Markham considers taking on debt

The city’s spending on big capital projects is leaping ahead of development charge revenue.

Thestar.com
May 11, 2015
By Noor Javed

Markham's massive build-out in recent years of roads, bridges and community centres, including the Pan Am Centre, has left the city short of development charge reserves and heading into debt.

City staff say Markham will have to consider borrowing for the first time in 20 years to complete many of the large capital projects, including libraries and a fire hall, slated for construction over the next few years.

City staff presented council with a financial snapshot of the development charge reserves Monday that showed the city was short $7.4 million in its reserve balance at the end of 2014.

This was due, in part, to $54 million spent on the Pan Am Centre (which will host badminton, table tennis, water polo and para table tennis this summer), $60 million spent on the Southeast Community Centre, and millions more on roads and bridges.

“Annual expenditures on growth-related capital infrastructure are projected to exceed annual revenues in the upcoming years, thereby resulting in a depletion of the DC reserves,” according to the staff report.

Development charges are fees charged to developers to fund new infrastructure such as roads, parks and facilities. Markham has some of the highest development fees in the GTA.

“From a strictly financial point of view, we are going into debt; we should be conscious of that,” said CAO Andy Taylor. “Are there ways to reduce requirement for debt, by partnering, quality of infrastructure or moving them (the projects) out?”

The city would need to start borrowing in 2016, peaking at $94 million in 2023, with recovery expected to occur around 2031. The city’s options include borrowing through York Region or from its own general portfolio fund, which includes investments.

“So we are sort of loaning it to ourselves,” said Councillor Don Hamilton, trying to get a grasp of the situation. “I think it’s important we be prudent.”

Many councillors expressed concern at the thought of taking on debt, and said the planned projects should be re-evaluated instead.

“My problem is I hate to borrow,” said rookie regional councillor Nirmala Armstrong. “But when the City of Markham hasn’t borrowed for 20 years, and to now be in the awkward transition,” she said, “I would like us to look at other ways to move the money around.”

Mayor Frank Scarpitti said this is not a situation where the “world is falling down.”

“I think staff is saying: Choose carefully what your next project will be. Can you do them all?” he said. “If you choose them all, you could potentially end up with $90- to $100-million in debt,” he said.

Staff said Markham can expect development dollars to continue coming in, which would help pay off the debt. But they warned that it’s difficult to determine development charge revenue precisely due to the volatility of the real estate market. If growth slowed, taxes might have to be raised to service the debt.

The city already has a separate $10-million debt for the creation of the Birchmount Energy Plant for Markham District Energy.