City gradually resumes pay-as-you-go fiscal approach

During city council's monthly public meeting last week, a $395,000 five-year loan bylaw was adopted for the acquisition of a new fleet of vehicles.

Councillor George Bowser, who handles the Public Works portfolio, noted it would probably be the last time Westmount borrowed money for that type of purchase. He said that in such cases, a pay-as-you-go policy would likely be in place in 2008.

"Something like that would definitely be in the pay-as-you-go," he told the Examiner. "Part of the plan is to be able to make those purchases from money set aside for pay-as-you-go … We want to be in that position …

"Good financial management involves being able to pay as you go," he added. "The same as we do in our own lives, we don't want to borrow. We'd rather have money to cope with things that we know are going to come up."

Pay-as-you-go was first implemented by Westmount more than 15 years ago during the administration of former mayor Peter Trent. Since then, the City stood out as virtually the only municipality in Quebec which refrained from routinely borrowing money for the purchase of goods and services. Westmount only took out long-term loans for especially costly capital works projects.

When Westmount was forcibly merged with the City of Montreal from the beginning of 2002 to the end of 2005, it had to comply with new regulations that made loan bylaws mandatory—even for small purchases—in all of the megacity's boroughs.

In 2005, shortly before Westmount's reconstitution as a municipality, then-borough mayor Karin Marks warned that the City might not be able to return to pay-as-you, because 60 per cent of local taxes were now being sent to the City of Montreal for the administration of the island Agglomeration.

According to Director General Bruce St. Louis, Westmount established a $1 million budget to fund capital works projects through pay-as-you-go during the first year of demerger.

This year, the amount was increased by $500,000. He said the City plans to keep adding to the budget by that amount each year until pay-as-you-go is achieved for all projects in eight to 10 years.

"Typically roads and watermain infrastructure, which is good for 50, 60, 70 years, you can justify borrowing for that over a 10- or 20-year period, because the borrowing period isn't as long as the lifespan of the article" he said.

"But where you get into smaller things, things that don't have anywhere near the same lifespan—like vehicles or improvements to your IT systems, where you're looking at a useful life of anywhere from three to 10 years—those are the type of projects that you want to fund as pay-as-you-go," St. Louis added.

While Westmount still stands out with its innovative approach to public finances, Marks suggested that the idea is catching on. "Montreal is now starting to try and do it," she said, noting that Frank Zampino, who chairs the centre city's executive-committee, is setting up a pay-as-you-go fund.

She summed up Westmount's fiscal approach. "It just means that we are effectively paying for our infrastructure as we go, rather than saying the future generations will pay for it," said Marks.