Over the past decade, York Region’s government has gone on a spending spree, planning for big growth and in the process, accumulating debt at a record pace. Yet recent economic developments create doubts over the Region’s ability to pay back what it owes. With talks of housing bubbles, rising interest rates, and slower than expected growth, is York Region headed for a debt crisis?
The Council of the Region of York consists of the nine Mayors of the 9 municipalities that make up York Region, including 11 Regional Councillors and one Chair. At the local level, heads of municipal council are occasionally subject to public and media scrutiny – but decisions made at York Region Council are rarely reported in the news. So while a Mayor might say he or she is fiscally prudent within the local municipality’s business, the same Mayor can spend lavishly at the Regional level.
One example of such recent lavishness is the extravagant retirement party for Chairman Bill Fisch, which happened to catch the attention of the Toronto Star, in an article entitled, “Dining Out on the Taxpayer’s Dime at a Party for York Region’s Retiring Chairman”
As a former municipal councillor, I can attest that no Mayor would survive the public’s outrage if a similar party was held for a local dignitary. The decision to host such an event for York Region’s former Chair Bill Fisch was made knowing that there would be little public awareness or political fall out. After all, from a politician’s perspective, the best time to throw yourself a party paid for by taxpayers is when nobody is watching.
As a York Region taxpayer, I see the need for an increase in public involvement and the demand for greater accountability at the Regional level. With an area that represents over 1 million taxpayers, and with little media scrutiny, citizens need to take action on how the decisions made by their elected representatives affect their wallets – and just as importantly, their future.
The Toronto Taxpayers Coalition has done excellent work demanding accountability from Toronto City Council on behalf of their members. It’s no surprise then that I often hear York Region residents asking for a similar voice.
The root of York Region’s public debt accumulation comes out of growth expectations. At approximately 1.1 million residents, York Region is Canada’s sixth largest municipality. By 2031, York Region predicts its population will balloon to over 1.5 million residents. In anticipation of this growth, York Region’s Council made a decision to spend on infrastructure. Below is a chart that compares York Region’s debt to its annual revenue for the years 2008 to 2013. This chart clearly shows how public debt has grown at a stunningly rapid rate.
Regional Municipality of York
Net Direct and Indirect Debt/ Total Revenue (%)
Alarmingly, Moody’s predicts that York Region’s ratio will peak in 2018 to approximately 160% of revenues.
The reality is that in comparison to other Canadian municipalities, York Region’s decision to invest in infrastructure before development fees were received is an unusual one. At the time the decision was made, York was experiencing annual growth of approximately 4%. But since that time, growth has slowed to approximately 2% annually – and the lower than anticipated growth has prompted York Region to raise development charges by a whopping 40%, in some cases to offset lower than expected revenues. In contrast, Durham, Halton and Peel Region decided to wait on infrastructure spending until the development fees started to roll in.
With economists increasingly pointing to a housing bubble subsiding growth even more, York Region can no longer simply rely on new home sales to fund its debt burden. If interest rates begin to rise, expect that property taxes will increase, and pressure is put on Provincial and Federal governments to contribute more. Taxpayers will be able to recognize these calls once municipal politicians start demanding for their “fair share”, or speak about uploading services.
By the numbers, York Region’s debt currently sits at approximately $3 billion. By 2020, that number will peak at $3.7 billion – and yet York Region has plans to spend approximately $6.6 billion on infrastructure (46% of that related to water and sewers). That means that as the Region is reaching its limit on how much debt it can assume, the remaining $2.9 Billion in spending is to be funded by development fees, reserves, other levels of government, and – you guessed it: taxes/ user fees.
If economists’ predictions are true and new home sales fall flat, York Region will find itself in a debt crisis that will mean severe cuts in government services, higher taxes and increased user fees for residents.
It may have only taken a few short years to find ourselves in this debt predicament, but if the gamble on increased development and new home sales doesn’t pay out, it will take a generation of higher taxes to get York Region’s taxpayers from under this burden.
And that’s something we should all be concerned about.