I assume that "off-sheet financing" means "off balance sheet" financing wherein you do not list a debt on your books. I find this very off-setting. I speak of the financing idea floated by civic administration to council as a means to pay for the sound walls being constructed in Lakeview and Lakeridge neighbourhoods (SP June 1/11.) It was also described as a "mini P3" partnership. LOL
Option 1, being the pay as you go, is flagged as leading to inconsistent constructions schedules and higher costs compared to one large project. It also leaves the city without any funds for other wall projects until 2020.
Option 2, the "off-sheet" financing means the city would pay the contractor his due over a period of time using the $576,000 annual funding set aside in the budget for sound walls. But the contractor will have to be paid interest and I suspect no contractor is offering the city better interest rates that a bank. The project is stated to cost $4.5 million. Repayment at $576,000.00, plus interest, means their still won't be money available for wall project until well after 2020.
The city touts its AAA credit rating, which means it would receive good interest rates on its borrowing. So why wouldn't the city simply finance this project as it has all other projects?
Governments play by a different set of rules than do private business,. Why is that? Private business would not get away with not listing any debt it owed.
As I understand it, the Enron fiasco was a result of "off balance sheet" activities.
Methinks the city needs Sheila Fraser type outside audit done on the books.
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Is it really a mystery why they are doing this. It is as easy to see as why they doubled the term on the financing of the police station, they are broke and are now looking for ways to pay for things that won't set back the books.
ReplyDeleteA dollar spent, is a dollar that needs to be repaid no matter how or where you list it on your balance sheet. This has the feeling of paying higher interest rates for the purpose of covering up how much is actually being spent. I would hope this information is being made public so that one can compare the itnerest rates being paid to the contractors as opposed to what the city could have gotten itself.
I couldn't believe my eyes when I read this story or should I say Fictional story. I can't understand how they general public would view this as anything else but carnival misdirection. And I haven't fell for that since I was 12. For the administration to bring forward such a lame idea had to be planted by the mayor or other councilors. This has nothing to do with being a P3 project no matter how you try to swing it.
ReplyDeleteMistress
ReplyDeleteGreat point and I think off balance sheet accounting would get someone in hot water from an audit perspective. Does this smell like the education infrastructure financing program from the days you were on the school board.