Interesting…the Province of Ontario, which cannot produce a balanced budget if their life depended on it, and is carrying a debt load of
telling municipalities how they should finance their infrastructure projects. Really?
And who benefits from this policy of debt financing? Well I can think of four parties: politicians, city employees and banks/investors.
Politicians gain because municipal taxes appear to stay low. This is all an illusion of course because as more and more of the budget goes to service the increased debt load, less and less is left for other budget items. A kind of budgetary inflation.
Also, municipalities, over the twenty year or thirty year term of the loan, will pay tens of millions of dollars in servicing fees. Money that does not get spent in the city on city infrastructure. This living beyond your means debt management policy is headed towards disaster.
Municipalities are not allowed to run a deficit. This is exactly the same thing.
Of course banks and investors love this idea because municipal bonds are secure. The bonds are backed by the taxpayers who have an endless supply of cash. The banks love cash.
Contractors will get more work immediately as cities spend now and pay later. Of course, that work will dry up later when municipalities have a large debt load to contend with…but hey that is in the future and who cares about the future? Right? Its take the money and run..NOW.
Then the city employees, both management and bargaining unit, will love this because their wages can continue to soar through the stratosphere. Employees demand a raise? Just borrow more for infrastructure. Problem solved.
Look, Ontario is in a shit load of financial trouble. It is truly fucked. Ontario owes more money than it will ever be able to pay back. The province should not be giving finacial advice to anyone. Nor should anyone be listening to them.
Servicing that shitload of debt costs the Ontario taxpayer over $10.6 billion a year. Since 2002, the taxpayers of Ontario have paid out close to $100 billion in interest servicing that debt. I don’t know about you but I still think $100 billion is a lot of money.
Pay now for what you spend now. Its the only way to stay out of trouble in the future.