Thank goodness for the sale of the Brighton Beach land to the Federal Government.
Otherwise, the city may not have been able to afford its $44-million contribution towards the $424.2-million spending spree which both the Province and the Federal Government contributed a total of $89-million.
A story in Friday’s Windsor Star got me thinking as there were some interesting points made, which I’ve underlined below.
The Star reported:
Of the $34-million payoff, council has directed $13 million to pay the outstanding costs of the properties. Those funds will be directed internally to a handful of capital reserve funds that were used to finance the Brighton Beach acquisitions.
Another $6 million will go into the city’s budget stabilization reserve to repay the legal fees related to border issues.
The remaining $15 million is being directed for use toward the city’s five-year capital plan which includes about $646 million in municipal projects.
City council has approved spending $200 million for capital expenditures in 2009.
Regardless of the expenses, any time the city gets a cheque for $34 million that spells good news, according to treasurer Onorio Colucci…
…The city will actually receive a $28-million cheque today from Ottawa as first payment for the lands.
Under the deal, another $4 million must be paid no later than Dec. 31, 2010, and the final $2 million no later than Dec. 31, 2011.
The immediate question that sprang to mind was, why would the city direct $15-million toward the city’s 5-year capital plan?
After all, didn’t Mayor Francis state:
While there might be some need for short-term financing, the coming mega-spend can be handled without issuing any new long-term debt, said Francis (Windsor Star, May 21, 2009).
But then I found the following document outlining the 5-year capital spending plan which would see a $64.1-million shortfall in fiscal years 2009 and 2010.
I wonder how the Mayor intended to fund this shortfall – short of raiding the reserves.
The $15-million from the sale of Brighton Beach towards the 2009 Capital budget would eliminate the budget shortfall for 2009 leaving a $4.4-million surplus.
But we are still facing a $46.4-million capital budget shortfall in 2010.
Brighton Beach Sale
The other interesting point made in the Star was that $6-million of the $34-million would be paid out over the next 2 years for the Brighton Beach sale.
Mmm.
Is the Federal Government so cash poor that it could not afford to pay the entire sale price upfront?
But wait – doesn’t the outstanding $6-million equal the amount of the border legal fees spent to date?
Another $6 million will go into the city’s budget stabilization reserve to repay the legal fees related to border issues.
The cynic in me wonders if this is to apply pressure on the Mayor to refrain from any legal challenges against the border project – because based on the 5-year capital budget – the City of Windsor needs this money.
And I won’t even get into how borrowing money from the reserves, as Dave Battagello wrote, “dating back to the 1980s, the city has spent about $25 million to buy dozens of residential and commercial properties totalling about 94 acres in the city’s far west end,” translates into a $34-million transaction.
Because money borrowed from the reserves accrues interest.
As Onorio Collucci wrote to me on December 9, 2008 with respect to the arena financing:
The interest rate has varied but has always been the equivalent of what the City could have invested the funds for an equivalent length as the term of the internal loan.
Today it is around 3% – who knows how much it was back in the 1980′s and 1990′s. Because even the $13-million repaid to the reserves amounts to a little over $23-million at 3% over 20 years – which is probably overly conservative.
But I find it oddly convenient that part of the proceeds from the sale of the Brighton Beach lands are being directed towards the capital budget, which without, would experience a significant shortfall.
And we can’t have that because in order to access federal/provincial stimulus money the city must be able to contribute its share.
In a way, the Federal Government helped to pay for part of the city’s share for stimulus funding.
Chris Schnurr
Carol Kosowan LL.B., B.A. (Law), B.A. (Policy)
Chris, the Mayor is correct in stating that “there might be some need for short-term financing, the coming mega-spend can be handled without issuing any new long-term debt”.
The 5-year capital spending plan projects a surplus of over $60 million, which with the money from the sale of the Brighton Beach lands would cover the projected shortfall in 2009 and 2010. So the City gets a loan for 2 to 3 years. In my books that qualifies as short-term financing.
Yes….
As I said, good thing the Feds bought the Brighton Beach land to help out.
Nonsense. The ‘costs’ to taxpayer from this insane spending spree will be enormous – in tax driven inflation. Governments around the world have trapped themselves in false economic theory – the idea that money is a commodity, and has value, rather than a medium of exchange.
Witness the so-called “jobless” economic recovery that is supposed to be ongoing.
In fact, our entire economic system is little more than a
vast ponzi scheme.
jrlo –
I’m glad there’s someone else out there recognizing this.