Many governments are operating beyond their resources and some, such as Detroit and Montreal, are now experiencing the calamitous situation that occurs when debt is too great.
Government is obliged to set an example.
Government has a moral obligation to operate within its financial resources and set an example of fiscal prudence for its citizens. Borrowing from the financial health of its children, as is now occurring, is an immoral act.
The average taxpayer is feeling tapped-out.
In addition to government debt, Canadian citizens are accumulating personal debt. Nationally, according to BMO (national debt report), average household debt rose from $72,045 last year to $76,140 in 2014, and increasing this debt-load will impact negatively on government’s capacity to raise taxes for paying down government debt. The average taxpayer is feeling “tapped-out.”
As of December 31, 2013, Abbotsford’s debt is $102,900,000 ($78,349,000 in long term debt plus $24,561,000 from internal borrowing for development cost charges, more commonly referred to as DCC projects). Almost $71,000,000 is designated for long-term repayment similar to home owner mortgages where advanced payments incur penalties.
The remaining $33,000,000 debt contributes to the $4,260,000 paid in interest during 2013, and can be reduced according to our own repayment schedule.
Fiscal prudence reduces the potential for financial turmoil.
Periodic market corrections occur when inflation is rampant and when interest rates rise dramatically as they did in the early 1980’s when we experienced 22% rates. Fiscal prudence reduces the potential for financial turmoil when such inevitable market-place corrections occur.
Abbotsford must ensure that its finances are in a healthy position by:
- Keeping expenditures within budget.
- Reducing its debt annually so that it is debt-free.
- Incorporating a schedule for debt repayment into the annual operating budget.
Here is what I think we should do.
As mayor, I will propose to Council that:
- Abbotsford city government accelerates its debt elimination, and that Council formally declare its repayment schedule with specific targets identified.
- Incremental debt reductions for each budget are incorporated into the annual budget.
- Transparency is increased by reporting annually in the media to Abbotsfordians on our progress toward achieving this specific financial goal.