By STEPHEN WICKENS
Apparently, Toronto is suddenly rolling in cash.
Politicians and newspaper columnists are blathering on about what this alleged surplus means, but few mention the most salient point. We were forced to piss away $420 million this year for interest on accumulated debt, making the latest surplus nothing more than dangerous illusion. It doesn’t matter whether your politics are left, right, middle or unaligned.
We made a big deal a few months back about restoring $19 million worth of services to the city budget. But this $420 million is a hidden-in-plain-view cut from services and it’s imposed by bondholders, not by council’s budget hawks. Key decisions are being made for us by credit markets, not elected officials.
What sane person would let the household mortgage principal rise each year?
We had better start paying down debt and making a big dent soon for two reasons.
1. Interest rates are at record lows and can go in just one direction. The only thing that will keep rates low is economic stagnation, and that’s hardly encouraging.
2. This ballyhooed surplus appears to be largely rooted in a hot real estate market. That might continue for some time, though a few reasonably expert types are calling the situation a bubble. I don’t think it’s that dire, what with the GTA population continually rising, but if there’s any significant correction in the real estate market, the sustainability of city revenue will be badly eroded.
If we get a correction triggered by rising interest rates, Toronto faces a double-whammy followed by a potentially spiraling credit crunch, further rate hikes because our debts will be seen as increasingly risky to lenders.