Markham gets hosed on U.S. exchange rate buying fire equipment

Yorkregion.com
Jan. 19, 2016
By Amanda Persico

There is much ado about the low Canadian dollar and its relation to skyrocketing food prices.

But the effect of the slumping loonie is also being felt at the municipal and taxpayer level, with Markham dishing out close to $600,000 extra for several pieces of fire fighting equipment paid for in U.S. dollars.

The city has a U.S. account that is used to fund fire trucks and truck equipment, theatre acts, library books and IT services purchased in U.S. dollars.

“We’re not the only ones facing this,” said the city’s treasurer, Joel Lustig. “There is plenty of economic uncertainty out there. Do we lock in today or wait and let the Canadian dollar improve?”

The city purchases U.S. funds throughout the year, but stockpiling the greenback doesn’t work in the city’s favour as it doesn’t earn interest, Lustig said.

But purchasing U.S. funds on an ad-hoc basis is a dangerous precedent, Councillor Don Hamilton argued during this week’s general committee meeting.

“This is gambling,” he said. “This isn’t the first time the Canadian dollar has fallen.”

Instead, the city should have a policy that allows for purchases made in U.S. funds to be postponed, Hamilton said.

He also questioned if it was better to purchase U.S. funds in bulk instead of buying on an as-needed basis – whether gaining zero interest is better than paying a high exchange rate.

In June 2014, council approved the purchase of several pieces of firefighting equipment, including a new truck, pumper and ladder.

At the time of ordering, the exchange rate was about 91.2-cents, bringing the total up to $2.06 million Canadian from $1.89 million U.S.

Final payment is due about six months after delivery of the entire truck, equipment and all, which brings us to December.

By that time, the exchange rate had dropped to 71.2 cents, inflating the original price by more than $377,000 Canadian.

Had the city waited and paid the bill at the general committee meeting, Jan. 18, when the loonie plunged to about 68.9-cents the price would have jumped from $2.06 million to more than $2.74 million.

The Canadian dollar has been on an 11-day downward spiral, which is unprecedented, Lustig said.

“In November, there was talk the dollar would go as low as 72-cents,” he said. “Now, there is talk it could go as low as 59-cents.”

Likewise, the city purchased a similar pumper apparatus in May 2014 and in November 2015 costing between about $600,000 and $620,000 U.S.

In May 2014, with the exchange rate the piece amounted to about $650,000.

The price of a similar piece of equipment jumped to more than $850,000 in November 2015, of which more than $220,000 was from the exchange rate shortfall.

There are consequences with postponing purchases, Mayor Frank Scarpitti said.

“We can’t stop doing business while waiting for the exchange rate to be favourable again,” he said.

“I don’t see the dollar rising to anywhere we’ve enjoyed it over the last number of years quickly. The longer we wait, there are other factors to contend with.”