> Your Questions Why does the City use debt?

The City of Edmonton is growing.

Just like a growing family, we are planning for the future.

The debt the City takes on to help pay for new projects is much like the loan a growing family would take on for a new home.

Just like new homeowners, the City goes through a process to make sure the loan is appropriate and can be paid off in a reasonable amount of time.

Taking on debt that’s directed and spent responsibly results in a better quality of life for citizens today and tomorrow.

Edmontonians have come to expect a certain level of quality from the City. Keeping up with this requires responsible planning and a balanced approach to creating and maintaining infrastructure—this includes debt.

The debt the City takes on is not like credit card debt. For instance, the City of Edmonton never uses debt to pay for operating expenses —it only borrows money to pay for infrastructure. If the City were a homeowner, it would only use cash to pay for groceries, clothes utilities and consumables, but it would rely on a mortgage to purchase a house.

Much like someone taking out a loan on a new home, the City also goes through a process to make sure the debt it takes on is a responsible amount and that there is sufficient income in place to begin making payments on that debt in a manageable timeframe. Before the City can borrow any money for any project, they are required develop a specific plan for paying that debt off.

Unlike a homeowner, the projects the City uses debt for need to serve multiple generations. The City’s use of debt means that infrastructure investments are spread out over a longer period and are paid for by those who use them, rather than burdening a single group of taxpayers with a massive lump-sum payment.

As well, there is an expectation from the public that the taxes they pay will be used to provide services and programs they need today, rather than being stored away so they can be used on a single infrastructure program at some point in the future. Taking the homeowner analogy further, imagine how quality of life would be impacted if someone hoping to buy a home had to, in addition to all other daily expenses, save up the full cost of a home before buying it.

In the past, the City never used to take on debt. This affected how Edmonton grew and how people could invest in the City. Our current approach to growth and development uses a combination of cash-in-hand and debt. This approach has seen impressive results including the Neighbourhood Renewal Program funded with cash and grants, while debt has been used for new rec centres, bridges and many other capital projects, which increase the image of the City and quality of life of its citizens.