LARRY'S CORNER- Hamilton's Former Mayor Speaks

Hamilton’s Future Fund: A Success Story

By Larry Di Ianni
(posted January 7, 2009)

I read recently that a Hamilton Councillor wanted to use the $100M in the Hamilton Future Fund to provide an economic stimulus to the city during this economic downturn. Most Hamiltonians reading this news might have justifiably had two thoughts in mind. The first, “Wow, we have $100M lying around?” And the second would probably wonder what has taken so long to put that money into play as the Councillor’s press release suggested.

The $100M windfall deserves to be explained. In 2002, the City of Hamilton received a one time $137M dividend from Hamilton Hydro as the result of amalgamating the various hydro commissions into one entity entirely owned by the city, and recapitalizing the assets of our utility. Mayor Bob Wade at the time presented the money to Council, but with a plan to preserve it rather than spend it on poorly thought out make-work projects. He ‘protected’ the money by structuring a citizen Board of directors with a mandate to provide some legacy leadership for the community in years to come. This HFF Board would be entrusted with the financial management of these funds, and the decision-making around any expenditure. The Trustees would have carte blanche on the investment management, but would need to have their decisions ratified by Council. This structure suggested by Mayor Wade proved to be a very wise move.

Firstly, Councillors who might see the windfall as a short-term ticket to re-election were kept at bay. Secondly, the citizen members, broadly representing the city, were for the most part a bright, committed group of citizens. Thirdly the Trustee panel decided to adopt some far-reaching terms of reference which addressed three priorities to guide any decisions made on behalf of the community: Hamilton’s economic well-being, Hamilton’s social fabric, and the enhancement of community life were the three legs of the stool the fund was intended to strengthen. I was one of three members of Council placed on this committee to help guide it in its first year of operation. Murray Ferguson from Ancaster and the Mayor were the other two.

The panel decided to bank and invest $100M and use $37M for legacy projects that would benefit the three priorities above. I recall recommending that we spend nothing for the first few years, allow the fund to grow exponentially if left alone and then, as the Alberta Fund did in that province, only use the interest in future years rather than the principal for legacy projects. My Council Colleagues in the group correctly surmised that Council would balk if they weren’t given anything tangible in the short term, and the whole amount might be jeopardized. I agreed with this thinking and we set about interviewing Councillors and senior staff on how to spend $37M. It was a fabulous exercise. Later, when I was Mayor, the public was invited to make presentations and requests and that worked out okay for the most part, but there were a couple of unprepared groups who made a mockery of that process since they saw it as ‘easy money’ to get.

The group went about dutifully collecting information and then recommended to Council the expenditure of approximately $37M on projects fitting into the three priorities already established. They were:

- Urban Development Bank
- Downtown Street Revitalization Programs
- Business Tax Reductions 2002-2003
- Airport Lands Servicing
- Career Development Resource Centre
- City Housing
- Housing Hamilton Innovations Fund
- Opportunity Fund
- Art Gallery of Hamilton 2002-2004
- Dieppe Memorial Park
- Scenic Waterfall Program
- Heritage Curatorial Centre
- McMaster Biotechnology Incubator
- Giant’s Rib Discovery Centre
- YWCA 2002-2004
- Skateboard Park
- Powerline Trail
- Waterfront Trail Extension

As it turned out not all of the projects were funded in the end because some such as the Giant’s Rib never materialized but to my knowledge with the exception of the curatorial centre, all were completed. I am particularly proud of the Dieppe Memorial, among others, as a true legacy of the fund.

Does the Councillor have a good idea then to tap into the remaining funds to help stimulate the economy? Perhaps he does if the money were still around. Except that from what I recall, in 2004 and 2005, Council decided to use the money as a loan to itself for capital projects. In 2004, the city borrowed over $15M dollars to build the compost facility on Burlington Street. In 2005 the balance of the funds, about $85M were earmarked as capital loans to the city for additional projects over the next 7 years. The city did this for several reasons. The first was that it was awkward going to Toronto to ask the province for money knowing that we had a $100M unallocated reserve in the bank. You can’t cry poor if you have that sort of cash in hand. The second was that we were trying to lower our debt ratio and do worthwhile projects. So, rather than borrow from the banks, we borrowed from ourselves and repaid (at least I hope we have been repaying ourselves) the loans plus interest, thereby replenishing the Future Fund.

This is why the Councillor’s idea puzzles me. There is no $100M to invest in capital projects. It has been done. I say this fully acknowledging that things may have changed in the past two years. If that is the case, however, the city’s website should update its information because the public statements presented support my conclusion rather than the Councillor’s.

The good news, however, is should I be correct, that the fund is being replenished, and capital stimulus has already been happening. And this should please the Councillor and his colleagues.

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