The amount of debt a municipality carries, can divide a population and Rocky View County (RVC) is no different, as residents say the debt is too high, and staff says it’s a necessary evil.
For the 2013 fiscal year, the County’s debt is at $66 million, down from $75 million the year prior.
A positive trend or a blimp on the radar?
According to County officials, there’s nothing to worry about, an expected answer, but one that might be true, according to Rocky View Weekly’s research.
The official explanation for the staggering debt is the sluggish economy and lack of developers knocking on County chambers to bid on valuable and sought-after land.
While that may be one reason for the current situation, the question of “how did we get here?” will be a major issue in October’s municipal election.
According to sources who have worked with County and have asked not to be named, the County’s past operations and decisions have left the municipality in a fiscal hole and taxpayers have been forced to pay the price.
Where it began
Construction began on a sewage and water line in east Balzac in 2006, costing the County $100 million. The line was approved, based on the premise that the investment would encourage the business community to set up shop in the County.
When development did not follow, it left only a portion of the 16,000 acres developed and a “ short-sighted move and poor foresight, saw insufficient levies put in place,” according to an source close to council.
The levies were suppose to recoup the cost of the borrowed investment, but the returns fell far from the mark, leaving the financial books spiraling further into the red.
“The reason the levies were so low, was to make it attractive to developers to come to the County,” one source privy to council decisions said.
According to another source, “You get these big players, and there’s a lot of pent-up demand in the beginning for a big pieces of land and they come in because it’s cheap. But then it drops down to nothing like an open house.
“Well sure enough, two years ago (the County) stopped paying the principal and were only paying the interest. But they didn’t tell anyone. Staff was quietly trying to get through it. Previous councillors were already nervous enough about what was happening and they just wanted to keep it quiet.”
Becoming the bank
Recognizing the urgency, the County used taxpayer money - $3.4 million in 2012 and an additional $1 million in 2013 – to pay off the incurring interest and principle on the current debt.
“Currently, the model we have used on this particular debt we hold is, developers pay for it,” Kent Robinson, manager of corporate services said at the March 12 council meeting where council voted 7-2 in favour of adding an additional $1 million in tax revenue to pay down off the interest.
“That continues to be the model from a recovery perspective but we can’t make people come in the door and pay their levies so we’re having a bit of a timing issue, so as per your (council’s) strategic plan we are trying to accelerate the repayment of the debt.”
A move that isn’t out of the ordinary according to Barry Woods, manager of Business Services for Rocky View County.
“We have to be careful when we are talking about debt,” he explained.
“There are times when taxpayers’ money is used to pay down debt.”
This was one of those times, according to Woods, because if interest is not paid, debt will continue to soar.
“This money (the debt) will be paid back through developers. With the economy the way it is, we don’t have the developers we thought we would. We are, in some cases, paying the interest with the idea that when the developers come, we recover the costs,” he said.
Increased levy fees
With a lack of interest from the business community, the County decided to inact a pay-per-usage levy system aimed at recovering water and wastewater infrastructure costs on July 23.
Some residential developments are facing increases of more than 700 per cent in water levies.
The County rescinded the previous bylaw after determining it was unable to recoup the remaining $66 million still owing on the $100 million investment. Less than $11 million was generated through the bylaw since its inception in 2006.
That figure works out to be only $1.8 million a year in recouped finances. Until 2012, when council shifted focus to debt repayment.
The new levy was prepared by MPE Engineering Ltd., a third-party engineering consultant based out of Edmonton.
An administration report presented to council on July 23, said the levy is “fair and equitable” and will “provide for cost-recovery based on actually servicing needs for each development proposal.”
However, in a presentation to council in July, Greenfield Development Corporation, developers of Buffalo Hill and Meadow Ridge residential projects in East Rocky View, argue the increase is too high.
“Total levy charged for Buffalo Hill and Meadow Ridge is $81.3 million (just for the residential portion). For the whole 630 acres, we are being asked to pay close to $100 million in water and wastewater levies,” stated the developer’s in a presentation to councillors.
Based on the old bylaw, the developer would be required to pay $26,184 per acre, under the new bylaw, Greenfield will have to pay $190,000 per acre.
The increase in levies, according to sources, is a benefit to the County, as the ideal candidate is a commercial/industrial developer with low-water usage, and the higher levy rates will prevent developments that don’t fall under that ideal umbrella to develop elsewhere.
“I believe that we have other advantages to offer developers,” Woods said when asked if the levies would drive developers away. “We don’t have a business tax and we’re close to urban municipalities.”
By the numbers
Rocky View County (RVC), with a 2011 Canada Census population of 36,461 is the 11th largest municipality by population in Alberta.
The County is almost one million acres in size and occupies 1,551 farms and ranches in the County, which comprises approximately 92 per cent of the total land base.
The County’s debt ceiling is $130 million, and is calculated at 1.5 times the County’s revenue.
According to Woods, the more the County generates in revenue, the more the County can borrow against, the same principle applies to those purchasing a house.
In comparison, Parkland County - (see illustration on opposite page) - east of Edmonton, with a population of 30,000 has a debt ceiling of $85 million and operates at $5.7 million current debt.
According to the 2013 operational budget, the cost is estimated at $5.8 million this year for long-term debt repayment.
Interest is accumulating on the total debt, but “it’s hard to give a figure because the number is always changing,” according to Woods. “We draw and add on the debt regularly.”
Taxes
Tax collection is based on the assessed value of a property, and tax rates are split into two components: the education component that goes to the provincial government and the municipal rate.
RVC council approved the 2013 budget and set the new tax rate on May 7.
Taxpayers will see an overall eight-and-a-half per cent increase in taxes from 2012. This is due partly to a five-and-a-half per cent increase in the provincially mandated portion of property taxes, which include the Alberta School Foundation Fund and the Rocky View Seniors Foundation.
The municipal portion of property taxes will bump up three per cent for residential, non-residential and farmland properties.
At the same time, council also approved a new bylaw making the minimum tax levy for each taxable property $20.
Provincial frustrations
According to sources, the issue of soft infrastructure and hard infrastructure are adding to the County’s woes.
The frustrations stem from the Municipal Government Act, section 648, which allow the municipality to impose levies on hard infrastructure projects – to recoup a portion of the costs from the developer – but do not allow the same levies to be placed on soft infrastructure.
“Without the capacity to collect levies, as the City of Calgary is able to do, Rocky View County, continues to build a huge unfunded liability,” explained a source close to council.
“Compared to development activity in Calgary, developers are receiving a form of ‘subsidy’ in Rocky View. In the absence of Development Levies for the capital cost of soft infrastructure requirements such as firehalls, community recreation facilities, libraries, etc. the County needs to depend on the local tax rate to fill the gap.”
Hard infrastructure is defined as land and infrastructure related to roads, pathways and trails, and water, stormwater, wastewater and parking and loading facilities.
Soft infrastructure is defined as infrastructure relating to recreation, libraries, protective services, fire protection services and schools.
The section of the act is a source of frustration for the municipality, as the argument can be made the County should be able to enter into cost sharing initiatives with the developer or private company.
RVC has sent two letters to the provincial government – one, four years ago, which was rejected and sent back because the government wasn’t amending the act, and another in the spring of this year that is under consideration.
According to sources, the provincial government is currently taking input on how to amend the act and a decision is expected to be made in 2014.
See next week’s Rocky View Weekly as we look at the controversial issue of the rate of development in the county.
