Civic Alert: Tackling the merger’s $43 million debt

Despite the controlled operational costs, which lead to a slight reduction of local tax, there is the worry over the unprecedented debt load. A need for as much as $43 million is forecast — a stunning contrast to the pre-merger years, when debt was held to about $2 million.

The budget could have its stating point in November, 2005, when Mayor Karin Marks promised when running for election, that her Council would strive to return to a pay-as-you-go system. This means that all routine infrastructure maintenance would be paid from a cash fund instead of seeking long-term loans, the custom of most municipalities.

The annual spending, pre-merger, was about $4.5 million, but it is projected to be $7.3 next year.

Paying cash reduces costs by avoiding interest charges, but requires a large cash pool as the starting point. Montreal appropriated Westmount’s cash fund, while the limited infrastructure work done during the forced merger was paid for by borrowed money.



Cost doubles



For instance, even the $25,000 survey work on the Summit Circle Lookout prior to its reconstruction — minimal as part of the borough’s $22 million operating budget — was capitalized by the megacity. By the time it has been paid off, it will have cost more than $50,000!

That is how Montreal functions. Habitually, the city capitalizes everything possible and then repays the loans for up to 20 years. While merged with Montréal, Westmount did not control its tax revenue and could not opt out of the wasteful custom.

In 2006, a start was made. $1 million was set aside in the operational budget to cover routine capital maintenance and this has been increased to $1.5 million for next year. There will be similar increases in future years until the fund covers the work.

Meantime, the difference in capital spending will have to be covered by new loans.

As part of the Charest government’s rules governing the demerger, Westmount had to take a $13.3 million loan in April to repay Montreal for the various capital works done during the four years.



Water mains impact



Also, Westmount took over the secondary water mains network. Again the government established a formula to recompense Montreal, an amount of about $9 million. There will be a need for ongoing maintenance, and this will also add an element of debt.

In her pre-budget statement in October, Mayor Karin Marks said the road program was now about eight years behind due to the merger and Montreal’s delays in replacing water mains.

Council wants to catch up, if possible, and has begun by preparing the rebuilding of Kensington Ave.

Next year’s programme will include major rebuilding of Carleton and Chesterfield, as well as parts of Aberdeen and Olivier.

Taking advantage of its new control of water mains, they will be renewed at the same time on Carleton, Aberdeen and Chesterfield.

Total cost of this roadwork will be about $3.4 million. Some of them are more than 100 years old, Director-General Bruce St. Louis commented on Monday.

Approximately $2.7 million will be invested in buildings, parks, vehicles and information systems.



Repayments



Next year’s debt repayments, predicted to be $4.7 million, is about 6.5 per cent less than in 2006. St. Louis explained that this is due to over estimating last year before the extent of the inheritance of the mega-merger was known.

“We had to borrow at seven per cent,� he said. “We now have the opportunity to refinance it at about 4.6 per cent over 20 years.�

The closing balance with Montreal for the years to 2005 is still not finalized, although St Louis told council that he thought it could be in the first quarter of 2007.



Innovatory Treasury



The terms of Guy Charette as Finance Commissioner and Claude Lachance, the new City Treasurer, have led to innovative thinking on the debt.

In April, to meet the $13.3 million due to Montreal, Westmount issued municipal bonds at about six per cent for 12 years.

In this way, council expected to save a substantial amount — anticipated to be about $2 million — of the interest payments.

Historically, small municipalities have borrowed only on a per project basis. This restriction did not apply to Montreal, which could take blanket loans to cover even undetermined needs.

In fact, this week Montreal city council was authorizing debt increases of $430 million to meet most of its 2007 borrowing.

The province now permits small cities to use this method, and Westmount will probably take advantage of the new ruling.



Staff addition



To prepare for the financial emphasis, changes have been made in the treasurer’s department.

The latest was the appointment by council this week of Annette Dupré as Treasury and Budgets Manager.

Dupré, who was chosen from 37 applicants for the position, will start January 10 on a five-year contract. A graduate of McGill, HEC and UQAM, she comes from Mouvements Desjardins and was previously with the Royal Bank.

“It will be part of her job to ensure that no available source of outside funding goes untapped,� Administration Commissioner Tom Thompson commented at Monday’s meeting.



Mill rate



The debt will be a relatively small component of the overall budget, which will be $34.6 million, an increase of 2.4 per cent. “The goal was for no increase,� said Mayor Marks, “but that was difficult, particularly with garbage costing 72 per cent more.�

The final mill rate was set following last-minute government decisions — to allow a four-year spread to ameliorate the high valuation increases, and new flexibility with the commercial property differential.

This allows non-residential property to be indexed at 3.7 times the main rate. “It gives us the same flexibility that Montreal gets," Marks added. “We don’t want residents to take the whole Agglom burden.�

Putting them together allowed the 1.3 per cent drop in residential rates, although Tremblay’s Agglom tax increase of 4.1 per cent means that the total burden will climb another four points!



Caluori’s briefing



Fred Caluori was back again briefly in the Public Works chief’s office last week. He interrupted his retirement leave to meet his successor, Jacques Lahaie.

They toured the city and discussed the operations and tasks Lahaie is inheriting.

After a five-month search, Council finally hired Lahaie as the new City Engineer this month. As public works chief, the director heads the city’s largest department in both budget and personnel. It includes a substantial blue collar labour force, and its work involves him with almost all activities in the city.

Some of the next big issues include revisions to garbage collection, acceleration of road reconstruction, expansion of compost collection, Sunnyside Park renewal and renewal of the water mains.

Caluori retired in September after 36 years’ service with Westmount and is looking forward to his first winter vacation — he believed that was the time city engineers here should be on the job.

During the interim, Caluori’s deputy, Marianne Zalzal, had been acting as chief.



Civic Studies



Teamwork Montreal West Mayor Campbell Stuart and Sean Finn, who as Mayor of St. Lambert is one of the hardest fighters against the South Shore Agglom, have been discussing a common front. They will be joined by mayoral colleagues from both sides of the St Lawrence in one of those downtown corporate high-rises for a planning breakfast this (Thursday) morning.



Tribute Former Mayor May Cutler’s homage to the late activist Edyth Germain (Letters to the Editor, Examiner, Dec. 14) was not only an important recognition of a community figure, but a reminder of why local papers should be published — and read.



Wind of Change 1 "I think we have to come to the conclusion that the agglomeration council is, at least currently, dysfunctional. It has to be a body that responds to the legitimate needs of the population of the entire island of Montreal, not just the city of Montreal." — NDG MNA Russell Copeman to CBC Radio.

Wind of Change 2 “It will need to be a real change, not just cosmetic tinkering. It may not need legislation. Many of the problems came in the Charest cabinet’s decrees, so they might be put right just as easily.� — Hampstead Mayor Bill Steinberg.

Big spenders Montreal has not only budgeted to spend $3.9 billion next year from taxes and grants, but it is already starting to borrow another $130 million to be paid-off, with interest, by city taxpayers and eventually their children, plus another $300 million, the responsibility of the Agglom. Now that’s mega-city dollars!

Unhappy camper 1 “The suburbs won’t use Montreal’s 311 phone system so it should not be an Agglom cost.� — Baie d’Urfé Mayor Maria Tutino.

Unhappy camper 2 “We closed our two Access Montreal offices so that we could house the new 311 system. Now they have delayed it and don’t yet want the space we rented for them. They’re refusing to pay us for the empty space. They take decisions but leave us with the bill.� — CDN-NDG Mayor Michael Applebaum

Happy camper A highlight of a recent George Bowser weekend was the annual visit of his British childhood friend and cousin, Alex Cooper, who was drummer with Katrina and the Waves and co-wrote their big 1985 hit “Walking on Sunshine.�

Assessment “Economic activity in a handful of big cities in Canada has generated much of the wealth of the country. Social and cultural policy has also been shaped in these cities. But they have not been able to achieve reasonable powers of self government nor the power to levy the taxes needed to finance the kinds of programs they need. It seems unclear how this situation might change given the political leadership in Canada's biggest cities, which could be charitably called weak.� — John Sewell, once Mayor of Pre-mega Toronto, retiring after publishing his Local Government Bulletin for seven years.





Community activist Don Wedge can be reached at calert@web.net. His columns are archived at www.westmountexaminer.com,">www.westmountexaminer.com,">www.westmountexaminer.com, go to Opinion.