Richard Gleeson
Northern News Services

Yellowknife (Nov 12/99) - The city has taken the Kraft macaroni approach to eliminating its $20 million debt.

The approach is akin to homeowners who choose to sacrifice steak dinners in favour of macaroni to pay off their mortgage faster and save on interest charges.

Repayment periods for some of the city's long-term loans were shortened up when they were refinanced at lower interest rates in 1997 and 1998.

The 1997 refinancing is expected to save the city $1.8 million in interest over the six years it will take to repay the loans, according to the city's draft 2000 budget. The 1998 refinancing is expected to save the city $690,205 in interest over four years.

But the savings come at the cost of higher annual payments.

The draft budget notes 29 cents on each tax dollar goes to paying off long- term debt. In 1997, when debt stood at $25 million and the interest rate being charged was higher, only 22 cents on each dollar were used to pay down debt because the payments were spread out over a longer period.

Annual debt payments went up by $547,000 in 1999 and are budgeted to go up another $123,000 in 2000. Debt repayment is forecast to be the highest area of spending increases next year. The budget forecasts spending $4.6 million on debt repayment next year.

If the city borrowed no money between now and then, the debt would be down to approximately $5 million by 2004.

That is an unlikely scenario. The city has come to rely on a combination of borrowing and block funding to pay for construction projects including road paving and replacement of water and sewer lines.

If followed to the letter, the city's plan for future capital projects, its multi-year capital plan, would require borrowing another $11.5 million between now and 2004.

Combined with current debt and repayment of it, that borrowing would leave the city with about $15 million of debt in 2004.

Legally, the sky's the limit as far as borrowing is concerned. Territorial law sets the borrowing limit for municipalities as a percentage of assessed property value. In the case of Yellowknife that amounts to $241.6 million.