FAS-006 - Debt Management Policy_2025
City of Saint John
Debt Management Policy
Title:Debt Management Policy
Subject:General Fund Debt Management Policy Category:Finance and AdministrativeServices
PolicyNo.:FAS-006 M&C ReportNo.:2025-
EffectiveDate:April 07, 2025NextReviewDate:
Area(s)thispolicyappliesto:Cross Corporate OfficeResponsibleforreviewofthisPolicy:
Fianance and Administrative Services
RelatedInstruments:PolicySponsors:
Chief Financial Officer
FAS-001 Asset Management Policy
FAS-002 Investment Management Policy
FAS-003 Reserves Policy
FAS-004 Operating Budget Policy
FAS-005 Capital Budget Policy
DocumentPages:
Thisdocumentconsistsof9pages.
RevisionHistory:
CityClerk's Annotation for Official Record
Date of Passage of Current Framework: April 07,2025
I certify that this Policy was adopted by Common Council as indicated
above.
______ _April 10, 2025_
Common ClerkDate
DateCreated: CommonCouncilApprovalDate: Contact:
Strategic Services
April 07, 2025
1
City of Saint John
Debt Management Policy
TABLE OF CONTENTS
1. POLICY STATEMENT ........................................................................................................ 3
2. DEFINITIONS .................................................................................................................... 3
3. ACCEPTABLE PURPOSES FOR DEBT ................................................................................. 4
4. DEBT LIMIT CITY OF SAINT JOHN ................................................................................. 5
5. DEBT LIMIT SAINT JOHN WATER .................................................................................. 6
6. DEBT ISSUANCE ............................................................................................................... 7
7. INTERNAL BORROWING .................................................................................................. 7
8. PAY AS YOU GO ............................................................................................................... 7
9. REPORTING ..................................................................................................................... 8
10. RESPONSIBILITIES .......................................................................................................... 8
2
City of Saint John
Debt Management Policy
1. POLICY STATEMENT
1.1. The Debt Management Policy also applies to Saint John Water (Utility);
1.2. The Debt Management Policy is established to ensure that all debt is issued
prudently and cost effectively in accordance with the Long Term Financial Plans of
the City and Saint John Water;
1.3. The Debt Management policy objectives are as follows:
The Organization obtains debt financing only when necessary;
The Organization manages debt such that future financial flexibility is
maintained;
The Organization strategically issues debt based on sound financial planning.
1.4. The Capital Investment Plan (CIP) is essential to intelligent planning of debt issuance
by prioritizing potential capital investment and potential sources of financing.
1.5. The organizations debt issuance and management procedures will comply with the
following legislation where applicable:
Province of New Brunswick Local Governance Act
Province of New Brunswick Municipal Capital Borrowing Act
Province of New Brunswick Municipal Debentures Act
Province of New Brunswick Control of Municipalities Act
Province of New Brunswick Financial Corporation Act
2. DEFINITIONS
Sustainability - means meeting the needs of the present without compromising the
ability of future generations to meet their own needs.
Long Term Debt - means financing with a term over 10-30 years with municipal bonds
through the Municipal Finance Corporation or capital leasing as defined by the Public
Sector Accounting Standards.
Inter-Generational Equity - means distributing the costs associated with capital
investments across the generations which will be enjoying the benefits of the capital
assets built today.
Debt Term - the period of time during which debt payments are made. At the end of
the debt term, the loan is paid in full.
3
City of Saint John
Debt Management Policy
Internal Financing - means financing for capital purchases from reserve funds as permitted
in FAS-003 Reserves Policy.
Pay-As-You Go Financing- means the use of operating funds for capital purchases as
opposed to using debt or reserves.
Organization the term is used to include the City and Saint John Water as one entity for
the purpose of the policy unless specified otherwise.
3. ACCEPTABLE CONDITIONS FOR USE OF DEBT
3.1 The Organization will issue long-term debt solely for the purpose of financing the
projects approved in the Capital Budget and the Capital Investment Plan (CIP);
3.2 Long term debt shall not be used to fund operating or maintenance costs or
used as a tool balance the operating budget;
3.3 The Long Term Debt amortization period shall not exceed the life of the asset it is
financing;
3.4 The Organization shall promote a balanced approach between maintaining an
affordable debt level, maintaining infrastructure and accommodating growth by:
3.4.1 Utilizing this Policy in conjunction with the Asset Management Plan,FAS- 005
Capital Budget Policy, FAS-004 Operating Budget Policy and FAS-003 Reserves
Policy.
3.4.2 Integrating debt issuance with the Capital Budgeting process todetermine
the necessity, priority, and viability of the capital project.
3.4.3 Considering the Long Term Financial Plan and analyzing the tolerance or
capacity to absorb and manage new debt given future priorities.
3.5 Debt will be structured to fairly distribute the costs over time, taking into
consideration inter-generational equity.
3.6 The Organization may also issue debt on behalf of an Agency, Board or Commissions
(ABC) under its control pursuant to Generally Accepted Accounting Principles to
further the public purposes of the City. The City shall take appropriate steps to
confirm the financial feasibility of the project, the financial solvency of the ABC, and
4
City of Saint John
Debt Management Policy
that the issuance of such debt is consistent with the policies set forth herein;
3.7 This Policy does not apply for the use of Short Term debt instruments.
4. DEBT LIMITS AND DEBT CAPACITY GENERAL FUND
4.1 The New Brunswick Local Governance Act stipulates that:
4.1.1 A local government shall not, in any one year, borrow for its current operations
any money in excess of the sum represented by 4% of the budget of that local
government for that year or $15K, whichever is greater.
4.1.1 A local government shall not, in any one year, borrow for capital expenditures
any money in excess of the sum represented by 2% of the assessed value ofreal
property in that local government.
4.1.2 The total amount of money borrowed by a local government for capital
expenditures shall not exceed 6% of the assessed value of real property inthe
local government.
4.2 The City's capacity to issue debt is directly related to Taxpayer's ability to service the
payments required on the debt. Three key performance indicators will be
benchmarked and measured, and the following debt limits shall be applicable:
4.2.1 Debt per Capita: This measurement can provide elected officials with a trend
of overall debt outstanding by measuring how much debt the City has per
citizen. General Fund Debt per Capita shall not exceed $1600;
4.2.2 Debt Service Ratio: This measurement allows elected officials to be aware of
the amount of the current year's annual operating budget which is devoted to
servicing debt. The General Fund Debt Service Ratio shall not exceed 12%;
4.2.3 Total Debt Outstanding as a Percentage of Operating Budget: This
measurement identifies the percentage of annual operating revenues that
would be required to extinguish the City's outstanding debt. The General Fund
Total Debt Outstanding as a Percentage of Operating Budget shall not exceed
70%;
4.3 Additional debt is only permissible when existing debt is within these limits, the limits
will be reviewed and updated on an annual basis;
5
City of Saint John
Debt Management Policy
4.4 The City's General Fund target Debt Per Capita is $750 by 2032, the City's Debt Service
Ratio Target is 6.5% by the year 2032 and the City's General Fund Target Debt
Outstanding as a Percentage of Operating Budget is 30% by 2032.
4.5 Long Term Debt Term shall be in accordance with the Debt Management Plan.
5. DEBT LIMITS AND DEBT CAPACITY SAINT JOHN WATER
5.1 The New Brunswick Local Governance Act stipulates that:
5.1.1 A local government may borrow temporarily in each year for current
expenditures in respect of the operation of a generation facility a sum or sums
of money not exceeding 50% of the budgeted revenue for that year.
5.2 The capacity to issue debt is directly related to ratepayers ability to service
the payments required on the debt. Two key performance indicators will be
benchmarked and measured, and the following debt limits shall be applicable:
5.2.1 Debt Service Ratio: This measurement allows elected officials to be aware of
the amount of the current year's annual operating budget which is devoted to
servicing debt. The Utilities Fund Debt Service Ratio shall not exceed 15%.
5.2.2 Total Debt Outstanding as a Percentage of Operating Budget: This
measurement identifies the percentage of annual operating revenues that
would be required to extinguish the Saint John Water's outstanding debt.The
Utility Fund Total Debt Outstanding as a Percentage of Operating Budgetshall
be reduced to 100% by the year 2026 and shall not exceed by 100% then after
unless there is a business case to substantiate the increase.
5.3 Additional debt is only permissible when existing debt is within these limits, the limits
will be reviewed and updated on an annual basis;
5.4 Long Term Debt Term shall be in accordance with the Debt Management Plan.
6
City of Saint John
Debt Management Policy
6. DEBT ISSUANCE
6.1 A resolution of Council is required for all new debt issues.
6.2 The debt issuance process generally follows the steps below:
6.2.1 Notice of motion: Council gives notice of intent to borrow after 30 days
from the day of Council resolution;
6.2.2 After expiration of 30 days, Council authorizes staff to issue and sell to the
New Brunswick Municipal Finance Corporation debentures at such terms and
conditions recommended by the Corporation;
6.2.3 Application form filled out and submitted to the New Brunswick Municipal
Finance Corporation;
6.2.4 New Brunswick Municipal Finance Corporation advises the City of theactual
bond issue; and
6.2.5 Staff reports back to Council regarding terms of the issue, coupon rate, price,
average yield and settlement date.
6.3 Debt is structured to fairly distribute the costs over time, taking into consideration
intergenerational equity;
7. INTERNAL FINANCING
7.1 The Organization may use reserves as a source of funds for the internal financing of
capital projects as approved by Council. Any borrowing from reserve funds shall
comply with Policy FAS-003 Reserves Policy.
8. PAY-AS-YOU-GO FINANCING
8.1 The Organization will seek to gradually increase pay-as-you-go as an option for
financing capital over time. Factors which favor pay-go financing include:
8.1.1 Asset Renewal Projects;
8.1.2 Assets with a useful life that is less than 10 years - for example,IT
equipment and road maintenance;
8.1.3 Situations where additional debt could adversely impact the
7
City of Saint John
Debt Management Policy
financial health;
8.1.4 Situations where market conditions favour the use of cash rather than debt
(for example, escalating interest rates)
9. REPORTING
9.1. The total debt outstanding, and total annual debt service payments will be
reported in the annual consolidated financial Statements;
9.2. Key performance indicators for debt will be measured and tracked in the
Annual Financial Health Report Card;
9.3. Long-term debt will be forecasted over the long term in a Debt Management Plan
based on the Capital Investment Plan as part of the Long-Term
Financial Plan.
10. ROLES AND RESPONSIBILTIES
10.1 Council shall:
10.1.1 Approve the Debt Management Policy;
10.1.2 Approve new debt issues; and
10.1.3 Approve budgets sufficient to provide for the timely payment of principal
and interest on all debt.
10.2 Finance Committee shall:
10.2.1 Review borrowing requirements for alignment with the Long Term Financial
Plans; and
10.2.2 Recommend to Council the approval of new debt management plan.
10.3 The Chief Financial Officer shall:
10.3.1 Review the policy annually in consideration to meeting the City's and
debt management goals and submit required changes to the
Finance Committee for recommendation to Common Council consideration
and approval.
10.3.2 Assume primary responsibility for the debt management process;
8
City of Saint John
Debt Management Policy
10.3.3 Determine the Ci available debt capacity and alignment with
Long Term Financial Plans;
10.3.4 Provide for the issuance of debt at appropriate intervals and in reasonable
amounts as required to fund approved capital expenditures;
10.3.5 Submit to Finance Committee and Council, all recommendations to issue
debt; and
10.3.6 Ensure compliance with the principles and mandatory requirements
contained in this policy.
9