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Coaldale council considers implications of borrowing term to fund lagoon upgrades

Posted on December 29, 2021 by Sunny South News

By Erika Mathieu
Sunny South News

Budget deliberations for the Town of Coaldale continued on Dec. 15 as council heard from CFO Kyle Beauchamp on the draft operational budget for 2022.

With the Town of Coaldale no longer eligible for an MSI (Municipal Sustainability Initiative) operating grant through the government of Alberta, the municipality will now receive a significantly lower grant of $65,000, down from $265,000 awarded in previous years. As a result, this funding decrease will need to be made up through tax support from the municipal rates.

Interest rates for municipal borrowing will increase between 0.5 per cent to 0.75 per cent up from previous figures and will result in increased financing costs for new municipal debentures which will ultimately, “have to be funded by the municipal rate payer,” in coming years. Beauchamp added that an example of this would result in, “higher financing costs related to the aerated lagoon upgrade debenture.”

As the years increase on a given loan term, the interest rate also increases, and the Town would be locked into that term. Hastings added that while a 15-year loan would offer slightly more modest rate increases, the overall interest on the loan would be set at a higher rate, and a longer term could pose challenges for the town to finance other necessary capital infrastructure with debenture funding.

“A 10-year debenture could put the municipality in a better position to take on more capital projects in the future (…) you free up cash and debt capacity for other pieces of critical infrastructure that are going to (be) due in the next five to 10 years,” Hastings said.

Beauchamp revealed inflation is expected to increase into the future, which will continue to affect construction prices and materials, labour, cost of living, and salaries.

“Certain costs must go up or service levels decrease to maintain the current budget,” but said the Town will continue to focus on ways to mitigate the impact of these increases by, “reviewing existing contracts, supplies and services will be required to ensure Coaldale is getting the best bang for their buck.”

Beauchamp said the Town will, “have to consider a proposed increase to the municipal tax rate in order to balance the budget, the exact level of a rate of adjustment will be dependent on potential changes to the draft operating budget.” In order to mitigate this increase for the rate payer, Beauchamp has proposed a, “funding structure over two years.”

Council will have to approve an operational budget first which will determine the amount of tax required to balance next year’s budget followed by a complete property assessment in February or March. After this point, council will be responsible for setting the municipal tax rate for the year. Beauchamp said that different rates can be set for residential and non-residential properties.

Property taxes are calculated by assessed value of property and the residential rate equates to about $800 in municipal property taxes for every $100,000 of assessed value on residential parcels, excluding the seniors and education requisitions from the provincial government. This rate for Coaldale is expressed as 8.06. Comparatively, the city of Lethbridge and Coalhurst’s residential tax rates are expressed as 8.75 and 7.26 respectively.

The non-residential property tax rate, which includes commercial properties, sits at 9.92, or $992 for every $100,000 in assessed non-residential value of a land parcel in Coaldale, and the Town ranks considerably lower in non-residential tax rates when compared to Lethbridge (21.32) and Taber (12.59).

For some municipalities, the non-residential to residential tax rate ratio can be “as high as a 5:1 in larger centres like Edmonton or Calgary,” However, Beauchamp said Coaldale is currently sitting at a 1.23:1, adding that the city of Lethbridge sits at 2.43:1, and Taber’s non-residential to residential tax rate is 1.56:1. Beauchamp said the 1.5:1 ratio could be attainable for the Town of Coaldale too, “it is not unreasonable to propose an increase of the non-residential tax rate to be closer to the 1.5:1 ratio.”

He added that a modest, “one per cent increase is equal to about $8 (more) for every $100,000 of assessed value on a parcel of residential land and (equates to) about $73,000 in revenue for town of Coaldale annually.” A one per cent increase for non-residential property taxes would equate to about $10 for every $100,000 for assessed non-residential property and would add an additional $14,000 in revenue, for a combined total of $87,000 in additional revenue per year.

At the time of writing, the budget deliberations have not been formally accepted as the reviewed information was a draft budget only and had not been voted on by council. The final day of budget meetings is set to conclude on Dec. 20.

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