Comment
Without a net
Much of what Shire Hall has planned for this place for the next 10 to 25 years is predicated on growth— more houses and more people. These plans rely on many more people coming to live here to fund big infrastructure spending— roads, bridges, waterworks and such. Shire Hall is increasingly walking a very high wire—its financing plans depend on waves of new folks coming to live in Prince Edward County.
But what if they don’t show up? What if all the planning is based upon growth projections that don’t transpire— or fall short of expectations Shire Hall has modelled? Never mind that the County population has been fixed at about 25,000 people for about a century. Perhaps a growth spurt is overdue.
No need to worry, assured the Director of Finance last week in response to Wellington councillor Corey Engelsdorfer’s question (Engelsdorfer is also the publisher of this newspaper). Shire Hall has an agreement with the developer in Wellington to finance about three-quarters of the village’s infrastructure plans.
Some background is needed. In a typical development-municipality arrangement, the town builds roads, waterworks and such for new subdivisions. It pays for these on the go, most of it funded by borrowing. Then, as the subdivision is built out, the municipality’s coffers are refilled by development charges, connection fees, building permits and such. In time—usually measured in decades— these two ledgers should balance out.
The province sets limits on how much debt municipalities may take on so that municipal leaders don’t get in over their heads. Debt limits are pegged to municipal revenue generated each year. The County, however, has more plans and ambitions than it has the capacity to borrow. So Shire Hall has had to innovate some workarounds.
In Wellington, the developer has agreed to pay, upfront, a portion of the development charges and other fees it would eventually have to pay for the homes it plans to build in the village. In exchange, Shire Hall has granted this developer priority rights to waterworks capacity, ensuring it has enough to service every home they plan to build.
If all goes as planned, this infrastructure financing technique will be case studied and copied elsewhere. It is not, however, without risk.
So far, the developer has committed $4 million to Shire Hall through Letters of Credit. The Director of Finance assured the Wellington councillor last week that this security enabled the municipality to fund the debt “for a period of time.”
It may. But waterworks users are on the hook—at a minimum—for a $10 million water tower, and now $8 million for big new pipes under the Millennium Trail (approved by council last week). That is $20 million committed on behalf of waterworks consumers to serve the developer’s future subdivisions.
The developer’s security deposit might get us four years of debt payments on a 25-year term. Then what?
If the developer fails to sell homes in Wellington—or a sufficient number to satisfy its business plan—will it continue to pay for the village’s infrastructure? Or will it look for an exit?
Of course, Shire Hall will have recourse through the courts to compel the developer to honour its agreement. Maybe this works. Or, perhaps, existing waterworks users are stuck with a pile of debt—for infrastructure they didn’t need—or want. Or could afford.
In any event, this isn’t about second-guessing. Rather, it underlines why waterworks customers need to be at the decision-making table—if for no other reason than to understand the risk being assumed on their behalf.
Councillor Engelsdorfer won approval last week for the formation of a waterworks committee. But it was not friction-free, even though only three of his colleagues pay a municipal water bill. Just three council members are directly affected by the decisions they make regarding the waterworks utility.
“When you pay for something, you tend to look at it differently,” noted Engelsdorfer.
Some of his council colleagues thought a waterworks committee could be a nifty way to educate users. Others went along, reluctantly, pointing to the thin scrutiny by which they had just approved $25 million in new capital spending on waterworks.
“It is what it is,” observed Ameliasburgh councillor Janice Maynard.
Of course, if that were true, we might not need Council at all.
The premise underlying such casual governance is that Council fully understands and has absorbed the implications, impacts and risks of the vast and complicated programmed spending plans Shire Hall is devising on its behalf. It depends, too, on Council fully comprehending the high wire that Shire Hall is venturing out upon.
It is a terrifyingly wobbly premise—with huge consequences if it all goes wrong.
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