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Tuesday, June 21, 2011
Toronto's $449-million loan groan
Perhaps we should call it City Bank or the Home of Free Money on Queen St.
Not content to limit themselves to being the tree and pet police or social workers to poor misunderstood panhandlers, it seems city officials have been busy playing the role of Bay St. bankers too.
A report to Monday’s executive committee confirms that cash-strapped City Hall has handed out a grand total of $449 million in capital loan and line of credit guarantees, not to mention outright loans, over the last few years.
It should come as no surprise that all but three of the list of loans and loan guarantees were approved (or renegotiated) during the David Miller era.
It is clear this report was precipitated by the request — contained in a separate report — to bail out the beleaguered $43.4-million Lakeshore Lions arena, for which the city is on the hook for $35 million in capital loan guarantees. Operators of the project, which ballooned well beyond the original scope with little oversight by city officials, are poised to default on their loans. (The executive committee opted Monday to create a new arms-length city corporation to oversee the arena and to take over the entire project debt of $43.4 million.)
The Lakeshore Lions loan guarantee is merely the tip of the iceberg.
According to the executive committee report, the city guaranteed a $160-million loan to Build Toronto, one of Miller’s pet projects, to get it up and running. The city is the guarantor for another $10.8 million in loans (five in all) for the fiefdom created by Artscape — including Coun. Joe Mihevc’s White Elephant on Wychwood, the Wychwood Green Arts Barns project.
Former deputy mayor Joe Pantalone’s sacred cow, Exhibition Place, got both a capital loan guarantee of $20 million for the Ricoh Coliseum and a direct loan of $35.6 million to build the conference centre.
The loan guarantees do not expire until the end of 2013 at the earliest. A $10-million loan to the North York Performing Arts Centre has no expiry date and no repayment schedule, according to the report.
The city report also notes the Toronto Philharmonia is currently in default on its $250K line of credit — one that now must be repaid by the city.
Hmmm. Is it just me or is there something patently absurd about a city that recklessly lends money or guarantees loans to a variety of projects with few controls — and then cries each year that it has an operating shortfall of $500 million or more?
Shouldn’t the city be getting its own house in order first?
Sigh. It’s all just Monopoly money to them.
Admitting the city “does not have an overall loan policy,” city officials suggest capital loans continue to be given out to a maximum of $250 million in total and loan guarantees be extended to a cumulative limit of $300 million.
They also maintain, rather cheekily, that a loan guarantee does not result in a direct cost to the city — unless the organization defaults (see sections on Lakeshore Lions and Toronto Philharmonia above).
All of this left city budget chief Mike Del Grande shaking his head.
He told the committee there was indeed a cost — even if the loan guarantees are in good standing — because they are considered loans on the city’s books which impact on how much City Hall can borrow and its borrowing rate.
He proposed that city officials start to phase out the capital loan guarantees once they expire — and not continue to roll them over again. He also suggested once the Waterfront’s Corus building sells and their $128 million outstanding loan is repaid, the maximum of capital loans given out be limited to $125 million in total. Both motions were approved by executive committee.
“We’re not in the business of providing loan guarantees,” Del Grande said. “It is not a core activity... simple as that.”
Added Mayor Rob Ford: “I don’t think we should be in the business of loaning money ... we’re here to deliver services, I think that’s what banks are for, to loan money.”