New Tec mayor clarifies debt questions
I am writing to correct misinformation included within Mr. McInnes’s letter published in the Sept.19 issue of The Herald.
The submission made to the Province by the Simcoe County Primary Urban Settlement Areas and discussed at a meeting hosted by the Premier and Minister of Municipal Affairs and Housing requests the Province to consider debt incurred by municipalities for growth-related infrastructure and paid for from development charges to be calculated separately from the debt arising from maintenance and replacement of existing infrastructure which is funded from sources other than development charges.
Debt arises from two sources, new growth and existing needs. Currently municipal debt limits are calculated based only on funding sources that do not include development charges even though all growth related debt is paid for only with development charges. The suggested change is simply to use the funding source that will pay the debt to calculate the limit of debt that can be incurred.
Mr. McInnes comments re “credit notes” are also incorrect. The Development Charges Act provides that there are two ways for growth related capital work to be done. Either the developer does the work, in which case the developer receives a credit on the amount they would normally have to pay for their development up to the amount of the development charge funded project they have undertaken or the Town does the work and the developer pays the development charges to the Town that are applicable to their development. This means the developer either does the work or pays the Town to do the work. The Act also provides the Town with the authority to borrow additional funds to do growth related work and all payments including interest are fully paid by development charges to be collected in the future. Under no circumstances are the existing taxpayers ever required to pay for growth related debt.
The suggestion that there is any concealment or hiding of debt is completely opposite to the facts. The true facts are that by separating the debt into the two funding categories, it will be very clear what debt has been incurred for growth and paid by developers through their development charges and what debt is incurred to maintain and replace existing Town assets, which is funded from all other available sources other than development charges.
Mayor Mike MacEachern,
New Tecumseth
Making tough municipal times tougher
Letter to the Alliston Herald Sep 17, 2013
NEW TECUMSETH – Our mayor recently led a delegation of rural mayors to a meeting with Ontario’s Premier, Ms. Kathleen Wynne.
The meeting included discussion of the municipal debt and how it could be better dealt with by Queen’s Park. The mayors spoke to setting acceptable easing of the limits that municipal governments could borrow.
The purpose was to convince the government to separate the two areas of expenses. That is, to not consider the debt because of development charges in order to raise the limit of loans the municipality could borrow for day-to-day operations.
In other words, conceal or camouflage the DC debt while raising the total debt. Our current debt as of December 2012 was $51 million, while our current debt for 2013 is closing in on $57 million. A healthy increase of $6 million in less than eight months and by the end of this Council’s mandate it could be $60 million plus.
The New Tecumseth Council has shown themselves aggressive in the expansion of our town.
New Tecumseth has put monies up front for the building of essential infrastructure for new development and sub-divisions amounting to millions of dollars.
The new Regional Waste Water Treatment Plant, for which New Tecumseth had to arrange a line of credit with its bank, was in the amount of $35 million. That project is up and running with the cost of this line of credit having been converted into a debenture currently being paid out of the Town’s DC reserves when there are sufficient levels, otherwise back to the bank.
Within the past three to four, the downturn in sales of new homes has been drastically impacted by hard economic times.
Currently at least two of the most recent new developments are being underwritten by the developers and have been given Town “credit notes” until the said development charges, less the outstanding credit notes, are deposited with the Town.
This is borrowing money to pay for what you, in effect, cannot afford. Has consideration been given to the fact that some developments may “go under” and the DCs will not be collected?
Throughout Canada, not just New Tecumseth, provincial governments and municipal governments are spending beyond their abilities to pay in order to sustain their growth. Individuals are revolving their credit cards and lines of credit in order to keep the bailiff away from the “door.”
In brief, the deputation has asked Premier Wynne for government to not consider all monies borrowed as necessitated by development charges when arriving at the approved limit of borrowing by the municipality.
If you or I were to go to our bank or credit union and ask for additional loans without disclosing the total amount of debt/loans that we already have further loans would be unlikely.
Municipal governments are not allowed by legislation to run or operate deficit financing. Nor are they or the province allowed to “print money” just because they have run out of it. That is quantitative easing, which the US Federal Reserve has been doing to the tune of $85 million per month in order to keep their economy afloat.
So, what is the Mayor of New Tecumseth seeking to accomplish by manipulating the financial municipal books?
Concealing one debt in order to accumulate another!
The economists around the Globe are telling us that repaying or paying down debt is prudent before the economy turns the corner and all those interest rates on future infrastructure borrowing will go up.
Gordon McInnes,
New Tecumseth
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