The final details behind the city’s $103-million debt increase were resolved last week, with city council offering the plan their final approval.
The final vote was 8-3, with Ward 1 Coun. Mark Signoretti and Ward 3 Coun. Gerry Montpellier voting against it. Ward 2 Coun. Michael Vagnini abstained from the vote, as he did with every other motion of city council during last week’s city council meeting except the one to adjourn. Abstaining from a vote without declaring a conflict of interest means a vote of no.
Mayor Brian Bigger was absent from last week’s meeting and Ward 6 Coun. René Lapierre didn’t log into the meeting until after this vote took place.
The new debt will add to the city’s existing load, which will now total approximately $355 million. The additions include $43 million toward 2020 and 2021 roads and bridges program investments and $60 million toward the Pioneer Manor Bed Redevelopment project.
The debt is in the form of a 25-year debenture priced and sold on March 7 at a coupon rate of 3.457 per cent.
This is the rate of interest the city will pay, and the underwriting fee was 0.7 per cent or $721,000. The debenture was marketed by a syndicate with National Bank acting as lead agent.
Debt servicing costs related to the new $103 million will be $2.8 million this year. The city has budgeted $1.47 million toward the debt, with its shortfall of $1.354 million to be funded from reserves. The city’s 2023 levy impact will be $1.975 million.
The new debt’s related expenses have already been approved by city council, and city staff have defended now as the best time to secure it due to low interest rates which are now expected to fluctuate. They’d initially anticipated an interest rate of 3.08 per cent, but market turmoil began taking hold in recent weeks.
The city has a debt policy wherein staff only recommend debt in cases where the cost of taking on debt is less than the cost of saving up money in a reserve fund and undertaking the project years down the road.
The city’s debt has drawn some people’s criticism recently, namely due to the fact it has increased from $18.98 million to its current load of approximately $355 million in only eight years.
Lakehead University economist Livio Di Matteo told Sudbury.com last month that although the city’s total debt load isn’t alarming given its broader context, its rate of growth is unusual. After speaking with Sudbury.com, he expanded upon his thoughts in a column for the Fraser Institute.
According to the latest BMA Management Consulting Inc. Municipal Study, Greater Sudbury carries the second-highest total outstanding debt per capita among Northern Ontario’s most populous municipalities. Greater Sudbury’s was $1,543, while Thunder Bay’s was $1,889.
By adding $103 million to municipal debt, Di Matteo said Greater Sudbury will become the highest ranked among these municipalities. Among municipalities throughout the province, the average debt per capita is $685 and the median is $441.
Tyler Clarke covers city hall and political affairs for Sudbury.com.