Karen Sinclair, Township of Langley director of finance (left) discussed the Township’s capital budget with council on Monday, Jan. 27. (Matthew Claxton/Langley Advance Times)

Land purchasing drives debt increase in Langley Township

Council remains divided over the loans as this year’s budget talks continue

Increases in debt, largely driven by land purchases, were debated by Langley Township councillors Monday as the process of creating a 2020 budget moved forward.

When last year’s budget was drafted, the Township had $99 million of outstanding debt.

This year, the draft budget has $200.2 million of outstanding debt proposed. Much of that debt has already been approved over the last several years.

“We’ve increased our debt over 100 per cent in one year,” said Councillor Kim Richter. “It’s even worse than I thought.”

But other councillors were quick to point out that much of the debt won’t directly affect taxpayers, because it’s borrowing against development cost charges (DCCs).

About $109.3 million is debt from DCCs, which are collected from developers to pay for new amenities, including parks, or from user-pay utilities, including sewer, water, and garbage pickup.

None of those debts are funded from property taxes, noted Township administrator Mark Bakken.

Coun. Eric Woodward noted that a large part of new debt, which he voted for, was for a few projects, including land in the Smith neighbourhood near 216th Street, and for upgrades to the McLeod Athletic Park, among other projects.

He also pointed out that some of the additional debt was on the books this year but was approved by previous councils

“There’s debt on there that’s been coming down the pike,” agreed Coun. David Davis.

Much of the increase in debt was due to a series of major land purchases, including as part of a $86 million loan the council approved last year to fund future parks and school sites, particularly in Willoughby. The loans are for 20 to 30 years terms.

At the time of the September vote last year, one of the main reasons given for borrowing now was the ever-increasing cost of land in Willoughby, which had been going up extremely rapidly over the last few years.

If the land purchases and borrowing for land was removed from the budget, there would actually be a reduction in the request for capital funding compared to last year, said Karen Sinclair, the Township’s director of finance.

Large amounts of borrowing can increase taxes, despite low interest rates.

Sinclair noted that a hypothetical $22.26 million in additional borrowing would require the Township to pay $1.34 million in annual debt servicing costs – interest and principal – and result in a one per cent tax increase.

Sinclair’s presentation detailed dozens of items the Township either has to replace or would like to replace, from garbage carts to dump trucks to firefighting equipment to furniture for RCMP stations.

At last week’s operations budget review, Sinclair noted that without finding cost savings, the Township’s property taxes would go up by between 4.12 per cent and 9.69 per cent.

The low number was based on keeping programs running at current levels, a “keep the lights on” budget. The high number would include requests for various Township municipal programs, and some discretionary requests.

By putting off some programs and capital projects to future years, the low number could be reduced to 3.86 per cent.

One option would cut the amount to be put towards capital spending and instead spend it on debt servicing for the land purchases, which would mean a net $3.7 million less money for capital projects in 2020.

Another option would cut $1 million from capital spending, use it for debt servicing, and thereby borrow more money, yielding a net $14.4 million for the Township to use in 2020.

Another option would also cut the tax increase to 3.86 per cent by slashing capital expenditures by more than $2 million, using one-time debt proceeds to fund this year’s costs, but cutting back the capital spending by the same amount a year from now.

The Township staff will also be looking at alternative sources of revenue, said Bakken, and will continue trying to find ways to bring the overall numbers down.

Expenditures in the draft capital budget are listed under a number of urgency levels, from critical down to low.

Critical projects would include those that could present a major safety issue to residents, such as needed road upgrades or repairs, or to keep water lines and sewers functioning.

Among some projects the Township has on its lists for 2020 are repairs to the boat launch in Fort Langley – which is cracking – and a replacement for a pedestrian bridge in Walnut Grove that is aging and needs to be replaced with a steel prefab bridge.

This year, the Township has added “climate” as a level, although that is more parallel to the other urgency levels, Sinclair noted. An urgent need might also contribute to the Township’s priority to mitigate climate change, or a climate change-related project might otherwise be a relatively low priority.

Township councillors will have another future budget meeting before sending a draft budget out to the public for open houses, expected in early February.

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