Thunder Bay – Naysayers Vindicated!

I just got back from Toronto so I have been absent from my keyboard for a week.  Time to get caught up with the news.

naysayers vindicated
A headline you will never see …never ever


The city report card report released on December 23 is a very interesting read.  This report is a validation of everything that the so-called naysayers have said in their arguments against the outlay of $120 million plus of tax dollars to build a multi-purpose arena. An arena….for $120 million plus?   Nothing mentioned about the estimated $2 million (maybe more) annual operating costs of the proposed facility?

The city’s infrastructure is in desperate need of repair.  THAT should be the spending priority of city council.  THAT has been the mantra of  so-called naysayers.

What has Tim Commisso said on the issue?

With about $23 million in the Renew Thunder Bay fund, a reserve that kicked off discussions of a future event centre back in 2009, and $5 million coming from places like  land development and parking, that could mean a possible debenture of $14 million. That’s if the best-case scenario of $72 million from federal and provincial funding comes through.

Commisso said the city is in good financial shape to handle the project despite some people thinking otherwise. Since 2010 $5.8 million per year has been saved. And while over-budget projects get a lot of media coverage, since 2001 total projects have come in more than $4.4 million under budget. – September 24, 2014, Tbnewswatch 

So…at least a $14 million debenture to build the arena. Additional operating costs.  City in good financial shape. No budget problems. All is well.  Time to move forward as Hobbs would say.

City Manager Tim Commisso did not mention anything about …

It would cost every household in Thunder Bay $59,301 to replace the city’s infrastructure.

With $3 billion in assets, infrastructure in Thunder Bay is getting a C overall in a report to city council that outlines a $17 million infrastructure deficit and recommendations on how to close the gap.

The report card outlines eight major asset categories from roads to the city’s fleet. It would cost $561 million to replace the city’s roads alone. The network got a C for condition with 91 per cent in fair condition. It’s funding though is at a D, with historic spending at 45 per cent of what’s needed to maintain the system.

City sidewalks appear to be the most in need as over 70 per cent are in poor or critical condition with only 27 per cent being spent on what’s needed. – December 23, 2014, Tbnewswatch

Two different messages from the same person.  When Commisso wants public support for the $120 million plus multi-purpose arena, then all is well financially. When Commisso wants support for his plan of taking on $7 million of debt annually for the next 11 years, then the city’s infrastructure is crumbling around us as we speak. Interesting. You don’t think Commsso knew about the future infrastructure debt tsunami while promoting the $120 million plus multi-purpose arena?   You don’t think Commisso knew about the future infrastructure debt tsunami while lauding the findings of the Phase 3 Feasibility Study? If he didn’t, then he should be fired. Immediately. Why?  Because his jobs is to know those things.

What effect will all this additional debt have on the city’s AA- rating? Good question. That issue is not addressed in the article.  Higher debt will surely lead to a lower rating and higher borrowing costs.

Sewers show a $5 million deficit. That would also take on $42.8 million in debt over 11 years and then $1 million every year after while also increasing revenue through internally developed cash flows the report states.  – December 23, 2014, Tbnewswatch

..increasing revenue through internally developed cash flows…means what exactly? I’m guessing higher rates, fees and charges on almost everything.

This end-of-the-year ghost of budgets future  is all provincially driven.  Earlier in 2014, the province released its Asset Management Plan….

Funding for asset management plans should come from a variety of sources – including property taxes, user fees, debt issuance, and drawing on reserves. It may not be advantageous for large, one-time capital expenditures to be funded from current revenues alone. Municipalities need to plan their reserves and debt issuance accordingly. – Guide for Municipal Asset Management Plans

In fact, much of the report’s move toward debt financing is taken right out of the provincial plan….

 Financing strategies are a key component of a detailed asset management plan. Municipal councils must be open to all available revenue and financing tools. For example, there may be a need for some municipalities to revisit their “zero debt” policies. Debt financing, such as debentures, loans, and construction financing agreements, helps to spread the cost of expensive capital projects over time so that both current and future users of services share the burden. – Guide for Municipal Asset Management Plans

Yes…provincial funding help will come in the way of loans….just like Tbaytel and the City of Thunder Bay.  Loans that will have to be paid back….with interest.

Interesting.  I wonder if the provincial government will add a fraction of a point or so to the interest rate charged to the cities taking advantage of these loans? A single percent of additional interest on several billion dollars over 20 years can add up to an impressive amount of money.



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