t be afraid to borrow in the right circumstances. The typeof debt that helps our community grow by replacing aging infrastructure, upgrading equipment and expanding recreation facilities to beenjoyed by future generations and taxpayers is worthwhile.
As we deliberate on the 2016 budget and work through the difficult task of balancing the current and future needs of the community withtaxation, understand that the decisions we make are not made lightly. During this process, we encourage you, the taxpayers, to engageand give constructive feedback. The budget represents council’s strategic priorities, values and best ideas on how to move Castlegarforward. Each and every councillor has something different to add to the conversation and while we don’t always agree, we all certainlyrespect each other’s passion for the community.
Let’s not live out the rest of our days in our parents’ basement. It’s time to face our fears and move out. The possibilities are endless.
If you agree, disagree, think I’m off my rocker or just want to chat, email me at fvassilakakis@castlegar.ca.
