Who's holding the purse strings?

When groups of municipal representatives get together, the conversation invariably turns to infrastructure.

Mayors and councillors across the country are calling for collaboration with the higher levels of government to find a new funding model that would lighten the cities' financial load.

The question of how to avoid providing an off-road experience on city streets is a hot topic of debate in Prince George. That debate will reopen tonight, when city council further discusses proposals to move money from reserves or implement a gas tax to pay for paving projects.

The reason for this is that the city's coffers are only so large and money for projects like road rehabilitation has to come from money the city already has - the tax base.

While large-scale projects - like the new RCMP detachment, the waiting-to-be-tested District Energy System and the now-defunct River Road Dike - may seem like a misallocated use of resources when motorists are being treated to a free full-body massage, they are not actually pulling cash from the same pocket.

These big builds are financed with debt.

According to the Community Charter, essentially the rulebook governing provincial-municipal relations, if a city needs money for infrastructure they can only borrow to pay for capital projects.

Things like infrastructure maintenance are funded out of the roughly $80 million of the tax levy allocated for operating costs.

The pockets Prince George taps into belong to the Municipal Finance Authority (MFA) of B.C. - a 42-year-old institution used by nearly every local government in the province.

"The MFA is a not-for-profit organization and what they do is, through collective borrowing with all the municipalities, they've put themselves in a position where they can access securities that individually we would not be able to," said Kris Dalio, the city's manager of financial planning.

While the city would first look to secure grant funding for major projects, they generally still have to contribute at least one-third of the cost.

"And most of the time, those grants are big money and we just don't have that kind of money sitting around," Dalio said. "Debt is usually the only option here."

Once council receives approval through a referendum or alternative approval process, a rubber stamp from the provincial Inspector of Municipalities, they can approve the loan authorization bylaw.

The loan is then repaid over a 20-year term to spread the cost over the life of the people using the facility - both current and future taxpayers.

Recent examples of these loans are the $3 million approved for the 18th Avenue public works yard, $4.6 million for both the Simon Fraser Bridge and River Road reconstruction and more than $37 million for the new RCMP facility.

With its AAA credit rating, the MFA also has lower rates of borrowing than those offered by banks.

And because they're a not-for-profit, the MFA isn't looking to make money off of the borrowers, Dalio said.

"If they do well in their market, they in turn forgive some of our principle down the road. So sometimes these 20-year loans may actually be done in the 18th year or 19th year," he said.