Are you confused about the debt picture in Collingwood?


There has been a lot of talk in this election campaign about debt and fiscal prudence. In fact at the all candidates meeting Cooper stated that the debt had been paid down $9.5 Million. Earlier on councillors Lloyd and Chadwick stated that town debt has been paid down $7.4 million. The voting bloc has also been passing around financial statements that are 10 months old and by virtue of their age, irrelevant to this election campaign. Marjory Leonard sent out a more accurate picture of the towns finances on September 19th, but the incumbent’s have chosen to ignore that spread sheet (shown below)

I was also on the receiving end of a barrage of email threads in which Chris Carrier had been having conversations with various town staff including CEO John Brown. He seems quite incensed that his political adversaries have been cooking the books to make themselves look more fiscally prudent than they actually are. I decided to investigate this myself and try and explain the fiscal situation in laymen’s terms so here goes:

Outstanding Debenture Debt Dec. 31st 2013 …………………………….. $36,401,776.00 (This is the number being touted by Cooper, Lloyd and Chadwick).
Less Committed Re-payment Plan …………………………………………. -$3,087,156.00
Sub-Total …………………………………………………………………….. $33,314,620.00

What they fail to mention are the following; which are numbers that were put out in by Marjory Leonard to all town councillors in the email shown below.

New Debenture a) Fire Station …………………………………………… $3,300,000.00
New Debenture b) Raglan Street ……………………………………….. $1,500,000.00
Sub-Total #2 ……………………………………………………………….. $38,114,620.00

The following are voted for and approved by this council. So the money is committed and will have to be found, so unless they want to raise taxes by around 25% guess where the money comes from? You guessed it by borrowing – more debentured debt:

Eddie Bush Memorial Arena ………………………………………………… $500,000.00
Curling Club ………………………………………………………………….. $1,000,000.00
Water Related Items …………………………………………………………. $1,500,000.00

Sub-Total #3 ………………………………………………………………. $41,114,620.00

The following is where it gets murky. But from what I understand these are internal loans within town hall. Kind of like robbing Peter to pay Paul or using one credit card to pay off another credit card, but guess what? There is only one tax payer you and I.

Internal Loan #1 OPP, Shipyards Walkway, Heritage Park ………. $2,787,610.00
Internal Loan #2 Mortgage on Fisher Field …………………………… $459,000.00
Internal Loan #3 Owing Water Dept to the Waste Water Reserves … $6,000,000.00

Total Outstanding Debt ………………………………………………… $50,361,230.00

If we want to also take into account the fact that this council also spent around $10,000,000.00 of the Collus money on the rec tents. They have actually been spending like drunken sailors on shore leave. It seems to me Carrier has the right to be incensed by the constant nattering about his previous administrations spending habits by the Three Amigo’s Cooper, Lloyd and Chadwick. Because they are not the beacons of fiscal prudence that they claim to be.

The widely accepted figure that is banded around by everyone, it seems, is Carrier left us in 2010 with around $49,000,000.00 in debt that number does not seem to be disputed. So you could actually argue if you take into account the spent money from the Collus sale. We are another $11,000,000 and change worse off than when Carrier left us.

Debt Picture 2014

Advertisements

15 thoughts on “Are you confused about the debt picture in Collingwood?

  1. You all scare me …

    The debt on 2013 was $38,000,000 audited statement. Marjory letter are one sided entries. When a debenture is issued cash comes into to bank account $4,300,000 (addition of two debenture). This is basic accounting. Issuing a debenture is allocating long term debt with a long term asset. The three basic statements are cash flow, balance sheet and income statement. Looking at debt is only part of the picture. One must look ALL the entire statements to get true picture. Luck Georgian college is offering basic accounting I would suggest all candidates take a course.

    • Basic accounting principles aside, decent honest factual campaign statements using the information the Town Treasurer sent to all incumbents Sept. 18th at their request to clarify debenture debt versus total debt should not be an issue but it is. We are in the 10 month of 2014 and using a number from 2013 is misleading and misinforming at best! If they are proud of their spending then do not try to trick the public into thinking the debt is lower than 50.3 million dollars.

      • This was from the Town Treasurer, Marjory Leonard. No matter how you add it up, Sandra’s campaign literature is misleading and misinformed. The total debt is 50.3 million dollars.

        Please be advised that there are two kinds of DEBT – that which is funded externally through debentures or mortgages AND affects our annual borrowing limit and that which is internally funded through inter fund loans, unfunded capital and money we (the Town) are ultimately responsible to fund – this is debt related to the CPUSB. On September 18th, I was asked to “confirm what the debt is expected to be at the end of this year.” On September 19th, I provided Council with the response below. This response includes not only the DEBENTURE DEBT but the internally funded DEBT as well.

        If you continue down the email, you will see a second email reply that is in response to the question (what was) “the total at the end of December 2010”. Again, I have shown the DEBENTURE DEBT and the internally funded DEBT.

        I have also been asked an additional question related to 507 10th Line and the outstanding internal loan amount to the sewer reserve. The amount is $1.184million and is included in $2.787million noted below. I also note that the sewer reserve is just that – a reserve or an allocation of surplus. By definition, a reserve does not “earn income” on its’ own. Any additions to the reserve are made via an allocation of surplus. When repaying this amount to the sewer reserve we are not “charging” interest, we are repaying principal only.

        First email response:
        Outstanding debenture debt at December 31, 2013 $ 36,401,776

        Repayments to be made in 2013 ( 3,087,156) – the typo was noted and corrected in a subsequent email

        Fire Station debenture in progress 3,300,000

        Raglan Street debenture in progress (maximum) 1,500,000
        —————-
        $ 38,114,620

        In addition, this Council has committed the following:

        EBMA 500,000

        Curling Club (we will debenture 100% and collect
        Annual payments from the Club for one half) 1,000,000

        Water related items committed 1,500,000
        —————–
        $ 41,114,620 **
        ==========

        The water commitment may be higher or lower than the estimate above. Town staff do not prepare the budget nor do we prepare any analysis on the water operations. It would appear that if their 2014 budget plans were carried out there is a potential $1.5m for 2014 to have been spent and awaiting funding.

        **You should also note that we have an additional $2,787,610 in “internal loans” (OPP cell upgrades, recovery of the “lost costs” related to the prior Councils Heritage Park plan, phase1 of the Shipyards walkway), $459,000 outstanding on the mortgage with F W Fisher Foundation plus an additional $6,000,000 that the water department owes to the wastewater reserve.

      • Using your logic let make the debt $55 million, however I have $19 million sitting in a reserve fund. Am I $55 million in debt? Yes, but my net debt is still $36 million. I am however paying interest on $55 million and receiving little or no interest on my deposits.
        Given the town borrows at around 3% the $19 million from internal funding saves this town little over half million in interest. Sound financial management would suggest you pay off your debt. Agree? Use a line of credit for day to day management. After a project is completed issue a sinking fund debenture towards the life of the asset. Marjory email is not audit financial statement if fact it not even a financial statement. Only number I believe is 3rd party audited number $36,401,776 supplied by the town auditor all other are questionable. If I am believe $50 plus million debt number this council had to spend $14 million between Dec 31 2013 to now. I find hard to believe.

      • Below is taken from the letter by the Town’s auditors to Council. The number of 36.4 million is the audited number from 2013 and as the auditor makes clear they have no comment on 2014 as it is not yet an audited number. The total debt is 50.3 million, I am not commenting on whether internal borrowing is prudent or not, previous councils have also done it, what I am commenting on is the campaign literature that says the debt has been paid down by 7 plus million dollars and the numbers quoted are irrelevant for a comparison to the previous council total spending. The incumbent campaigns have misinformed and misled the voting public on the total debt picture. Look at the 2009 audited financials if that is the comparison you would like to use. The Town Treasurer has made it clear, total debt has increased, political spin by the incumbents is making everyone dizzy but hopefully not too dizzy to see the truth.

        “We understand there have been some inquiries regarding the “definition of debt” and how the debt levels have changed during this last term of Council. Our professional opinion is that debt is external, contractual debt, typically in the form of bank loans, debentures and mortgages. This definition is in keeping with the presentation of debt on the Financial Information Return prepared annually for the Ministry, as well as the Ministry’s calculation of the Annual Repayment Limit. As per the 2010 audited financial statements: long-term debt was $45,507,356 and there was a bank demand loan in the amount of $664,013 for a total of $46,171,369. As per the 2013 audited financial statements: long-term debt was $36,860,776 and there was no bank demand loan debt. We are unable to comment on the 2014 balances as we have not audited those transactions to date.

        We understand that, like many municipalities, the Town has some internally financed debt. We have not included this in our definition of debt as Council has the flexibility and authority to change the nature of these amounts by Council motion, unlike the external debt that must be repaid based on a legal contract.”

  2. I agree Colin. This is the most important issue that new Council will have to deal with and it will be a tough one! We do need a total reset and bringing some common sense to the spending. Thank heavens we have a good CAO & Treasurer to help guide the process.

  3. As one of the current candidates that has looked extensively at the Town’s finances over the past few months, I can concur with the numbers that VFAN has set out herein. Sub-totals #2 and #3 are absolutely correct, it is the latter that does indeed get “murky” as it is money that has been borrowed from within. Put it in this context. It’s like you own personal credit report not showing a loan from your parents or a friend as it may be a forgivable loan or something you can otherwise get out from under to some degree. Even if the $7.4 million number that is being touted by a couple of the incumbents in terms of the debt they have allegedly reduced this term is correct, that’s less that $380 per person over the last four years for each of Collingwood’s 19,500 residents. Would you be boasting to your friends that you paid down your mortgage, your credit card debt of car loan by just $380 over a four year term? When you look at it in that light and even if it were true, it is an abysmal financial record.
    The fact is, the Town has not had a strategic financial plan in place this entire term and the incumbents have alluded to that fact in their campaign speeches. Only now in the final few weeks of this term have issues like economic development, developing the harbour and establishing a financial plan etc. come to the forefront of their campaigns. The prior four years have truly been a fly-by-the-seat -of-your-parts form of management of this $50 million dollar corporation. Those of us fortunate to get elected will in the first 90 days or so, have to roll up our sleeves to see where we are truly at financially in order that we can chart a new heading for the next four years and beyond in order to restore some stability while we also plan for the future.

    • My hope is Rick that the first order of business when yourself and new council gets elected is that EVERYTHING is put on hold. Even items approved by this current council. We need a complete reset in this town before we move forward.

      • Spending is not the only area that need a complete review prior to the next Council moving forward. Development of the waterfront, the sale of any town owned land and any major capital requests/purchases all need to be scrutinized as part of both the 2015 budget and more importantly with respect to a longer term strategic plan which has obviously not been in existence during this term of Council.

  4. Yes, I am very confused about Collingwood’s debt…almost to the point that I am tired of hearing about it. $30M, $40M, $50M, to me, it’s all too much. By saying this, my intention is NOT to take a shot at any town staff, any candidate or any incumbent who has gone on record with a debt figure. I am simply saying that I personally feel disengaged in this area.

    Jamie Berman

    • I get your point Jamie they are all relative numbers in the big picture. The point I am trying to make is we have incumbent candidates that are campaigning and scoring points about their own fiscal prudence. They are hoping and have probably been quite successful in the fact that most of these numbers just boggle people’s minds so they get a free pass on this file.

      • Completely agree. To the average person, listening to “debt-speak”, must feel like listening to the teacher from the Charlie Brown cartoons “Waa, Waa, Waa!” I know it does for me 🙂

  5. Debt is Debt and the Total Debt is $50.3 million.

    From: [@gaviller.com]
    Sent: Tuesday, September 30, 2014 3:09 PM
    To: John Brown; Marjory Leonard
    Subject: The Definition of Debt

    Hello John and Marjory,

    We understand there have been some inquiries regarding the “definition of debt” and how the debt levels have changed during this last term of Council. Our professional opinion is that debt is external, contractual debt, typically in the form of bank loans, debentures and mortgages. This definition is in keeping with the presentation of debt on the Financial Information Return prepared annually for the Ministry, as well as the Ministry’s calculation of the Annual Repayment Limit. As per the 2010 audited financial statements: long-term debt was $45,507,356 and there was a bank demand loan in the amount of $664,013 for a total of $46,171,369. As per the 2013 audited financial statements: long-term debt was $36,860,776 and there was no bank demand loan debt. We are unable to comment on the 2014 balances as we have not audited those transactions to date.

    We understand that, like many municipalities, the Town has some internally financed debt. We have not included this in our definition of debt as Council has the flexibility and authority to change the nature of these amounts by Council motion, unlike the external debt that must be repaid based on a legal contract.

    115 Hurontario Street, 3rd Floor | P.O. Box 130 | Collingwood, Ontario | L9Y 3Z4
    Phone (705) 445-2020 Ext. 230 | E-mail: sbragg@gaviller.com | Website: http://www.gaviller.com

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s