• Rothesay’s spending is growing faster than its revenues.
• Rothesay must put a brake on big ticket items to allow town revenues to catch up to the increased cost of running new facilities and servicing the increased debt.
• The Town’s per capita debt has increased by 250% during the four years of this Council’s term that began in 2012.
• Four of the Candidates for re-election to Council and one of the Mayoral candidates want to add substantially to Rothesay’s debt with a new Arena and fieldhouse.
• The May 9th Election is a crucial opportunity for voters to decide if they want this spending to continue and if they want the substantially higher taxes that will be necessary as a result.

 

Rothesay Council’s report on the state of the town’s finances last monday night was an eyeopener, not because of where we are now, but where we are headed.

The Town’s treasurer went to some pains to explain that Rothesay’s debt service ratio for the Town’s General fund was a healthy 4.9%. That means for every 95 cents we spend on operations we’re spending about 5 cents to service our general fund debt. That may not be bad compared with other municipalities our size. That’s because Rothesay is blessed with a (mostly) residential tax base of over $1.2b (Yes …that’s b for billion), a real cash cow for those tempted to be empire builders.

Some have suggested that because the maximum debt service ratio for borrowing purposes is 20% and Rothesay’s is at 4.9%, we have plenty of room to borrow and spend. The reality is that at 20%, Rothesay would have maxed its credit limit and would be forced to raise more revenue through much higher taxes or reduce spending by cutting town services.

It is not a question of how far into debt Fredericton will allow us to go, but how much debt homeowners are willing or able to support with higher taxes and fees or reduced services?

During this election, candidates are hearing concerns that many in Rothesay have little tolerance for the coming tax increase needed to pay for the Rothesay Common(2.5 -3 cents) and even less for the prospect of an additional 10% increase that a new arena would force on them.

Rothesay’s per capita  debt in 2011 was $334. Last monday’s Council figures showed per capita debt was $1,179.

During the term of this Council, per capita debt has increased 250%. That is two and a half times what it was before Councillors Wells, Alexander, McGuire, and Grant started their spending spree in 2012.

Rothesay is like a car driving too fast on a mountain road. We’re still on the road. But, there’s a sharp bend coming up and the tax and spenders on Council are driving toward it with the accelerator all the way to the floor. That bend in the road is the 20% debt service ceiling and the cliff … well it’s too late once we’re over it. Just ask the Greeks.

Blair MacDonald, chair of Council’s finance committee also had a sobering warning last Monday night. Rothesay is progressively burning up its financial maneuvering room by reducing past revenue surpluses.

In other words Rothesay is increasing spending at a rate that is faster than the town’s revenues are growing and the financial cushion that previous councils prudently built in to earlier budgets is all but gone.

This will not end well as that extra spending is being fuelled by not only by the increased debt servicing that we are locked into for at least the next decade, but also the added cost of operating the facilities the town has bought with that debt.

The Rothesay Common rink, for example, will cost the town about a quarter of a million dollars per season. That rink brings in no revenue from users. Its annual cost is four times more than the $60,000 the existing Rothesay arena lost last year. A new arena would lose even more. A study, obtained under the Right to Information Act, looked at Rothesay’s last attempt at a Field House with a lightly refurbished rink. It projected an annual operating loss of over $890,000.

At least three of the councillors seeking re-election and lead by Mayoral Candidate Nancy Grant, will push Rothesay’s debt much higher with the latest $15 million attempt at an arena/ and fieldhouse. That project will force the tax rate beyond $1.31 from the current $1.21. Wells, Alexander, McGuire, and Nancy Grant are all on record as supporting the new arena and turning the existing one into a fieldhouse.

When you add to the Arena project the 2.5 to 3 cent increase that rates will also have to go up next year to pay for the Rothesay Common project, the average family will pay between $3,500 – $4,500 in extra taxes over the next decade to cover all the new debt. Figure on a 10% tax increase or nearly eight times the current rate of annual inflation.

Faster and faster…the bend is approaching and  the fiscal cliff is waiting…

The big question for May 9th is who do you trust to slow down to get us past it in safety?