Mayor deems Town debt analysis 'completely misleading'

Posted July 11, 2012

New Tecumseth mayor Mike MacEachern noted this morning in an emailed statement that isolating the Town's long term debt commitments as a per capita obligation doesn't take into consideration that development charges (DCs) are earmarked to service two-thirds of the $75 million, including interest, the Town has borrowed.

In particular, mayor MacEachern takes exception to Ward 3 councillor Paul Whiteside quoting Monday night from a recent Toronto Star article that focuses on "York Region putting development money ahead of good planning."

"With a debt of $1.95 billion and growing, York Region is counting on the levies from current and future development of single-family homes in Vaughan, Richmond Hill and Markham to pay back the money it borrowed to build extensive water and sewer infrastructure," according to the article. "Dividing the debt by population shows that every resident in York Region owes $1,840. In Toronto the amount is $1,305 per person. Almost 78 per cent of York's debt charges are based on money it hopes to recover from future growth. "How do we fund growth? We fund it through development charges," said Edward Hankins, the region's Treasury Office director. ÒBut since we donÕt get paid until a new resident moves in, we actually have to borrow the money in advance."

Mr. Whiteside said the article gave him the notion to use New Tecumseth's outstanding principal debt of about $53 million and determine the per capita debt load here based on a population of 30,000 and came up with $1,757 per person.

"Unfortunately, although the article was used to discuss debt limits, it was actually focused on urban sprawl rather than municipal finance. A more relevant article was published in the Toronto Star on August 14, 2011 under the title "Is it bad for cities to be in debt ? Not necessarily,"This according to the email from mayor MacEachern which was addressed as a letter to the editor, but used here for this report. "The author of this article actually spoke with qualified municipal finance experts being Dr. Enid Slack, director of the University of Toronto's Institute on Municipal Finance and Governance, Ryerson urban planning professor and municipal finance expert David Amborski and senior staff in the City of TorontoÕs finance department. These municipal finance authorities advise that borrowing "is good fiscal policy" because "capital costs can be spread out fairly. It helps ensure that property taxes and user fees don't spike and that reserves can grow through investment, to be used when needed."

More than half of the Town's principal debt obligations are related to approximately $33 million debentured to finance the regional wastewater treatment plant expansion. And that will increase as New Tecumseth will have to debenture the cost to expand the Parsons Road reservoir, currently underway, and the reconstruction of the sewage plant in Tottenham, and master service plan upgrades in Beeton. These are all projects that are required to accommodate the proposed residential growth, and are expected to be paid back by future development charges.

"While attributing the Town's debt to a per capita calculation is completely misleading considering that 65 per cent of it will be paid by development charges and not by the residents, if we want to do calculations then let's also consider that the Town has $237,000,000 in capital assets and that works out to $7,900 of capital assets per capita (per person)," according to the mayor. "The important issues that really need to be considered are that we ensure that the Town grows to support our local businesses and properly maintains our capital assets in a true fiscally responsible manner, not a politically expedient one."

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