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Iqaluit ratepayers to vote on massive borrowing

City’s 1,300 property owners to decide whether to borrow up to $35 million

DENISE RIDEOUT

The City of Iqaluit is taking a bold new step to borrow the money it needs to pave roads, upgrade the water system and introduce public transit.

Iqaluit city council is proposing to go deep in debt, borrowing between $24 million and $35 million over the next five years to pay for badly-needed capital projects.

But according to municipal law, if the city is to assume a debt, it must first seek the approval of ratepayers. So it will put the option before Iqaluit property owners in a plebiscite to be held within the next three months.

If approved, the plan will require property tax increases of between 15 and 30 per cent.

Traditionally, the city has used a "pay-as-you-go" method to build infrastructure and purchase equipment. But the proposed debt financing would require the city to pay back the loans over 15 years or more.

John Matthews, the mayor of Iqaluit, said the city doesn’t have much choice but to go into debt. "We don’t have enough money now to pay for the requirements of the city," Matthews said.

Iqaluit needs about $46 million between 2002 and 2006 simply to pay for basic infrastructure, including a new dump, the paving of major roads, replacing aging water and sewer lines, and upgrading water treatment capacity.

The capital plan also includes several less urgent, but crucial items, such as building a new swimming pool, cleaning the three metal waste dumps, starting a public transit system, contributing to the construction of a cultural centre, and replacing the city hall and fire hall buildings.

All together, Iqaluit anticipates its five-year capital plan will total $72 million.

Last year, the city turned to the Nunavut government and the federal government for help, but both flatly turned down the requests for more cash. "It is a logical progression, then, to look at debt financing," Matthews said.

The city’s administration has come up with two possible borrowing scenarios. It’s discussing these with the Nunavut government in hopes that the GN will become a major player.

However, the city will go into significant debt and will need major support from the Nunavut government to carry out either option.

Under the first option, called "the basic borrowing scenario," the city will ask the Nunavut government to contribute $3 million in 2002 and $4 million in 2003, 2004, 2005 and 2006. With this option, the city will still have to borrow $35 million over that period.

To pay for the loan required under the first scenario, the city would have to raise property taxes next year by 30 per cent.

The second option would require the Nunavut government to contribute much more money — which means Iqaluit would have to borrow much less. The city will need the GN to pitch in $39.9 million over five years, and the city would borrow $24 million.

Under this plan, property owners would see taxes increase by 15 per cent in 2004.

City councillors will get to vote on which scenario to implement during their Jan. 22 council meeting.

Once council votes, the question will go to Iqaluit’s ratepayers, who number about 1,300.

City administrators will hold public meetings before the plebiscite, to give ratepayers a detailed look at the budget, said Rick Butler, the city’s chief administrative officer.

Butler, who compares debt financing to mortgaging a house, said: "They will decide if they want to put a mortgage on the house or wait until they have all the money before they build the house."

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