$1B Debt Strain On York

$1B debt strain on York
If the region's rapid growth continues to stall, carrying costs on massive debt could be a problem

Phinjo Gombu
Urban Affairs Reporter
Toronto Star
Mar 06, 2009 04:30 AM

York Region's $1 billion debt the highest per capita in the GTA has the potential to become a serious problem as new home construction slows drastically and income from development charges takes a big hit.

Bruce Macgregor, the region's chief administrative officer, cautioned politicians this week about a 20 per cent drop in fees paid by developers last year, money that normally pays for new sewer lines and the like.

Given the recession, Macgregor said later, he expects a further 50 per cent drop in those revenues in 2009 to about $100 million. If that continues for very long, it will put pressure on the region's ability to service its debt, much of it incurred as a result of the region's habit of borrowing heavily to send new pipes and roads marching out in advance of the region's infamous sprawl.

For now, reserve funds will cover the difference.

“The treasurer's considered opinion is that for a one- or two-year downturn, as we've experienced in the past, we would weather the storm,” said Macgregor. “Anything longer than that would require the further consideration of some drastic measures.”

That could include, he said, “throttling back” major projects that are the backbone of the region's growth.

York Region has seen new building permits drop by as much as 46 per cent, part of a bigger recession-era pattern across the GTA that's expected to continue until at least 2010. Many of the permits being issued today are for houses that were sold last year.

One reason York Region's financial exposure is greater than most is that, unlike other fast-growing regions such as Halton, York pays a significant part of the “upfront” cost of building expensive infrastructure for new neighbourhoods. It then recoups the money later from developers, with interest.

Today, almost 62 per cent of York's debt charges are based on money it hopes to recover from future growth, if and when it occurs.

Despite having $1.3 billion in general reserves, York recently decided to borrow an extra $270 million to prevent its development charge reserve fund from going broke. That's money normally used to service debt.

If growth stalls or stops for a long time, the carrying costs on that debt could become a problem.

In contrast, only 25 per cent of Halton Region's $200 million debt charges is based on future growth, because the philosophy is different: Halton's politicians expect developers to pay the costs upfront.

“Residential development has to front-end its own way,” said Mark Scinocca, Halton's director of financial planning and budgets.

The two regions are also different in the way they burden property-tax payers. Halton council last year threatened to freeze development altogether if the province and the development industry didn't cough up more money for hospitals in the face of growth.

York Region, on the other hand, recently passed a motion to pay for the long-term costs of building hospitals, a burden that used to be carried in part by developers until the Conservative government of Mike Harris relieved them of their share in the '90s. York, desperate for new hospitals, was the first region in the GTA to accept that long-term responsibility officially.

Macgregor said he's confident York's credit-worthiness is excellent and the municipality will still service its debt. He's also confident the economy will return to “some level of prosperity” in the near future because the Toronto region remains an attractive area for growth.

He said the current drop in development revenues could be attributed, in part, to the fact that 2007 was a record year. Still, he acknowledged the region would be hit hard by a construction slowdown.

Major development projects underway in East Gwillimbury, he said, now require servicing costs to be paid upfront by developers.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Comments on this story are now closed

|
Commenting Guidelines
expandContent
Sort By Newest Oldest Most Agreed

You don't get it Dark Night

York Region has been doing _exactly_ what the Ontario Liberals wanted. Southern Ontario has been carved up for development as part of the Places to Grow act. If you were a developer or a bank on the receiving end of the gravy train, it was good times for many years. An economy that is built on real estate and sprawl can never be a real, sustainable economy — but it sure made a few people very rich. Lucky for them they don't have to live in the middle of the message they have created.

Submitted by rmpotter at 4:54 PM Friday, March 06 2009
Agree 1
|
Disagree
|
Alert a Moderator

lastman

up the rates for lastman on the mel lastman square

Submitted by HerrnGregory at 3:50 PM Friday, March 06 2009
Agree 1
|
Disagree
|
Alert a moderator

York Regional Councillors and Mayors Have Alot of Explaining To Do!!!

I call this complete and total mismanagement of our property tax dollars, but lets not stop with the regional representatives. What happened to our MPPs? Where is Greg Sorbara and Dalton McGuinty to help York Region? We have been abandoned and in 2010 and 2011, we will abandoned them.

Submitted by Dark Night at 3:35 PM Friday, March 06 2009
Agree 2
|
Disagree
|
Alert a Moderator

“lead82” is right on…

For too long York politicians have shrugged and pointed at the “Places to Grow” act as justification for the outrageous pace of growth in York Region. Tens of thousands of citizens are being asked to pay for infrastructure whose only purpose is to fuel growth and make developers — and banks — rich. In addition to the loss of green space and farmland, all those McMansions are plugged into a dwindling natural gas network. What will they burn when that fuel becomes too expensive or scarce? We need more than “Smart Growth” — we need “Wise Development” — a plan that looks at least 7 generations into the future.

Submitted by rmpotter at 3:00 PM Friday, March 06 2009
Agree 1
|
Disagree
|
Alert a moderator

I agree with 7th gen.

taxes should be set at an amount required to meet expenditures; that's how we got into this mess. This, I know better than government how to spend my money is a scam by buisnes to get your money & in many cases send it out of the country instead of having services at home. Personally “I know it's unusual”; if I don't have it (other than a mortgage for what I need not want); I don't spend it; works for me.

Submitted by biker650 at 2:11 PM Friday, March 06 2009
Agree 1
|
Disagree
|
Alert a Moderator

SHOPAHOLIC York Region Spending EVERYONE's Tax-Payer Money

York Region is already getting $2.8 Billion (Ont:$1.1Billion / Feds:$698m / Toronto$600m / YorkRegion$400m) 8.6km Spadina Subway Extension to LOW DENSITY Vaughan Centre (Hwy 7 & Jane -land of big box stores), which at $325million/km is amongst world most expensive! York Region is now lobbying to get $2.4 billion 6.8 km Yonge Subway Extension to LOW DENSITY Yonge & Hwy 7 ($352.9 million/km)? An area that's aready serviced by the Langstaff GO Train station! Building subways at $325-350 million per km to LOW DENSITY areas that will NEVER have the ridership to justify a Subway. York Region should be building LRT system like (higher density) Toronto's Transit City that cost $40-50 million per km. And you wonder why York Region is in such massive debt,….

Submitted by Sunnyray_toronto at 12:00 PM Friday, March 06 2009
Agree 2
|
Disagree
|
Alert a moderator

Enough sprawl already

York Region's development is growing at a massive pace. Vaughan and Markham are expanding at a massive pace. The entire region is becoming a huge suburban wasteland with huge industrial zones and all low-rise car-dependent sprawl. Stop widening your roads and stop building out. Start building up along the Highway 7 and Yonge corridors (transit supported). Enough grade A farmland has been decimated for McMansions. Ontario's Smart growth plan is a sham. 40% intensification is a joke. We need more like 90% intensification, otherwise York sprawl will go up to Lake Simcoe. Bye bye greenery, fresh produce. Hello pollution, 3hr one way crawls along 400/404.

Submitted by lead82 at 11:47 AM Friday, March 06 2009
Agree 3
|
Disagree 1
|
Alert a Moderator

High Taxes ! ???

I thought Durham has a higher Property Tax than York Region. I'm living in a 1800 sq ft detached house,4 br,single garage, $4300/year property tax and coming.How can York Region be more, my next door is paying more. York ( Markham,Richmond Hill,Unionville,Etc ) still can pay more, 15-20 % more.

Submitted by Big Fat Wolf at 11:39 AM Friday, March 06 2009
Agree 1
|
Disagree
|
Alert a moderator

We need a law….

..and we need it NOW! All governments in Canada must tax its constituents at a rate that matches their spending! Except for amortizing large captial projects over their lifetime (and not a “Ponzi” scheme like CPP) each level of government must meet its current expenditures by levying an equal tax. Then, and finally then, Canadians might start electing prudent politicians rather then the current practice of voting for those promising the “biggest handout” and then having those politicians bury the costs in never ending deficit. A novel idea – let's live on what we have. Deliver what we need not what we want. Somebody will have to pay this debt. It should not be the taxpayers' kids or grandkids!

Submitted by 7thGenCanadian at 10:16 AM Friday, March 06 2009
Agree 2
|
Disagree
|
Alert a Moderator

Message to York Region: STOP THE SPRAWL NOW

This entire region is premised on the belief that every hectare of farmland and forest must be bull-dozed to accommodate more roads and subdivisions. Looking around the GTA, we realize this unhealthy costly sprawl must stop. When the last natural area is paved, taxes sky-rocket to cover all the associated costs of infrastructure and services, plus on-going operating, maintenance and upgrading costs costs keep spiralling upwards. York Region is an unnecessary level of government that was created around 1977; it has been trying to justify its existence while building a huge bureaucratic empire ever since. We are learning that growth does not pay for itself. Last October, The Toronto Star reported Halton Regions decision to freeze development. Regional Chair, Gary Carr said, “Growth is not paying for itself, and we're saying to the province: Until it does, we are not going to continue to grow.” What does York Region know that Halton doesnt?

Submitted by veeh at 9:44 AM Friday, March 06 2009
Agree 2
|
Disagree 1
|
Alert a moderator

I wonder if this explains why York Region has high property taxes and high transit fares.

Submitted by Vote NDP in the next federal/provincial election at 9:24 AM Friday, March 06 2009
Agree 3
|
Disagree
|
Alert a Moderator

Debt problem…

I remember this saying that my dad used to say to me and that was, “Don't count your chickens before the eggs hatch!” The same goes for personal stuff. A penny saved is a penny earned. Hey people welcome to a new era. Those days of living on credit to purchase those big ticket items are coming to back to bite you in the ass. Whose in trouble now? When a city builds it's future on expected income and not on actual income well can we say “bankrupt”?

Submitted by andropause at 6:43 AM Friday, March 06 2009