|
September
1998 Newsletter
Third
Expressway Funding Scheme Blocked
The
Regional government has struck out a third time in its desperate
attempt to find financing for the north-south Red Hill Creek
Expressway. The latest scheme blew up when municipal workers
discovered the Region was trying to use their pension fund
to pay for the expressway.
The
Region began financing discussions in June with Borealis
Funds Management Ltd., a wholly-owned subsidiary of the
Ontario municipal employees pension fund (OMERS). CUPE Local
167 discovered the scheme and obtained a promise from the
OMERS Board to stop it. They pointed out that the Region
cannot afford the expressway and proceding with it would
likely lead to more municipal layoffs.
In
a letter to its members, the union local declared: "we know
the Region is in a cash crunch. This cash crunch should
not be solved on the backs of our members. We will not bear
the brunt of a cash crunch in the Region be it through layoffs,
contracting out, inappropriate use of our pension fund,
wage freezes, or any means the Region dreams up."
Regional
council eliminated 55 of its workers in the 1998 budget
and has announced plans to cut another 700 municipal jobs
to lower spending by a further $25 million. Repaying planned
expressway loans would cost the region $7.6 million a year
for the next 25 years — the equivalent of more than
200 additional full-time jobs.
Two
earlier "innovative financing" plans for the expressway
also collapsed. The first was floated in 1996 when Friends
of Red Hill first succeeded in alerting the public about
the cost of the expressway. The Region proposed a "public/private
partnership" to fund and build the valley expressway. This
was presented as a solution to the conflict between the
region and the province over subsides for the road. A consultant
was hired to evaluate the potential "savings", as well as
determine the overall cost of the expressway. The consultant
reported that savings of up to $18 million could be achieved
with the private-public partnership approach. However, a
May 1997 analysis by the region's Transportation Commissioner
decided the savings were only "marginal" and the scheme
was abandoned. Some sources indicated the real problem was
that no private company was willing to take on the risks
involved in the expressway.
During
the summer and fall of 1997, council pursued a second strategy
which involved Philip Environmental and promised to provide
$90 million to the Region for 16-20 years for the absurdly
low interest of 4%. This scheme was squashed by the federal
and provincial governments after it became clear that the
"savings" to the region and the "profits" to the private
investors were to be achieved by reducing tax payments to
the federal and provincial treasuries.
Three failed funding schemes in two years shows clearly
that the region knows full well that it can't afford the
north-south expressway, and that it stands an increasingly
slim chance of finding a way out of its financial crisis.
The fallback plan of issuing 25-year debentures for the
$81 million will saddle local taxpayers with a $190 million
in repayments -- an average of $722 per household —
and this doesn't include the costs of operating, maintaining
and repairing the expressway, or additional interest costs
arising from a deteriorating regional credit rating. It
also assumes the Region's current estimates of costs for
the expressway are realistic. They are currently more than
$60 million lower than the cost calculated in February 1997
by an independent consultant.
|
