CORNWALL – Facing a number of large projects, the City of Cornwall is planning to double its debt over the next four years.
It’s a stark contrast for a municipality that was debt-free for roughly 10 years up until the late 2000s.
As of this year, the city has already borrowed $25.9 million and is already approved to go to the bank for another $25.2 million. It plans to borrow an additional $57.3 million through 2024.
Those big projects on the horizon are the new fire hall, the arts center and the municipal works building. Other projects borrowed for are the Lemay Street extension, a landfill gas collection system, the widening of Marleau Avenue and the Emerald Ash Borer program.
A debt forecast shows the amount of outstanding debt will peak in 2023 at just under $60 million and back off slightly in 2024. With the exception of this year, the amount of borrowing is way above Cornwall’s long term financial plan targets.
CFO Tracey Bailey told council Monday the city was off target because they were “borrowing for something sooner than what we thought,” such as the arts center and the fire hall.
Based on that plan, the city should only be borrowing for projects greater than $2.5 million with a lifespan of 20 years or more.
“It is important to note that while debt is a funding source for capital, debt charges (principal and interest) have an impact on future operating budgets,” reads a statement in the debt financing section of the 2021 Cornwall budget.
This year, debt repayment is 3 per cent of the city’s $179.3 million operating budget. It will make principal and interest payments of $5.4 million this year – a 23 per cent increase from last year (an additional $1 million compared to 2020).
As for capital projects, there is $37.1 million in planned construction with 59 per cent of that financed through long term debt.
Under provincial rules, the city is allowed to have debt up to 25 per cent of the total revenue its sources itself, such as municipal taxes. The city currently sits at 5.7 per cent. Instead of using the provincial ceiling, the city’s financial office says it uses a council-approved limit of 10 per cent or a maximum of $12 million in annual principal and interest payments in order to make debt “affordable and sustainable.”