Debt solutions?

What to do when faced with a double-digit tax hike? If you're Edmonton Mayor Stephen Mandel, the answer is simple: take on debt.

Mandel this week unveiled a unique plan cut Edmonton's proposed tax hike to 2.6 per cent, down from the 13.1 per cent proposed.

Using debt in more creative ways has also been discussed in St. Albert, where city council was briefed at a committee meeting a few weeks ago.

Corporate services GM Dean Screpnek said at the time the city could inject $50 million into the 10-year capital plan without adding a dime to tax bills. The plan identifies $730 million worth of projects, but the city has funding to complete less than half.

By borrowing the city could shift dollars that it normally would put into the capital fund each year and use that money for debt financing. The $50-million sum was based on debt payments (principle and interest) of $3 million a year over 20 years.

Granted, the borrowed $50 million is less than the $60 million the city would have put into the capital fund over 20 years. But as Screpnek pointed out, with construction inflation factored in over 20 years there's a good chance the city would come out ahead by borrowing and building the projects today.

The added benefit is the city would immediately benefit from the new infrastructure, rather than waiting several years for funds to accumulate.

Of course, every plan has a down side. Coun. Len Bracko can't stomach the idea of handing down more debt to the next generation. The city's debt is already at $1,218 per capita. Bracko has introduced motions not to take on debt as proposed in 2009 for fire station No. 1 ($8.5 million) and stage three of Ray Gibbon Drive ($1.9 million).

This all shapes up for a good debate when council starts reviewing the 2009-11 capital budget next Tuesday.