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May
1998 Newsletter
Region
Admits Expressway is a Financial Failure
A
budget report prepared by senior regional staff has warned
the politicians that proceeding with the expressway poses
grave financial risks. The "1998-2007 Capital Budget Business
Plan" was released on April 15. It warns that the expressway
and five other new capital expansion projects "represent
substantial capital outlays" for which "there are insufficient
internal capital reserves". The expressway project accounts
for three-quarters of the cost of the six projects.
The
report advises council that "if approved, these projects
will require external debenture financing and burden regional
property taxes and users fees due to increased debt charges."
Consequently, the staff suggest that "the deferral or elimination
of some of the expansion projects in order to control the
level of external debt may be a consideration." Staff cannot
actually recommend the cancellation of the expressway project,
but it is clear from their report that they believe the
financial consequences are unacceptable.
The
report also repeats the earlier admission that monies that
should have been used to maintain the Region's water and
sewer system and existing roads were used instead to finance
the Lincoln Alexander Parkway. It states: "much of the capital
funding for maintenance, rehabilitation and replacement
of existing infrastructure was redirected to large capital
projects such as the Freeway and Homes for the Aged".
Since
this practice was allegedly ended in 1997, the only way
to pay for new projects like the north-south expressway
is to borrow. The report warns that "the increased debt
charges that will result from an expanded capital program
impact both the Region's credit rating and its Current Budget
flexibility". It notes that if the expressway and five other
new projects proceed, the debt to equity ratio of the Region
will go from 1 to 1 in 1997 to 2.07 to 1 by the year 2000
and warns this means "the Region risks having its credit
rating lowered". This would mean higher interest rates for
regional borrowing. The expressway accounts for 76% of the
total cost of the six new projects slated to begin in 1998.
The other five projects are renovations to Macassa Home
for the Aged, repairs to six leaking landfill sites, two
purchases of computer systems, and $2 million for "Downtown
Initiatives". The Region must borrow at least $85.1 million
for the north-south expressway.
This
document fully confirms what Friends of Red Hill Valley
has been saying for nearly three years. The region clearly
cannot afford to build the north-south expressway. Outrageous
sacrifice of the maintenance of existing infrastructure
has already taken place to pay for the east-west expressway.
Proceeding further will unreasonably compromise the taxpayers
of Hamilton-Wentworth.
The
repayment plan for the borrowing for the north-south expressway
runs for 25 years according to the appendices of this report.
By the Region's own admission, it will siphon off $6.7 million
a year from the annual budget every year from 2005 to 2022.
And this payment only covers the principle. The interest
is additional. All maintenance costs are also additional.
The full hit during this period may be $20 million a year
when all aspects are included. This is greater than the
entire operating budget for the Region's Environmental Services
and Health Services departments COMBINED. For financial
reasons alone, no responsible elected official can support
the construction of the north-south Red Hill Creek Expressway.
Details from the budget report are provided in the following
article.
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