City finances much better now than they were a decade ago

Dave Bartlett
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Part 2 in a four-part series

The City of St. John's has a surplus of about $10 million, while its debt sits at around $220 million.

While that second number may cause concern, Coun. Danny Breen and the city's director of finance, Bob Bishop, say it's actually good news when it's put into perspective.

Breen chairs the city's finance committee and pitched a seven-point, two-year strategic plan at its last meeting.

Two of the items on his list are managing the city's current and projected debt and figuring out what to do with the extra $10 million identified in the city's consolidated financial statements for 2010, recently presented to council.

The city is not legally allowed to run a deficit to cover operational costs and can only borrow money to fund capital works projects, which must be cost-shared by another level of government, a private company or a foundation such as the Bowring Park Foundation.

"We're in a pretty good debt position," Breen said.

He pointed out that the city's debt-servicing ratio is less than eight per cent - much lower than the 17.5 per cent maximum the city is allowed.

"I think (the current ratio is) low," he said. "We still have room ... but you have to use that room carefully."

But Breen said there are always other projects coming down the road, which the city has to keep in mind so it doesn't borrow too much, too soon.

Asked how he would rate the city's current debt situation, Bishop gave a single-word answer.

"Beautifully."

When Bishop started working with the city in 1995, the bottom had fallen out of the commercial real estate market. He said about half the storefronts on Water Street were boarded up and the city's revenues were way down.

At the time, Bishop said, the city's debt-servicing ratio was more than 20 per cent - over the legal limit - which led to massive layoffs at the city and five years of only funding capital works projects that St. John's could fund on its own.

Bishop suggested the hard times of that period are still partly responsible for the city's infrastructure deficit.

Two major projects top the city's list of capital works: a new west-end fire station and the replacement of the Wedgewood Park Recreation Centre.

But Breen noted that if an emergency comes up, even those priorities could be bumped down the list.

"The bottom could come out of something somewhere along the way," he said.

When it comes to the current surplus, Bishop said things started to turn around financially for the city around the time oil royalties started pouring into the province, but he said other factors contributed, as well.

He credits the city's financial discipline, lower interest rates, an influx of revenue from rising property values and the opening of new businesses.

The question before council is where to spend the $10 million it has in the bank.

Breen pointed out that a surplus is one-time money, and therefore it can't be put towards services or programs which require ongoing funding.

But he said there are lots of options for spending the money on the capital works side.

"We could do with 20 times $10 million," he said.

As an example, Breen represents Ward 1 and he has been lobbying for sidewalks on Logy Bay Road from Newfoundland Drive to Robin Hood Bay Road, where a number of newer housing developments have sprung up.

That project would cost $2 million. Upgrading sidewalks in Goulds would cost another $3.2 million, Breen added.

"It doesn't take long to spend $10 million," he said, adding that much of the city's infrastructure is showing its age.

dbartlett@thetelegram.com

 

Organizations: Bowring Park Foundation, Wedgewood Park Recreation Centre

Geographic location: St. John's, Water Street, Logy Bay Road Newfoundland Drive Robin Hood Bay Road Goulds

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Recent comments

  • John Smith
    March 17, 2012 - 11:01

    Just imagine where we would be if we didn't have to pay the 10 million for the screw up at bay bulls big pond, or the 10 to 20 million for the screw up at the waste treatment plant, or the 5 to 10 million for the screw up at the landfill, or the 10 million for the Eastport parking garage, no problem...right guys? It's only 30 or 40 million of tax payer dollars down the tube. It's not like it's going to interfere with the next round of wage increases, or pension top ups that these useless dupes will vote themselves before the next election.

  • Townie
    March 17, 2012 - 09:24

    So what they are saying is that the "turn around" is due to low interest rates and an inflated real estate market. I certainly believe that they should proceed "cautiously" as they have no control over either market force.