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City coffers mired in debt

Millions in debt payments will continue for foreseeable future

Debt associated with the construction of the Legends Centre and the Tribute Communities Centre (then the General Motors Centre, seen here) more than a decade ago will contiue to be on the city's books past 2026. At the end of 2016, the city had more than $101 million in debt on its books. Oshawa is also facing an infrastructure deficit of $464 million over the next nine years.

Debt associated with the construction of the Legends Centre and the Tribute Communities Centre (then the General Motors Centre, seen here) more than a decade ago will contiue to be on the city’s books past 2026. At the end of 2016, the city had more than $101 million in debt on its books. Oshawa is also facing an infrastructure deficit of $464 million over the next nine years.

By Joel Wittnebel/The Oshawa Express

Following the approval of new projects in 2016 that push the City of Oshawa further into the red, millions of dollars will be required in the coming years to finance the municipality’s debt load.

Most recently, the city approved a further $4 million of internal debt in order to pay for the new $6-million runway at the Oshawa Executive Airport. The last year also saw council approve a further $8.4 million of external debt to upgrade the city’s entire street lighting system to LED lights.

However, these numbers are only a fraction of the projects over the last 10 years that are still on the city’s books. In total, at the end of 2016, Oshawa had approximately $101.3 million in debt, $86.1 million of which is external and $13.9 million internal.

As part of the 2017 budget, a debt summary was provided to all council members, but received little discussion during deliberations. The chart details that while

the city’s debt will drop over the next nine years, many of the big projects will remain on the books, requiring millions of dollars in debt payments.

Over the course of 2017, the city will be spending more than $6.9 million on external debt payments, and more than $3.2 million on internal debt, meaning the city will be spending over $10 million on debt alone.

“Those are built into the budget, you’ve got challenges that they’ve all got to be paid for,” says Mayor John Henry, noting that paying off the city’s debt is a high priority. “I think we’ve done the appropriate thing for now.”

However, an extra $10 million could go a long way in the city’s budget, a plan that relies heavily on reserve funds ($28 million) for capital projects. The city also attempted to address the massive $464-million infrastructure deficit (the amount of projects over the next nine years that have no funding) by setting up a one-per-cent tax levy increase to be put solely toward infrastructure. The levy is expected to gain $1.2 million in extra revenue for city coffers over the year. Council has already directed $100,000 of that money toward Durham College and its new Centre for Collaborative Education currently under construction.

“We’re still doing great things and paying off all the other stuff,” Henry says. “When that’s paid off, you can see within the budget the amount of money that becomes free every year. The important part is to remember that money shouldn’t be spent, it should go to reserves.”

The relief the mayor mentioned, however, does not come significantly for several years as several large items will require until 2026 and beyond to be paid off

Show me the money

At the end of 2016, the City of Oshawa had just under $86.2 million in outstanding external debt. Approximately $7 million will be going toward external debt payments in 2017, bringing the total down to just over $79.2 million at the end of this year.

The largest items include the Legends Centre, of which there are three external debt notes totalling $30.5 million when they were first issued for the facility that opened its doors in 2006.  At the end of 2016, there was $13.1 million remaining, a number which is expected to drop by approximately $2 million over the next 10 years, leaving only $170,132 by 2026.

The pair of notes for the Tribute Communities Centre (the former General Motors Centre) totalled approximately $45 million when first issued for the facility that opened in 2006. At the end of 2016, $31.1 million remained, and will be dropping between $2 million and $3 million over the next 10 years. In 2026, the city will still have $5.7 million to pay off for the facility.

One of the newer, and more controversial items, on the list is the Consolidated Operations Depot, which, in 2013, the city needed $18.8 million to go ahead with the purchase and conversion of 199 Wentworth St. E. and the adjoining Ritson Road property for its new works depot. Over the next nine years, about $1 million will be paid off this debt, leaving $8.3 million remaining at the end of 2026.

There is some relief though, as some projects will be paid off in this timeframe, including the Centre Street Parkade, which had $719,530 at the end of 2016 and will be paid off by 2022, and the Northview Community Centre improvements, which had $440,379 left at the end of 2016 and will be paid off in 2022, along with a $3-million note taken out for the Donevan Recreation Complex.

Further relief could come in 2023 when the largest ($26 million) note for the Legends Centre is paid off and then in 2025 when all of the debts for Donevan and UOIT are paid off.

The LED street lighting project, the latest of the city’s external debt, is set to be paid off by 2026.

From the inside

At the end of 2016, the city of Oshawa had more than $13.9 million in interfund notes issued, or money it has borrowed from itself.

The largest items on the list include $8.9 million for the city hall revitalization project, which was completed in 2010, of which approximately $4.9 million was left at the end of 2016. Another big one is the $6.2 million taken out for the Amazing Spaces Project, of which $2.9 million remains.

Some relief comes in 2019 when notes for the city’s revenue control system and the Amazing Spaces Project are paid off. However, further relief won’t come until 2023 when the Municipal Law Enforcement and Licensing department lease for 44 Simcoe St. S. is done and then in 2026 when Fire Hall 6 is paid off.

By the end of 2026, the city plans to only have internal debt remaining for the UOIT Downtown Campus, and less than $500,000 at that, with the other seven items all paid off.

The newest internal debt is the $4 million taken out for the airport runway.

The decision to reach internally for the money drummed up some controversy in December as council’s policy for such a process states that no more than 40 per cent of the city’s minimum cash balance should be invested in this type of debt. The minimum cash balance for 2016 was approximately $35 million, meaning the debt should be capped at $14 million. The $4 million needed for the runway pushes council’s interfund note debt load to $14.8 million at the end of 2017.