Recipients of city loan guarantees tell councillors why they would really like them to continue
Ever since the city had to take over Etobicoke’s Lakeshore Lions arena under a cloud of financial mismanagement, it has been considering doing away with all loan guarantees for similar third parties. Unsurprisingly, some of those groups who have had the benefit of the city’s clout to help them with their borrowing costs would really, really like the city to not overreact over one bad ice rink.
The loan-guarantee program also was tapped by Evergreen Brick Works to help with the restoration of the city-owned property in the Don Valley, a project that attracted millions of dollars from other levels of government and private donors.
The move to end the program, in which the city pledges to step in if a third-party borrower goes into default, comes after council found itself on the hook for more than $43 million in debts chalked up by the Lakeshore Lions Club in the construction of a new four-pad hockey rink.
That project was financed entirely by debt, a fact that greatly increased the risk assumed by the city. Rather than phasing out all loan guarantees, as the city’s powerful executive committee has recommended, [Artscape CEO Tim Jones] said a better option would be to put in place stricter safeguards to ensure the groups borrowing money do not default.
It’s no surprise that the people who have benefited from these loan guarantees would really love it if they could continue. As long as the current cost-cutting mood prevails, however, the city probably has other ideas for what they could do with that money—except that the whole point of the program is that no money is being spent if these firms use their loan guarantees with the good sense that the Lakeshore Lions lacked. It’s worth pointing out that when a bank loses money on a bad loan, it doesn’t stop lending out money—it just gets smarter with its lending (recent financial crises notwithstanding). Why the city couldn’t do the same is a bit of a mystery.