Why the mayor keeps riding the credit rating dog and pony show

Posted January 11, 2014

Whenever her management of the city is questioned, the Mayor resorts to the tiny upgrade of Guelph’s credit rating by Standard and Poors (S&P), one of the major financial reporting companies in the world.

Be reminded of the role played by this rating company in the financial collapse of 2008. It was one of the credit rating outfits that kept giving favourable credit ratings to such major financial Wall Street icons as Lehman Brothers. Lehman invested client’s money in the mortgage-backed securities debacle in which billions were lost. And Lehman Brothers became history.

The city’s current S&P rating is purely based on the city’s ability to repay its debt.

It does not oversee or comment on the operations of the city, its management or “investment” policies.  So it is a minor measure in assessing the true and actual picture of city operations and financial management.

In short the Mayor keeps hiding behind this privately-generated rating to excuse her failure to manage the city within our means. Remember, as the debt grew it placed demands on increasing revenue to pay for it. That’s why we have the explosive growth in property taxes and user fees, including water charges and development charges. No source of revenue was spared to feed the hungry tiger of excessive spending and growing debt.

The exponential increase in development charges is a major impediment for new businesses to establish in the city.

Examples include the indoor soccer stadium guarantees, the Waste Resource Innovation Centre, the Loretto convent conversion to a civic museum, legal fees, soaring staff compensation and numbers, the $750,000 time clock in the Sleeman Centre, the $2 million spent on the Stone Road bicycle lanes, the mysterious WellBeing program that leaves most people scratching their heads.

She cannot rely on Standard and Poors to protect her from the criticism of her stewardship.

When S & P was contacted to state its methodology for the Guelph rating, it declined.

This company has no comment about the huge increase in debt including the $53 million and still counting, investment in waste management, or to the upcoming $34 million for a new police headquarters.

Then there is Coun. Lise Burcher, a professor teaching landscaping at the University of Guelph. She is waxing enthusiastically about the proposal to tear down a viable strip mall and standalone veterinary clinic bordering on the river downtown and turn it into a riverside park. The staff’s estimated cost is $16 million.  The councillor was so excited that she had her senior students take on the project of designing the park and study its impact on the community.

Do you believe Guelph has a shortage of riverside parks?

This proposal would destroy a valuable, established commercial development with an accompanying loss of property taxes. With thinking like this, it’s easy to understand why Guelph has failed to increase the commercial/industrial assessment ratio in seven years. It hasn’t changed from 16 per cent as compared to 84 per cent residential properties assessment since the Mayor was elected.

This results in a growing burden of increasing revenue that falls on the residential property owner.

And if you are wondering what the ratio should be so the tax burden is shared more equitably, try a minimum 40 per cent commercial/industrial and 60 per cent residential.

The magnitude of increasing the commercial/industrial assessment ratio is staggering. It will probably take years to accomplish and a massive effort to promote and open the city for business development.

This kind of growth will bring jobs, revenues, control spending and improve services

Not even Standard and Poors can influence this administration to change its propensity to spend your money on its pet projects, regardless of the costs or consequences.

That dog is off the porch. No matter what the Mayor says about her record, the consequences of her polices will not bring this Fido home.

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7 Comments

Filed under Between the Lines

7 responses to “Why the mayor keeps riding the credit rating dog and pony show

  1. Milton Burns

    Perhaps Mayor Farbridge can explain when you decrease your liquid assets ($30 million Hydro note redemption) and increase your debt, that your credit rating has improved.
    Try that with your local bank manager and don’t forget to mention Standard and Poor.

  2. geo

    Thank you Mr. Burns for a direct concise question that demands a direct concise answer.
    I guarantee you that “Her Royal Highness” will not respond.

  3. Paul:

    I have asked several times just how much taxes would be lost if the City pursued the pipedream to buy the downtown strip mall in addition to the $16 millions to purchase the strip mall. Add the cost of demolition and refit to the lost property taxes and this cost will be in excess of $20 millions. The City got rid of 3 buildings on Upper Wyndham next to the Post Office including some 13 low rental apartments and they have never confessed how much this cost the Taxpayers! This would further erode the 84/16 Residential to Commercial/Industrial tax ratio.
    If they really want to pursue Burchers (foolish) desire they should make it a referendum question on the 2014 Municipal Ballot.
    As for Guelph Hydro not only did they cash in the $37 Million fake debt note but they also take out an annual dividend of up to $3 million per year. This Council is very capable at Milking the Taxpayer. It is time they woke up
    Keep up the good work Gerry

  4. Comp

    So when are you running for Mayor? You complain a lot but don’t offer much in alternatives….

    • Comp: I am not running for Mayor. But I have regularly stated many alternatives to correcting the mess that citizens have been left with by the Farbridge administration. Just wait till council approves the $34 million to build a new police headquarters. Watch how much debt that will add to an already overloaded debt cost. Try $150 million. Using a simple interest calculation, the long term cost to taxpayers, at 4 per cent, is $600,000 a year not including repayment of principal. That’s for the next 20 years which leaves little for further future programs. They can’t raid Guelph Hydro anymore for capital. Increases in assessment will not provide the money needed to run this financially overburdened city. Think today, not tomorrow.

  5. DAVID BIRTWISTLE

    What,if any,other credit rating agency has given a credit rating to City of Guelph;surely other agencies have clients who might place more faith in them?Does the City select/pay/hire the credit rating agency that issues the rating for them? david.birtwistle@sympatico.ca

    • David Birtwistle: Good question. I suspect taxpayers ended up paying for the service. Otherwise why would S&P be interested in rating a small Canadian city unless there was something in it for them?

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