|
September
7, 1998
HAMILTON-WENTWORTH BLOCKED FROM USING PENSION MONIES FOR
RED HILL EXPRESSWAY
The
Regional government of Hamilton-Wentworth has struck out
a third time in its desperate attempt to find financing
for the north-south Red Hill Creek Expressway. Local 167
of the Canadian Union of Public Employees (CUPE) has blocked
the Region's scheme to use muncipal workers' pension funds
for the project.
The
Region began discussions in June with Borealis Funds
Management Ltd., a wholly-owned subsidiary of the municipal
employees pension fund (OMERS). CUPE Local 167 discovered
the scheme and exacted a promise from the OMERS Board to
stop it. 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." The Region eliminated 55 of its workers in the 1998
budget and has announced plans to cut another 700 municipal
jobs to reduce spending by a further $25 million. Repaying
planned expressway loans will cost the region $7.6 million
a year for the next 25 years -- the equivalent of more than
200 additional jobs.
The
Acting Commissioner of Finance revealed in July that the
Region needs to borrow $81 million to pay its share
of the expressway constructions costs. Staff had earlier
warned councillors 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 means "the Region risks having its credit rating
lowered" and "the Region's ability to manage the operating
budget is impaired". Current regional debt is $135.6 million
(including $19.9 million borrowed for the east-west 'Linc'
expressway). The July report projects this debt will more
than triple in the next six years. "In addition to our current
debt", it warns, "it is anticipated that a further $295.1
million will need to be raised through external borrowing
for the fiscal years 1998 to 2003 inclusive".
Faced
with this desperate financial situation, the Region has
searched fruitlessly for alternative means of funding the
north-south expressway. The first scheme, called a "public/private
partnership", was put forward in 1996 but abandoned in May
1997 when no private company was willing to take on the
risks and staff concluded the savings would only be "marginal".
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" were to be achieved by
robbing 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 more than $60 million less than
the amount forecast in February 1997 by an independent consultant.
|
