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Edmonton's Growth Requires Smart Debt


Several candidates in the civic election campaign are raising debt as a major Edmonton issue.

Perfect. We should discuss and debate civic finances and financial strategies.

My concern is that reasonable discussion about civic borrowing will be lost in the shrill, “sky is falling” tenor of some campaigns.

The comparison of Edmonton’s financial situation to Detroit is not just hyperbolic, it is desperate and ludicrous.

If anything, Edmonton’s history is one of being ultra cautious about borrowing. We came close to wiping out our financial debt in the early 1990s.

But to do so, Edmonton stopped building and maintaining the city. Everything from buses to recreation facilities were kept running with duct tape and prayer.

And then came the potholes. If we’d spent properly on maintenance in years past, our roads would be in much better shape today.

And in there is the irony. Those who complain about high taxes and debt will use the other side of their mouth to complain about potholes.

My view is this: I want to live in a dynamic and prosperous city. For Edmonton to reach it’s potential, we must prepare the urban landscape for current and future growth.

I also want to keep the property tax burden reasonable. It is a balancing act. But the balance demands we maintain our assets and prudently borrow for major projects.

For more on this, please read Edmonton blogger Mack Male’s excellent piece on debt. It puts Edmonton’s debt burden into perspective and context.

Mack quotes an old column of mine in his piece. I’ve reprinted that column below.

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Edmonton Journal
September 24, 2003
By Scott McKeen

If I called you stingy, would you stop reading this column?

If I called you parsimonious, would you cancel your subscription?

This is delicate, but here goes: Edmonton, you're a miserly old skinflint.

Individually, Edmontonians run the gamut, from salt-of-the-earth to scum-of-the-same. The majority — I mean you, dear reader — are much closer to the former than the latter.

But as a whole, well, the sum of our parts ain't as great as it could be. Not to put too fine a point on it, but we're a bunch of pikers.

How do I know this? The Canada West Foundation tells me so.

The public policy research institute recently revealed that Canadian cities are probably too frugal by half.

And of all the cities in Canada, Edmonton stands out for being a skinflint among cheapskates. Our per capita debt is about one-fifth of Calgary's and one-tenth of Vancouver's.

But that's a good thing, right? Oh, if only it were that simple ... .

As you're maybe already aware, Edmonton's hell-bent determination these past two decades to eliminate civic debt has created its own set of problems: neglected and decaying roads; inferior civic services; dated, second-class public facilities.

But we so loved the idea of getting out of debt that we ignored our mounting repair bills. We also ignored the fact that some other cities — Calgary and Vancouver, for example — were busy borrowing money to pave the way for growth.

Those cities gained a competitive edge by financing and building freeways, LRT systems and grand public facilities.

Why did Edmonton pinch pennies while others spent? Blame our miserly attitude.

It reveals itself in civic election campaigns, where successful candidates are often those who promise to hold the line on taxes, instead of offering a creative vision. It reveals itself when those elected councillors act like glorified bookkeepers instead of leaders.

It shows up whenever council decides to actually spend tax money on a public facility -- the Churchill Square project comes to mind -- and is then pilloried by pundits and the public.

The Canada West Foundation believes municipalities like ours should invest in expanding and maintaining facilities, even by borrowing the money. The foundation calls the strategy "smart debt," which sounds a bit oxymoronic, I realize.

Smart debt refers to a policy of borrowing for construction projects, not for operating costs, which was what Ottawa and the provinces did to rack up huge public debt in the 1980s.

That kind of ill-advised borrowing — akin to using your credit card to buy groceries — was what turned Canadians against debt, says Roger Gibbins, CEO of the Canada West Foundation.

Gibbins argues, though, that there is a certain logic or justice to borrowing for large capital projects.

By doing so, you spread the costs over time, meaning that future generations will not only enjoy the asset, but help pay for it.

Gibbins even argues that such borrowing could be used for so-called quality-of-life public projects — parks, recreation facilities, public squares, museums.

"There is a pretty compelling argument that quality-of-life things are critically important to the economic competitiveness of cities."

If we're going to attract talent and investment to this city — if we're going to slow the bleed-off of middle-class taxpayers to the satellite communities — Edmonton has to spend some money on itself.

On what? We'll have to talk in the coming months.

Ultimately, though, we can't be so hidebound that we ignore such options as smart debt to re-energize this city. But then again, you probably agree. You kept reading, unlike those real skinflints.


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