BARRHEAD - The Town of Barrhead is on strong financial ground.
This is according to Scott Ellerington of Ellerington LLP, who presented the 2024 audit report of the municipality's financial finances during the March 11 council meeting.
Under the Municipal Government Act (MGA), municipalities must submit an annual financial audit to the province.
An unqualified report means the auditor did not find any issues with the financial records, and town staff tabulated them using standard accepted accounting practices.
In 2023, the province changed how municipalities must plan for and keep track of the retirement and replacement of certain types of assets.
"Effectively anything that has a future cost to retire or clean up, then you have to accrue them on a financial statement," Ellerington said, adding the Barrhead Regional Landfill, jointly run with the county, is the most obvious example.
With the help of engineers, the municipality identified three building three municipally-owned buildings [the bowling alley, curling club and RCMP Detachment] would have "an asset retirement obligation."
For 2024, the municipality identified seven additional properties, including two pressure-reducing water stations, the town municipal office, a washroom at the Barrhead Sportsgrounds, the west-end sewer lift station, the sewer lagoon blower building, and an old section of the water treatment plant.
"They were identified because of the probability of asbestos, and there would be abatement costs involved in their cleanup, " he said.
Ellerington said one of the best indicators of a community's financial well-being is the debt ratio and debt limit.
He noted the town's assets increased in 2024 to $80,339, up from $79,0017 in 2023.
At the same time, Ellerginton noted its liabilities decreased by seven per cent, dropping by about $392,000 to $4,883,000.
"So you can see there is a significant amount of long-term assets versus total debt, which puts the town sitting pretty well," he said.
Ellerington said that in private business, he typically likes to see a debt ratio compared to assets of 40 per cent or lower.
The Town of Barrhead's debt ratio is 6.1 per cent.
"Based on this measure, the long-term health of the town is excellent," he said.
Ellerington said that, admittedly, many of the municipality's assets, including roads, sidewalks, et cetera., aren't readily saleable.
"They have a value, of course, but they are not something you can sell if you run into trouble," he said.
Ellerington added that the other thing that goes hand-in-hand with the debt-to-asset ratio is working capital.
Working capital is a way of expressing an entity's liquidity.
At the end of 2024, he said, the municipality had roughly $9.9 million in sellable assets compared to about $4.8 million in total liability and just over $1 million in short-term debt.
"We have a 10-to-one ratio, including asset retirement obligation, so the town's really in a robust situation. Your ability to pay your short-term debts is really strong," Ellerington said.
Similarly, he said council has a lot of flexibility regarding potential future spending due to the municipality's relatively small debt.
Ellerington said under the MGA, the province allows the municipality to carry a debt limit of about $22 million.
At the end of 2024, the town was carrying just over $3.7 million in debt, the remaining amount left outstanding from the 25-year $5 debenture used for the municipality's contribution to the swimming pool construction.
Coun. Rod Klumph asked Ellerington what he thought the municipality should do if faced with a potential $22 million hit to upgrade its wastewater lagoons.
"If we are looking at another project, should we put it off?" he asked.
In late October, former CAO Edward LeBlanc informed council that the province was going to change the environmental standards governing wastewater treatment, which would necessitate costly upgrades to the lagoons.
At their Nov. 12 meeting, councillors approved a recommendation from the municipality's engineering firm to apply for an Alberta Municipal Water/Wastewater Partnership (AMWWP) grant, which they hope will cover the bulk of the upgrades.
However, corporate services director Jennifer Mantay said they did not know how much they may receive or even if they would get the grant, noting there was no shortage of municipalities attempting to access the fund.
Ellerington couldn't offer a suggestion.
"The expenditure would take you from a comfortable position to a tough one where you couldn't do anything else," he said.
Barry Kerton, TownandCountryToday.com
