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September
1998 Newsletter
Regional
Debt Ballooning Out of Control
A
July report from the Region's Commissioner of Finance confirms
that the Region plans to borrow at least $81 million to
pay its share of the expressway constructions costs. Staff
warned councillors in April that borrowing for the expressway
and five smaller projects will push the region's debt to
reserves ratio from 1:1 in 1997 to 2:1 in the year 2000.
They pointed out this will mean "the Region risks having
its credit rating lowered" and "the Region's ability
to manage the operating budget is impaired".
The
July report paints a much worse debt and borrowing picture
because it covers six years instead of just three. The report
shows 1997 regional debt stood at $135.6 million (including
$19.9 million borrowed for the east-west 'Linc' expressway),
and projects this debt will more than triple in the next
six years (see below table from the report).
Note
that the Region's share of the east-west expressway (the
"Linc") was over $80 million, but it only records
an accumulated debt of $19.9 million. The remainder was
apparently robbed from the budgets for the maintenance of
existing infrastructure. This "redirection" of
money was admitted in the 1997 and 1998 budget documents.
For example, the 1998 capital budget notes that "Previously,
much of the capital funding for maintenance, rehabilitation
and replacement of existing infrastructure was redirected
to large capital projects such as the Freeway..." The
budget documents show that the accumulated shortfall in
maintenance spending for the region's water and sewer system
alone totals more than half a billion dollars since 1990.
Of
course this "shortfall" doesn't show up on the
region's books as official debt, but it is debt nevertheless
and will have to be repaid from future budgets. Indeed staff
pointed out in the 1998 budget that "Postponement of
maintenance for infrastructure serves to aggravate existing
problems. The repair and replacement of infrastructure is
5-6 times more costly than if an investment is made in annual
maintenance, rehabilitation and replacement." Council's
current plan is to increase water and sewer rates every
year for the next 20 years in order to simply reach the
level of annual maintenance spending that should exist today.
Also
note that a large chunk of future borrowing is allocated
to the "Regular Roads Program". While the amounts
diminish over the six year forecast, it appears that currently
the ENTIRE road maintenance budget is being borrowed. This
may be an "innovative" way around the Municipal
Act rules that local governments cannot show a deficit.
The
"Pollution Control Plan" refers to the program
to stop raw sewage from flowing into the harbour and local
creeks by building combined sewer overflow tanks. The forecast
spending over the next six years amounts to less than half
of what was promised to be spent by the year 2000 to complete
this program.
"Waste
Management" refers to plans to fix the Upper Ottawa
Street dump and five other leaking landfills.
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