Debt affordability model for municipalities
The Debt Affordability Model and how it helps municipalities plan for financing their future capital needs.
The Debt Affordability Model is a long-term financial planning model that helps you understand how much debt is too much.
Debt affordability is more than paying back the principal and interest on debt. It also takes into consideration the municipality’s future revenue and expenditure growth, including:
- impact of the tax burden on future generations
- future infrastructure needs
- population and economic growth
- maintaining the current municipal tax rate
- making sure current municipal services are not threatened
The Debt Affordability Model uses trend analysis, projections of economic and revenue growth, and future capital improvement needs.
The model provides decision makers with:
- flexibility to plan for the future
- ability to develop future capital improvement plans in a balanced and measured way
- opportunity to prioritize capital projects that compete for scarce resources
- opportunity to develop a long-term financial plan
The Department of Finance and Treasury Board works with you to produce a model for your municipality.