One of the First Councillors To Support The Municipal Bond Issue
  

Date:                     September 19, 2014

To:                        Media

From:                    Robert Kirwan
                             Candidate for Councillor of Ward 5

Re:                         One of the first Councillors to Support the Municipal Bond Issue

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I just wanted to make it clear that I am very much in favour of giving consideration to options such as the issuing of Municipal Bonds and borrowing from private lenders to fund infrastructure improvement projects and selected public private ventures. For the past decade we have had an obsession with avoiding taking on any long-term debt as the Corporation of the City of Greater Sudbury, but by doing so we have created such a tremendous infrastructure deficit that we are forced to spend at least $50 million a year doing emergency patch-work repairs that are merely putting us deeper into the hole and putting off the inevitable. If we keep doing what we’ve been doing, how can we expect to get any different results?

We cannot afford another four years of going hand in fist to the provincial and federal levels of government begging for funding or to ask for a larger share of the resource revenue from the mining companies. We’ve been doing this without success for years. We cannot continue to promote Sudbury as an attractive place for new businesses to set up when our existing businesses are leaving us and closing up because we are burying them in red tape or we do not have the infrastructure in place for them.

The time for us to seize control of our own destiny and come up with a different strategic plan that may very well include borrowing money in order for us to stimulate our economy and create growth in our construction, housing and business development sectors. I am not afraid to say that this is an option that I would like to give very serious consideration to as soon as we take office in December. I am not saying that we borrow and spend frivolously. But there are places where an infusion of money would go a long way to putting this city back on track. They say you can start a forest fire with just one match if you light the match where the kindling is dry and ready to burn. There are places where we could begin stimulus projects and infrastructure renewal that would start a snowball in this city and before long everything will take off again. We just need to make sure we have the right plan and I think we have candidates who, if elected, have the experience and wisdom to support the right plan.

The first thing we need to do is make a list of all of the projects we have on the table and identify the ones that are absolute “needs” for this community. I am not in favour of borrowing to pay for anything that we do not “need” at this time. There are many things that we “would like” or may “want” on our wish list, but those may have to be put to the side until we deal with the things that we really need in order to get control of our infrastructure deficit and stimulate growth that will generate more tax revenue for the city. This infusion of funding must be designed to generate a return on the investment that in turn will be used to pay off the debt and interest charges over time. All this requires is some careful and thoughtful planning with business experts who have a handle on the type of investments that will achieve our overall goals.

Councillors must then have the confidence in the advice from the business experts to approve the plan and begin implementing the elements of that plan immediately. While this is going on we can be reviewing all other aspects of our operation and by the time we find efficiencies the savings may very well be enough to pay for the costs of financing leaving us even better off financially that we were before. Borrowing may therefore actually help us maintain taxes where they are or even reduce taxes. Borrowing does not; in this case automatically imply that taxes are going to go up.

I am hearing more and more support from candidates for the idea of debt financing as a way out of our current state in this city. We have tried to operate the City of Greater Sudbury with cash flow for too long. It is like the homeowner who has a leaky roof and every year repairs the new leaks with just enough shingles to stop the leak. Year after year there are new leaks and year after year he replaced the damaged shingles. After ten years he realizes that he has spent all of this money repairing his roof and it still leaks. The money he has spent repairing the leaks ends up being more than he would have spent ten years ago to replace the whole roof and he would have been able to enjoy his house in comfort. This is where we are today in The City of Greater Sudbury. We’ve spent more money repairing our infrastructure during the last ten years than we would have spent if we would have borrowed the money and done it right from the beginning. There is no point in going on this way any longer.

So, it is my position that we should at least give serious consideration to the issuing of municipal bonds and borrowing from private investors. We may decide that we are not able to utilize this option. But we must at least put it on the table

ANALOGY
The City of Greater Sudbury has avoided getting a "mortgage" to renovate our home, preferring to do patch work with the money that is left over from our annual "revenue". The problem is that we don't have enough left over from our annual revenue to keep up with the repairs that are needed. So each year we end up with more to repair than the year before and we have to use more of our annual "revenue" to try to keep up, but it is futile. At some point the time is reached when you can take out a mortgage to do all of the repairs and then use the money from your annual revenue to make the payments over time. It costs you the same but at least you are living in a renovated house while you are making the repairs and not chasing your tail trying to keep up with the repairs. In the meantime, if your revenue increases because you don't have to spend all of your time doing repairs, but instead can go out and increase your revenue, it means that the mortgage payments take up less of a percentage of your annual revenue. I think the time has come for our "family" in Greater Sudbury to consider taking out a mortgage.
 
ANOTHER EXAMPLE
Let's say you have a flat tire and you are low on gas. You can't use the car because of the flat tire. But you only have enough money to repair the tire. You can put the money into gas and make sure you fill your tank, but then you can't go anywhere because you have a flat tire. So you repair the tire and "hope" you have enough gas to get home so that you can get some more money to put gas in the car. Some times you will make it home before you run out of gas. Other times you run out of gas and you are stranded. Now you have the tire fixed buy no gas so you can't use the car anyway.
Take the same scenario with road repairs. You know that the road needs to be replaced and the pipes are getting old to the point that they might need preplacing soon as well. The City Council only has enough in the budget to give the staff enough money to repave the road surface or replace the pipes, but not both. It is decided that there is no point in replacing the pipes if you can't resurface the road since people won't be able to drive over the road. So you resurface the road and "hope" that the pipes last a bit longer. Eventually the pipes need replacing, so now you go back with the money to replace the pipes but now you need more money to repair the road again because you needed to tear it up to get at the pipes. If we would have borrowed the money to repair the pipes and the road at the same time, it would have cost us less money than to go back and fix the pipes later. This is what we have been doing for so many years and if we would have done it right the first time we would have saved money, paid for our mortgage and enjoyed travelling over our road instead of wasting time doing it twice. 

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