Now that we have the benefit of 20/20 hindsight, can anyone determine roughly how long would have taken the City of Edmonton to work its way out of the debt imbalance caused by its accumulated debt that it took on in the 1970s and early 1980s?
Is there a rule of thumb for municipal borrowing beyond just matching debt terms to project life. As in, this piece of infrastructure will last 40 years so we'll issue 40 year debt.
i.e. Was the city's debt sustainable in the low growth economy of the 1990s or was it still a drag?
If it was still a drag, how much longer would it have taken had rising oil prices not come to the rescue?
What I'm getting at is; that 'excess'* debt is easy and quick to accumulate but often slow and cumbersome to extinguish. It takes years, so cities (think Detroit, NY...) have to think financially out into the future quite a few years not just on a project by project basis but in terms of matching revenue streams.
I'm guessing that in looking at cost/benefits of projects, their revenue streams look at averages and so indicate that a facility will generate an average sustaining cash flow over its life and as a result the project is deemed sustainable when in fact, during recessions cash flows may dip substantially.
* I'm thinking excess debt would be debt that seems well worth taking on in good times but significant threatens operating and solvency in average times. (Average times are rare though.)
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