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Montreal’s 2023 budget: City’s debt and long-term investment are rising

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2 years ago

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Montreal executive committee chairperson Dominique Ollivier speaks to the media after a forum to find ways to diversify the city’s revenue sources on Monday, November 7, 2022. Photo by Allen McInnis /Montreal Gazette

The prospect of a recession hasn’t dampened the city of Montreal’s spending plans.

The city’s 10-year capital investment plan, tabled by the administration of Mayor Valérie Plante on Tuesday, is up by $2.46 billion – 12.6 per cent – over the current year’s plan.
City executive committee chairperson Dominique Ollivier, Plante’s right hand at city hall, writes the higher investment is because of “years of underinvestment in the maintenance of infrastructure, notably water and the road network,” in a note in Montreal’s $6.76-billion operating budget for 2023 and the $22-billion 2023-2032 capital spending plan.

While the current year’s capital spending plan called for 70.3 per cent of long-term investments to be aimed at maintaining existing infrastructure and installations rather than developing new projects, the proportion is diminished to 68 per cent in the new 10-year capital spending plan. That means nearly one-third of the $22 billion planned as investments over the next decade are for building projects.

The 10-year capital works program will be financed mostly by long-term borrowing.

Using the analogy of a house, the city operating budget is like a bank account that’s used to pay for groceries and other day-to-day expenses. The capital spending plan is a wish list of expensive long-term projects, like repairing the roof, which are financed largely through long-term borrowing.

Some of the investments in the 2023-2032 capital spending plan

  • $3.77 billion for repair of roads and sidewalks, including $880.6 million destined for a program that puts a layer of asphalt on roads that are in bad shape while they await major repair.
  • $747.3 million to be spent on upgrading the city’s technology platforms, including digital technology at the municipal courthouse and a new communication platform for citizens.
  • $682.2 million to replace the incinerator at the island’s only water treatment facility, the Jean-R.-Marcotte plant in Rivière-des-Prairies; $461.2 million to continue a project to build an ozonation unit to disinfect water at the used-water treatment plant.
  • $507.1 million on bike paths, which includes $300 million to develop paths in the express bike network, known in French as REV, and $100 million to maintain existing bike paths.
  • $120.4 million for real-estate acquisitions to build social and community housing; $480 million for acquisitions to build affordable housing.
  • $413.4 million for aquatic installations.
  • $171.8 million to maintain sports installations.
  • $434.2 million for the long-promised Cavendish extension.
  • $132.3 million to redo Jean-Talon St. E. in St-Léonard.
  • $451.5 million to continue the renovation of Ste-Catherine St. downtown; $40.4 million to redo Peel St.; $70 million for continuing work on Pine Ave.
  • $409.6 million to improve Montreal’s library network.
  • $287.8 million for the city’s plans to build “eco-neighbourhoods,” including the Blue Bonnets-Hippodrome site near Jean-Talon St. W. and Décarie Blvd. ($156.6 million), de Louvain St. E. next to Christophe-Colomb Ave. ($67.2 million) and Lachine-Est ($64 million).
  • $270.3 million on natural habitats on the island; $406.5 million for large parks, including Jarry Park.
  • $264.3 million to repair the properties of Montreal’s police department and fire department.
  • $162.9 million to renovate Jean-Drapeau Park, including the aquatic centre.

The city anticipates $2.35 billion in gross expenditures on capital works projects in 2023, and borrowing of $1.13 billion.

As of this year, Montreal’s gross debt, including for the Société de transport de Montréal, is above $16 billion, which is double what it was in the first year of the municipal mergers in 2002. The STM has driven most of that increase.

While the opposition at city hall and the mayors of the island’s demerged suburbs have criticized the Plante administration for increasing the city’s debt, credit rating agencies have said they’re allayed by the province’s willingness to provide financial aid to the city.

Nevertheless, the agencies keep an eye on Montreal’s debt-to-revenue ratio. Montreal had a long-standing benchmark of 100 per cent, meaning the city’s net debt never exceeded its annual revenue. The Plante administration sought city council’s approval two years ago to temporarily go to 120 per cent.

The new capital works plan says the city’s net debt-to-revenue ratio will hit 111 per cent in 2022, below the new temporary ceiling of 120 per cent — largely because the city says investment slowed during the COVID-19 pandemic. However, the debt-to-revenue ratio is expected to hit 115 per cent in 2023, it says. It was 114 per cent in 2021.

The document says the city is still promising to return to a 100-per-cent net debt-to-revenue ratio in 2027.

Montreal’s credit rating influences the interest rate that lenders will charge the city on the billions of dollars it borrows for its infrastructure projects.

City administrations never spend all of their planned capital investments and have long promised to step up the pace.

The value of annual capital investments nearly doubled from 2015 to 2019, from $960 million to $1.8 billion, the latest capital plan says. However, investment slowed in 2020 and 2021 because of the pandemic, it says, adding that projects were either delayed or their start was postponed. The document says the rate of investment in 2022 should reach pre-pandemic levels.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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1 week ago

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September 6, 2024

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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

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2 weeks ago

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August 29, 2024

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TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

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1 month ago

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August 5, 2024

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The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.

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