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Council approves new debt strategy, eyes more borrowing for infrastructure

Hey there, time traveller!
This article was published 28/10/2015 (1335 days ago), so information in it may no longer be current.

City hall thinks it’s a good time to go deeper into debt.

City council approved a new debt strategy Wednesday following an administration recommendation to increase borrowing because interest rates are at an all-time low.

The administrative report stated city hall can safely take on an additional $250 million in debt — money the city needs for infrastructure projects.

The administration cautioned, however, that taking on greater debt could affect the city’s credit rating, which could result in higher interest rates for future loans.

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Hey there, time traveller!
This article was published 28/10/2015 (1335 days ago), so information in it may no longer be current.

City hall thinks it’s a good time to go deeper into debt.

City council approved a new debt strategy Wednesday following an administration recommendation to increase borrowing because interest rates are at an all-time low.

The administrative report stated city hall can safely take on an additional $250 million in debt — money the city needs for infrastructure projects.

The administration cautioned, however, that taking on greater debt could affect the city’s credit rating, which could result in higher interest rates for future loans.

Only Coun. Shawn Dobson expressed concern about the city going further into debt but he supported the proposal.

Dobson (St. Charles) said warnings were sounded on city’s current AA credit rating earlier this year, and he is concerned how the city will spend the additional borrowed money.

"Though I understand the reasoning for the increase in borrowing, I am hesitant in handing out that ability until I’ve seen where exactly it is planned to be spent," Dobson said.

The revised debt strategy increases the city’s net debt as a percentage of revenues for tax supported spending to 80 per cent from 60 per cent, and total city debt (including utilities and special operating agencies) as a percentage of all revenues to 90 per cent from 85 per cent.

Coun. Ross Eadie said dealing with the city’s infrastructure problems warrants greater debt.

"This is essential for the City of Winnipeg to make it a better place in terms of our infrastructure and what we can provide for services to citizens of Winnipeg," Eadie (Mynarski) said.

Credit agencies have warned the city and the provincial government about the impact of taking on further debt. The administration acknowledged the city is at the limits of the debt strategy put in place in 2011.

However, the administration said it’s been estimated the city needs to spend more than $7 billion to address its infrastructure issues, including roads, transit and upgrades to water and sewage treatment facilities.

"With the current and historically low interest rate environment, the public service believes it is prudent to increase the current limits to take advantage of interest rates," states an administrative report to council.

The city’s total debt stood at $943 million in 2014 but it’s expected to increase to $1.72 billion by 2023, based on projected capital spending.

Finance chairman Coun. Marty Morantz defended the change in the city’s debt strategy, arguing the city can take on more debt at lower, guaranteed long-term interest rates.

Morantz (Charleswood-Tuxedo-Whyte Ridge) said even if the city’s credit rating were to be downgraded, the debt the city takes on now will not be affected by the downgrading.

"In order for us to invest in Winnipeg, undertake the kind of projects people expect of us… we’re going to have (bring) the tools we need," Morantz said.

aldo.santin@freepress.mb.ca

Aldo Santin

Aldo Santin
Reporter

Aldo Santin is a veteran newspaper reporter who first carried a pen and notepad in 1978 and joined the Winnipeg Free Press in 1986, where he has covered a variety of beats and specialty areas including education, aboriginal issues, urban and downtown development. Santin has been covering city hall since 2013.

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History

Updated on Wednesday, October 28, 2015 at 4:51 PM CDT: Writethru.

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