Tax-backed city debt is reduced to zero

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The 19-year effort to reduce the City of Windsor’s long-term debt will reach a momentous milestone later this year when taxpayer-funded debt is reduced to zero.

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“I think it’s very important,” Mayor Drew Dilkens said Thursday, speaking of the long road it has come since 2003, when long-term debt peaked at $ 230 million. Now it’s down to $ 54.2 million. Starting next year, all remaining long-term debt will be for debts that taxpayers do not cover, such as public housing that is paid for with government rents and subsidies, and pollution control plant projects paid for with the sewer surcharge. The final taxpayer-backed debt went to the 21-year-old Windsor Justice Center. His final mortgage payment of $ 2.4 million per year was made this year.

The mayor commented that a budget-related graphic presented to the media two weeks ago on reducing the city’s debt does not illustrate one of the “best messages we have” to tell the public.

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“The numbers are moving in the right direction on the chart, but it’s also important for the public to know that they no longer support taxpayer-funded debt in city tax,” he said, referring to the estimated $ 437 million required from taxpayers. in 2022. so that the city council continues to function.

We pay as we go along on that project and once the work is done it gets paid

City Treasurer Joe Mancina said the elimination of long-term taxpayer-backed debt (the city has no short-term debt, he added) puts the city in an enviable financial position compared to other cities in the United States. Ontario.

“You do not have fixed principal and interest payments to make in your operating (budget) each year, which limits your flexibility when you are in situations like we had in the last 18 to 24 months with the pandemic,” he said. recounting how before 2003, before the arrival of former mayor Eddie Francis (mayor from 2003 to 2014), there was a different philosophy when it comes to long-term debt.

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Back then, it was common practice to finance capital projects, such as roads and sewers, by borrowing money.

“It was a regular funding option that was done all the time, so when Mayor Francis came in and after that, that was over,” Mancina said, referring to Francis’ pay-as-you-go approach to funding major city projects. . .

“There was a fundamental change in that practice. He didn’t see recurring debt show up every year to fund regular ongoing projects. “

A good example of the difference between then and now is the $ 50 million multi-year project to expand and improve busy Cabana Road, the mayor said. Before pay-as-you-go, the project could have been financed with debt. But now it is paid over the eight-year period of the project.

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“We pay as we go along on that project and once the work is done, it pays off,” said Dilkens, who noted that when he was first elected mayor in 2014, long-term debt had dropped from $ 230 million to $ 104.1 million. It is now at $ 54.2 million.

The city’s proposed capital budget for 2022 says the pay-as-you-go approach has saved tens of millions of dollars in interest charges over the years. Costly projects funded in this way in recent years include the WFCU Center, the center water downtown, the new Huron Lodge and the new city hall. Approximately $ 170 million annually is dedicated to capital projects.

While the debt has been on the decline, the City has already committed to making a couple of major debt-generating public housing investments through Windsor Essex Community Housing Corp. in the coming years. These include a substantial portion of the $ 39 million 145-unit Meadowbrook residential tower currently under construction, as well as about $ 54 million for the $ 170 million repair and renovation project to revive thousands of older corporate units. for eight years. Both projects are receiving substantial dollars from the feds and the Canada Mortgage and Housing Corp.

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But this new city debt will not be financed by taxpayers, Mancina said.

“When the long-term debts of the housing corporation enter the balance sheet, they are intended to be financed from rents,” in addition to savings from efficiency improvements and government subsidies, he said.

The budget document says that in 2003, long-term debt as a percentage of total financial assets stood at 68 percent. It currently stands at 5.3 percent. Even when future debts from housing corporations are factored in, that percentage would only increase “nominally” to around eight percent, the report says.

The mayor said that when the city does not have to pay the debt, it can invest the money saved in infrastructure projects that the city needs.

There may be future projects where debt is appropriate, he said, but added that “there is no desire” to go into debt to finance current projects such as road construction.

“This is how the city gets into trouble.”

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