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"Ever wonder if City Council is as contentious and chaotic as it is sometimes portrayed? Here you can get a progressive perspective on some of the issues from someone who spent four years in the trenches. Totally unbiased, though! Feel free to comment but keep it respectful, just like they do at council."

Monday, June 4, 2012

Debt and development, parking and partying

For most of the media, the Finance and Administration meeting at the beginning of last week was a bust, really, nothing to write about there.

But not so fast. Although there weren’t any big announcements, or major skirmishes, and the meeting itself took only an hour, there were two or through interesting forays.

Downtown Parking Study

Staff needs to obtain council approval for expenditures over $100,000. The update for the Downtown Parking Study had been requested by the Downtown Parking Committee years ago; in fact, I was one of those who requested that it be done before council commit itself to investing in additional parking. We had received one update from MMM Group, back in 2009, which reported that downtown parking was at 70% capacity at mid-morning, indicating that the much touted shortage of parking was not being borne out by actual research. It was suggested at the time that, since the update was conducted in late spring, more people would be riding their bicycles; therefore, we should repeat the count late in the fall.

But nothing happened. Those who wanted to build a parking garage were convinced that the need was there, especially for long term parking for downtown employees. An offer presented itself, from Tricar across from the John Labatt Centre, but it was seen as financially unacceptable.

The matter was revived with the new council. It received an unsolicited offer, an opportunity too good to pass up, to lease 300 parking spots Tricar was proposing to build between its two new buildings at a rate of $2600 per spot per year for the next 30 years, about $33M in total. At the end of 30 years, the building would belong to Tricar.

A few councillors were gung ho to go, but in the end, were persuaded by legal advice that they really did need to go to a competitive bidding process (by then Shmuel Farhi had come up with his own version) and should update the study identifying the actual parking needs.

$115,000 had been committed to update the original Downtown Parking Study. But now the parameters of the study had been changed with the proposal to add in another 300 spots, whether in the Tricar building which was going full steam ahead, or Farhi’s proposal, or something else entirely. Most of council was convinced another 300 spots were needed immediately, however they might be found. Including that change in the contract with the consultant, MMM Group, generated a request for an additional $27,464 to complete the project.

The mayor had been quite enamoured of the Tricar offer. He was, as he put it, “a little ticked off” that this company (MMM) on the basis of driving around on a Saturday morning had suggested that there was enough parking and had interfered with the direction being taken, in fact done “a complete U turn”. From Fontana’s perspective there was no doubt that the city needed more parking . They had had a “good partnership with Tricar” which suddenly went south on basis of legal advice. But $140K for an update, that was outrageous.

Councillor Paul Hubert professed to experiencing the same “sticker shock.” He couldn’t understand what constituted the additional workload, simply changing the number of spots. He could hire one and a half people for a full year for that price. What was the additional value? “Just plug in 300 spaces into the model,” he suggested.

The city treasurer pointed out that $115,000 had already been committed; he was requesting the additional $27,000 to accommodate the change in the project.

But, of course, anyone who has ever done home renovations can appreciate the effect of making changes in a project once it is underway. It doesn’t come cheap.

It’s another week before the matter comes before council. By then, staff may have some additional information to provide.

London Economic Development Corporation (LEDC) Contract.

For more than a decade, London has farmed out its economic development to LEDC. The original idea was that the corporation would attract private partners and investment but, in fact, the corporation has one funder, the London taxpayer, at a cost of more than $2M per year. At this meeting, LEDC came forward with an offer to renew the agreement at a somewhat higher cost after tossing in a 1% increase.

It’s hard to know whether LEDC provides a cost-effective service or not since it’s a single source provider and there are no competitive bids. London’s unemployment rate continues to be high, relative to many other medium sized cities, but this may be a matter of location and international conditions. However, the mayor has introduced a number of economic councils and he recently announced the creation of a private equity firm, LEAFCorp, headed by two of the coordinators from the first of his economic councils, Tim Kavanagh and Todd Gillick, and his former campaign advisor and current communications consultant, Susan McElroy. It claims to have attracted significant investment dollars but there is little evidence of that on the website. Additionally, a new committee, the Investment and Economic Prosperity Committee headed by Councillor Joe Swan, which will be consulting the public on June 19th about its wish list. And finally, council has agreed to hire a new investment officer.

But in the meantime, the contract with LEDC was up for renewal. This one specified that LEDC would be limited in its ability to negotiate land deals, especially the industrial lands. That’s because the Municipal Act prohibits bonussing—providing incentives or assistance to a particular business or company. Giving that responsibility to a corporation without electoral accountability could be a problem.

Fontana thought it was a pity that LEDC couldn’t do more, maybe leverage the asset base for economic benefit, be a little more like Build Toronto, which has a lot more latitude. LEDC CEO Peter White thought there might be more opportunities to do some of this once the new investment officer was in place, there might be ways to use the “asset base” but leveraging could be difficult to do “in a municipal environment”

Councillor Joni Baechler probably spoke for most in the room. “I have no comprehension of what this means,” she exclaimed. “I’m glad we’re not making a decision about this today.” She expressed concern about eroding her voice as an elected official. She was not thrilled about the model Toronto had adopted. Already, council was talking about handing over management of its utilities in the shared utilities model. “What will be left for us to vote on?” she wondered.

2012 Debenture Issuance

Then there was the matter of issuing debt. In 2010, the municipal debt per household was $1,692, but in 2011, that had increased to $2,122, just slightly less than it was in 2007.

Part of the reason for the increase was the federal stimulus program which allowed council to move forward some projects that would normally have waited longer. But getting the federal and provincial governments to pay two-thirds of the cost is a good opportunity to get needed work done and saves money in the long run.

Still, you don’t pay until you have to. But now, projects were facing completion and the bills had to be paid. Fortunately, interest rates are low.

Staff asked for the authority to shop around in the capital markets for loans, a little at a time, for up to a total of $70M to be paid back over 10 years. That should see them through for the time being.

Should we get debt for more than 10 years? Fontana wondered. Maybe take it out for 20 or 30 years, since interest rates are so low and likely to go up. Gets some extra money while the rates are good.

City treasurer Martin Hayward responded that the city has a mix of debentures, with longer terms for longer life assets; it gets "hazy" when you lock in for 30 years. The interest rate goes up; he likes to do a more aggressive pay down. “The city pays a lot more if you’re stretching your payments over the longer term,” he pointed out.

But Fontana continued to wonder if $70M was enough.

“Based on the projects, that’s all that we can do,” Hayward assured him. It still left $240M that had been authorized but unissued until the projects were undertaken and completed. You can't just issue debt without tying it to something.

$5,000 for a party

The final item of interest was a request by Ward 14 Councillor Sandy White. She wanted $5,000 so that a neighbourhood in her ward could have a celebration in a nearby park later in the summer.

This is truly ironic. White has repeatedly requested that the grants programs be carefully scrutinized and that staff develop a more rigorous policy for evaluating requests. And, in fact, there are very few occasions on which council would actually give money to a community group. Previously, there was a civic reception fund that could be used to welcome visiting delegations at a major conference or convention but that was discontinued in order to achieve a tax freeze. There is also funding for the arts and for festivals, but these are governed by specific policies and procedures and awarded by outside bodies; the amounts are dealt with through the budget process.

But for some on this council, policy and practice are two separate things. Policy is for others; practice is for “me”.


Anonymous said...

It is truly amazing that this council seems to know everything about anything while being dumber than a sack of hammer handles. Why would we borrow money for 30 years and pay more in interest when we can pay it off in 10 years? And hey Fontana, why are you in such a hurry to use my money to pay off your buds at Tricar for parking spots we don't need? Or you daft, dumb, or just crooked?

Anonymous said...

Sadly, Fontana continues to serve the interests of developers over the people of London. Let's borrow money to throw around now, and build, build, build so that developers make a kiling. Londoners will be stuck with the debt for decades. This is Fontana's brain wave of how to run a city. There is no limit to how much he will sell out Londoners to help out developers. Mr. Tax Freeze is going to leave us with a load of debt that will take years to pay off. What a disaster.

Anonymous said...

I have been driving in this city since 1970, quite often spontaniously to the downtown area and never once, not even on a Saturday afteroon during the festival season, fireworks displays or Santa Claus parade, have I been unable to find a parking spot within walking distance of my intended destination, so I don't think we need more parking spaces and would vote against any expenditure by The City of London to provide more.