Council receives spending warning from consultant
By Chris Simon Innisfil Scope December 2 2009
Innisfil council will have to significantly reduce its planned spending over the next few years, or the municipality risks running out of debt capacity by 2012, according to a report from a town consultant.
Town planning consultant Craig Binning presented a report on the municipality’s long-term financial projections during a special council meeting Thursday. And his news could force the town to make significant changes to its forecasted spending during upcoming budget deliberations, says councillor Lynn Dollin.
“It was a fairly lengthy presentation,” said Dollin. “Basically, it was an update on where we are. We’re just about to debenture all of our major capital projects (such as the Innisfil Recreation Complex and Cookstown Library and Community Centre). We’ve got to be careful, because we’re good now, but we’ve had a drop in building permits.”
In total, the town has about $36.2 million in committed long-term debt, due to the recreation complex, New Town Hall, library and South Simcoe Police North Division station. The town is also expected to build about $138.3 million in long-term debt by 2028, with the potential to pay back about $4.8 to $12.9 million per year. While the town has the capacity to fund recently completed capital projects, like the recreation centre and New Town Hall, future construction plans may be difficult to achieve, according to the report.
Dollin says the town could face financial difficulties in three to four years, without significant alterations to its infrastructure planning.
“If we keep spending the way we’re spending now, we’re going to run into trouble with debt capacity,” she said. “Staff gave us a heads-up, which is good. Council’s attitude that DC’s are free money, it’s a bit of a misnomer. If you have to borrow money, there’s financing costs.”
The concerns are mostly due to a slowdown in building permits issued by the municipality. In 2008, the town issued about 456 building permits, a figure that dropped to about 56 between January and October this year.
Next year, the town is expected to issue about 150 building permits, but that’s supposed to climb to about 600 annually by 2014.
“(Binning’s presentation) is a tool we’ll use to move forward,” said mayor Brian Jackson.
“Some of the things that came out of that were whether we’ll be able to meet our financial projections, infrastructure money, and how it effects our overall budgeting,” said Jackson. “We may have to step back and reassess … some projects.
“If we don’t grow, we obviously have to reassess (and re-prioritize) our capital projects.”
Development charges are fees levied on new construction that are used to pay for growth-related municipal construction projects, such as roads, sewers and water treatment plants. The town is expected to need $300 million in development charges over the next few decades, to pay for anticipated growth.
Between 2010 and 2018, the town is expected to collect between $3.4 and $14.1 million in development charges per year. Binning’s report could lead to changes in the town’s development charge system, said councillor Dan Davidson.
“We can’t build things in this town, unless we get the money upfront,” he said. “If we don’t get the developers to pay for a lot of things, the taxpayers have to. Once the DC’s start coming in, we should bank them, instead of spending. We have a higher rate of service than in other comparable municipalities. In these economic times, that rate has to be brought back into perspective. We can’t build everything that everybody wants; there’s a cost for doing that, and we don’t have the money at this period of time.
“I wish we’d received this report earlier, before we’d gone ahead with some of our capital projects. If we had stayed in the budget that was set, we may not be in the position we’re in now.”
Council asked staff to develop a spending policy for future growth-related infrastructure projects. That policy could set thorough standards for collecting development charges, before approving capital construction projects.
“There’s a disconnect between the (town’s) Development Charge Study and what staff have put into a five-year capital forecast,” said Dollin. “Affordability is obviously a big part of whether or not they include it. The DC (revenue) forecast is pie in the sky; if money wasn’t an object, what would you build. If we built everything in the year we said we were going to build them, we wouldn’t have enough debt capacity by (about 2012).”
Council will host a capital budget meeting at the New Town Hall Thursday, beginning at 5:30 p.m.