Winnipeg Free Press - PRINT EDITION

City plans to fix now, pay later

-- Debt will climb to $1 billion -- Tax hike to fund borrowing

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The city has earmarked $149 million for waste-and-water projects including repairs to water mains.

JOE BRYKSA / WINNIPEG FREE PRESS ARCHIVES Enlarge Image

The city has earmarked $149 million for waste-and-water projects including repairs to water mains. Photo Store

The City of Winnipeg's debt is expected to rise to nearly $1 billion during the next 13 months, primarily because of additional borrowing to pay for improvements to roads, sewers, bridges and other infrastructure.

 

At the end of last year, the city's debt stood at $793 million. It's expected to climb to $827 million at the end of this year and $993 million by the end of 2014, said Mike Ruta, the city's chief financial officer.

As recently as 2007, the city was on track to eliminate its long-term debt by the middle of this decade. But annual borrowing started to rise in 2008, the first year of the global economic downturn, when the city began to take advantage of low interest rates.

The belief is in the long term, it will cost the city less to borrow money to fix infrastructure now, rather than wait for roads, sewers and buildings to deteriorate further and absorb the entire cost of construction inflation.

To that end, the city has pursued a variety of borrowing vehicles, ranging from public-private partnerships -- in which private companies pay for construction costs up front -- to conventional bank loans.

Some of the conventional borrowing is now backstopped by dedicated reserves, themselves created through property-tax hikes.

"I don't have concerns about debt, provided you have the guaranteed revenue to pay for it," Mayor Sam Katz told reporters Monday at a news conference intended to highlight the benefits of borrowing money to accelerate road renewals.

The city plans to raise $9.7 million this year through a pair of one per-cent property-tax hikes and then use that cash to borrow more money to fix roads.

Katz said this will not place the city at risk, given continuing low interest rates and the dedication of cash reserves for road renewal. "I would not be a fan of the olden days, when we borrowed not knowing where that revenue was coming from to pay the debt," the mayor said, referring to the 1980s.

"This is a very different situation," he said, adding the city's credit rating remains stable.

Pending council approval of the 2014 spending plans, the city intends to spend $379.1 million on infrastructure next year.

The water-and-waste system eats up the largest share because the city plans to spend $149.1 million on sewers, water mains and new sewage-treatment facilities.

The second-largest type of infrastructure spending falls under public works, which handles road renewal, bridge repairs, bike paths and other basic forms of infrastructure.

A total of $138.4 million will be spent on public works in 2014, with road renewal eating up $84.2 million of that.

There are no road-renewal megaprojects planned for next year.

The largest road project planned is a $6.1-million Pembina Highway resurfacing, planned for the stretch between Markham Road and University Crescent. The biggest bridge repair is a $5.7-million rehabilitation of the Portage Avenue Bridge over Sturgeon Creek.

Winnipeg's capital and operating budgets face two weeks of scrutiny before councillors vote on them Dec. 17.

bartley.kives@freepress.mb.ca

Republished from the Winnipeg Free Press print edition December 3, 2013 A3

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