Yesterday members of council received a letter from our auditors that should clear up any misconceptions floating around about debt and debentures. It is clear and succinct.
I was also forwarded an email from a candidate (sent to his supporters) with misleading statements about how much debt there is. I don’t know if it was deliberately meant to be misleading – I suspect rather that the candidate simply doesn’t understand municipal finance. But it isn’t really a complicated process.
And no candidate should make claims based on misunderstanding or misinformation. It is their responsibility to get and present the facts, not fantasies, nor opinions.
In response to concerns over such inaccurate claims and misunderstandings, we asked for a clarification. Sue Bragg, B.B.A., CPA, CA, and partner in Gaviller and Company, which audits the town’s financial statements every year, wrote the following (emphasis added):
We understand there have been some inquiries regarding the “definition of debt” and how the debt levels have changed during this last term of Council.
Our professional opinion is that debt is external, contractual debt, typically in the form of bank loans, debentures and mortgages. This definition is in keeping with the presentation of debt on the Financial Information Return prepared annually for the Ministry, as well as the Ministry’s calculation of the Annual Repayment Limit.
Okay, here’s the first important point: debt is external. That’s both the professional and the legal definition of municipal debt as defined by the Ministry of Finance.
Debt is what we owe outsiders: money borrowed with interest and bank charges to be paid. It’s what affects your taxes. It’s our debentures.
It is not any internal loans we have. I’ll get to those a bit later and explain how they work. Just keep in mind that they are not debt by any professional or Ministry calculation.
So then what is our actual debt? Ms. Bragg continues (emphasis added):
As per the 2010 audited financial statements: long-term debt was $45,507,356 and there was a bank demand loan in the amount of $664,013 for a total of $46,171,369. As per the 2013 audited financial statements: long-term debt was $36,860,776 and there was no bank demand loan debt.
We are unable to comment on the 2014 balances as we have not audited those transactions to date.
Got that? We started with a total debt of $46.17 million ($45.5 million in debentures) when we took office. As of Jan. 1, 2013, this council and staff had brought it down to $36.86 million. By the end of 2014, we estimate it will be roughly $38 million because we will pay down more this year, but we also need to borrow for two earlier projects).
At the end of our term, this council will have paid down approximately $7.5 million of our debt, as we have been saying for months now. These are the facts verified by the auditor.
Our debt is not the $50,361,230.00 some candidates are suggesting.