B.C. municipalities allowed to take on more debt for small projects, says province
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Municipalities in British Columbia are fiscally conservative whether they want to be or not — but the province is letting that change, at least a little.
"The last time [we changed] the amount local governments could borrow to build infrastructure, Pavel Bure, Kirk McLean and Trevor Linden were making a run to the playoffs for the Canucks," said Ravi Kahlon, B.C.'s minister of housing and municipal affairs, referring to the NHL team's run of success in the '90s.
Municipalities aren't allowed to run operational deficits on a yearly basis. If they want to build or renew city infrastructure but don't have enough reserves, they generally have to approve capital debt through a referendum or an alternative approval process (AAP) — a type of reverse referendum where a project is approved if fewer than 10 per cent of electors fill out a form in opposition.
On Tuesday, the province announced changes that will:
Allow municipalities to borrow up to $150 per person without a referendum or AAP if the term of the borrowing is less than five years, up from $50.
Raise the borrowing limit without a referendum or AAP from five per cent of annual general revenue to 10 per cent for projects with a longer repayment schedule.
The changes won't allow municipalities to bypass public input for their biggest projects, but will allow more small projects to be approved quickly, said Kahlon.
"This is something local governments have been asking for for more than 30 years and we believe it is time for them to be able to catch up," he said.
WATCH | B.C. to allow municipalities to take on more debt
B.C. to allow municipalities to take on more debt
9 hours ago
Duration 2:45
Municipalities in B.C. face serious restrictions on borrowing money. But the provincial government has just given municipalities the green light to go more in the red. Justin McElroy explains why and how the current system for taking on debt can create confusion.
Are municipalities Dickensian orphans?
While some municipalities have taken pride in not going into debt for projects, the change came as a relief to cities that feel hamstrung by the current model.
"So kudos to the government. But like Oliver Twist said, 'Please sir, we want some more,'" said Nanaimo Mayor Leonard Krog, adding that it would help many cities deliver the increased housing and density mandated by the province.
"There is a tension around municipalities being expected to deliver housing … it's not as if we're paying for it in the direct sense, but we're responsible to ensure that the housing is serviced appropriately," he said.
Nanaimo has failed three times in the last two years to approve debt for a new operations centre through the alternative approval process, and Krog argued there's a funding gap between cities and other levels of government.
"Municipalities are treated differently. We're not recognized under the Constitution as a level of government that has an inherent right to exist," he said.
"But we deliver the most basic of services, the services that people may not wish to pay for, but if we turn them off tomorrow would have a tremendous impact on their lives."
Public approval still necessary for big projects
As more than 90 per cent of B.C. municipalities are under 100,000 people and $200 million in yearly revenue, virtually all big ticket items will still need AAPs or referendums to be approved.
One example is playing out in Saanich, where on Wednesday the deadline passed for residents to write in opposition against a proposed $150-million operations centre to replace the one that was built in the 1950s.
Organizers of the campaign against the AAP are confident that enough forms in opposition of the plan have been submitted, and argue the municipality should hold a referendum on the project instead.
"We chose to go the AAP route because it was a way for us to limit the potential additional cost to this project," said Saanich Mayor Dean Murdock, who estimated a recent referendum to approve a new pool in neighbouring Victoria cost $300,000.
"When you consider that so many of our facilities are going to require replacement or significant upgrades, I think the AAP is an appropriate tool," he said, adding that if it failed, Saanich would likely embark on a referendum.
The municipality with the most discussion around AAPs over the last year may be Kamloops, which has used them to move forward on a performing arts centre, arena multiplex, and a new RCMP detachment.
Kamloops deputy mayor Mike O'Reilly said that beyond the cost, going the AAP route instead of a referendum is a pragmatic choice.
"If an AAP fails, you can then move to a referendum," he said.
"If you do a referendum first, and it does not pass … you cannot fall back."
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