In this world there are those who like to save in advance of big purchases and those who prefer to deal with big ticket bills as they arise.
St. Albert’s decision-makers represent both types and they had a hearty debate about the city’s use of reserves on Monday during a meeting of the standing committee on finance.
In one corner was Mayor Nolan Crouse and Coun. Cam MacKay. In the other was Coun. Len Bracko and several members of the city’s finance staff.
Currently, the city has several lifecycle replacement programs that puts extra money into a reserve each year, to be spent on ongoing maintenance and eventual replacement of equipment and components. Servus Credit Union Place is an example of a city asset that’s managed this way.
City council also deals with “business cases,” which are funding requests for specific projects.
Crouse was the first to take issue with the system, saying the city is “flirting with two policies.”
“I think the lifecycle is a poor way to go. We should be approving business cases,” Crouse said. “We cannot afford this lifecycle strategy.”
Bracko holds the opposite view. He’d like a lifecycle reserve for everything.
“Our federal infrastructure debt is $123 billion because we were doing one-offs forever and ever,” Bracko said.
“To build something we need a lifecycle replacement or don’t build it because we’re passing it on to the next generation and that’s irresponsible.”
Engineering director Todd Wyman agreed that the reason the city has an infrastructure deficit is because “we just did business cases.”
Coun. Cam MacKay is of the same mind as the mayor. The way MacKay sees it, the existence of lifecycle reserves doesn’t stem the constant demand for business case requests, so why have the reserves?
“If we put that money aside, it’s spent and gone and there’s always going to be a request for more because that’s just the way the world is,” MacKay said.
The city’s utility program is a prime example of lifecycle costing in action. The city sets utility fees (for things like water use) to reflect the projected infrastructure replacement needs over the next 100 years.
This leads to higher water fees in the present but eliminates future spikes to afford large, one-time replacement projects that come up.
“Our experience of policy in St. Albert is that we put money away now to pay for things in the future,” said city manager Bill Holtby. “Most municipalities that you have discussions with around utilities do the reverse, they borrow money and they pay it off over a period of time.”
Chief financial officer Dean Screpnek is a believer in using reserves to mitigate huge property tax swings during years when large purchases are needed. However, he agreed with Crouse that affordability is a huge issue.
“We cannot afford to establish a lifecycle replacement reserve for any of our roads,” Screpnek said. “Conceptually, you want to try to commit to a lifecycle cost system to mitigate the impacts on your taxes, where you can afford it.”
Crouse said the city needs some sort of policy around the use of lifecycle reserves.
“We cherry-pick where we’re going to put a lifecycle reserve,” he said.
