By Denise Reinhardt
North Harbour and Millennium Park: Should we borrow $7.43 million? Who gets to decide?
Democracy is in trouble again in Powell River. Last November, City voters approved the borrowing of $1.43 million for the land under Millennium Park and $6.0 million to rehabilitate the North Harbour. The Municipal Finance Authority is the provincial agency that sells bonds for capital projects like these, and we might think that the City could just go to the MFA and borrow the money, after its citizens agreed to the borrowing.
Not so fast. Under the rules of the MFA, Regional Districts must consent to a municipality’s borrowing, so the City needs the Regional Board’s guarantee for the borrowing of the combined $7.43 million. The City asked the Regional Board to issue the standard “security issuing bylaw” containing that consent, and the bylaw was on the agenda at the last Board meeting, without any previous discussion by the Board. At that meeting, the bylaw was referred to the Board’s Committee of the Whole for discussion and it will probably be sent back to the formal Board meeting for action on April 23rd.
There, the security issuing bylaw will probably pass, because the City’s two directors can outvote the five rural directors. If the City defaults on either or both of the loans, the rural citizens of the Regional District will be on the hook for up to $7.43 million for these projects without ever having the chance to say yes or no to the borrowing. And the voices of caution in these times of financial uncertainty may never be heard, except at two upcoming meetings of the Regional Board.
How is this possible that the City can outvote the rural areas? Because the provincial rules established for Regional Board voting say so. In the Powell River Regional District, there are five rural directors, from:
- Area A, north of town;
- Area B, immediately south of town;
- Area C, south of Area B to Saltery Bay;
- Area D, Texada Island; and
- Area E, Lasqueti Island.
The City has two municipal directors who sit on the Board. For many matters, the votes are unweighted. But for some issues, chiefly decisions on money matters, votes are weighted. City directors only vote on matters that affect the whole Regional District, including the City, as this security issuing bylaw does.
The weight of votes is based on “voting units” of up to 2,000 people here in Powell River. So, because Area C has over 2,000 voters, its director gets two votes. All the other rural directors get only one vote because they all represent areas with fewer than 2,000 people in them. The rural directors thus have a total of six votes. The City’s population of over 13,000 gives the City directors seven votes. So, unlike in most Regional Districts, one municipality can determine the financial health of taxpayers of the whole Regional District.
In contrast with City taxpayers, the taxpayers of the Regional District will not have a vote on whether they want the Regional District to borrow almost $7.5 million. There is little opportunity for public debate. Still, Regional District taxpayers will most likely end up as guarantors of this huge amount of borrowing.
Many of us think that there are open questions about the City’s projects. The City has not given the Regional District any North Harbour business case or forecast of the users they assume will pay moorage fees to cover debt service on the $6.0 million loan. Some of us see the North Harbour venture as an updated version of a cargo cult — if the City builds it, they will come from Alberta and dock their big boats. But when desirable moorage is going begging in Nanaimo, a harbour that is far friendlier to the boating community, why exactly would people come here? What are the predictions of North Harbour use when people are losing jobs and investment funds at record rates, and no one says that recovery is near? Is building our local economy on carbon-spewing power-boat tourism a good contribution to sustainability?
We are living in most uncertain financial times. The MFA model was developed in times of steady growth of our economy. Under MFA shared liability, if the City defaults, the debt belongs to Regional District property taxpayers. If the Regional District defaults, then the debt belongs to all BC property taxpayers. That means that we should think about big borrowing in context of existing debt and financial outlook. Locally, the Regional District’s existing MFA debt for 2008 was $556,222 and the City’s was $3,554,464, for a total of $4,110,686. The City’s principal, $158,836, and interest, $234,746, will total $391,584 due from taxpayers for 2009. Regional District taxpayers will pay $82,660 for MFA debt in 2009, almost evenly divided between principal and interest.
The Regional Hospital Board, which covers the same area as the Regional District, also is already carrying debt that we all must pay. Additionally, it has committed city and rural taxpayers to pay back a loan of $18 million, as its share of the construction of the facility to replace Olive Devaud. The north side taxpayers will be paying for over $800,000 for a new fire hall. Is this really the time to take on whopping new debt?
We also need to look beyond our parochial interests. The MFA has top ratings from investors’ services, because the liability for loans is spread throughout the province and the risk to lenders to the MFA has historically been low. High ratings mean money is available to the MFA at low interest rates, which it can pass on the its borrowers. But there are rumblings in the financial community that the MFA’s paper could be downgraded, because of the concentration of two-thirds of debt to the MFA in Metro Vancouver and TransLink and the overall financial state of BC, Canada and the world. This could lead to higher interest rates throughout the province, and therefore higher property taxes.
What is more, even the MFA admits that our current financial situation is unprecedentedly bad. Just because there has never been a default on an MFA loan does not mean there never will be one, especially as the financial future looks so bleak. The MFA can raise provincial property taxes to cover an actual municipal or Regional District default or even a threatened default. We may end up paying for all that Lower Mainland debt. Perhaps it is time to ask whether an overheated economy has led us already to overextend our borrowing. Shouldn’t we, like consumers everywhere, be thinking about reining in our debt?
We have two last chances to speak out on this borrowing. The Regional District’s Committee of the Whole can discuss this new borrowing in the context of the entire financial situation, including existing debt and the economic forecasts of no growth or “negative growth”, as well as consider other important questions. The Regional Board will take the formal vote on the security issuing bylaw. That vote should not be a rubber stamp. We can tell the Committee of the Whole and the Regional Board whether we think it is wise or sensible to borrow $7.43 million for these projects now, and bear witness to what the Board members do.
If you think you might want to speak at either or both of these meetings, you can ask to be a delegation by calling (604) 483 3231.
Committee of the Whole: Thursday April 16, 2009 at 4:15 PM
Regional District Offices, 5776 Marine, Townsite (Powell River)
(parking at the rear via Birch Street)
The meeting room holds very few people. If the Regional District thinks that many people may attend, they may move the meeting location, so check at (604) 483 3231 to be sure.
Regional Board: Thursday April 23, 2009 at 7:30 PM
City Hall Council Chambers, 6910 Duncan St., Powell River
See you there.