Cornwall’s “Progress Fund”, the 25-million dollar proceeds from the sale of Cornwall Electric was set up to help build the city’s future. The fund was structured so that the principle would not be used. Only the interest received from the investment. The plan has been a smart use of the proceeds. But it is time to change the plan and scrap the progress fund.
How the fund works is that the money is invested in safe, low-risk investments. The interest or capital gains, become an annual return to the city coffers to pay for things. The interest the fund generates now is committed to paying the loan for the city’s portion of the Benson Centre project. According to Chief Financial Officer Maureen Adams in November 2015, the fund had an income of approximately $550,000. The yearly tab for the Benson Centre loan is $719,000. The fund is not growing and it is not able to meet the requirements needed to function long term.
The reason for that is simple, the city spends all the money earned by the fund. The 25-million principle has never been touched, which also means it has never grown.
On average, the value of money depreciates by three percent per year. 25-million in today’s dollars has the buying power of just over 17-million in 1998 dollars. That is a 32 percent loss in real value. Without reinvesting in the fund, the value or buying power will continue to drop.
Instead of reinvesting in the fund, it is time to cash out and move on. Every time a large project looms on Cornwall’s horizon, certain councillors mull using part of the principle from the fund, or borrowing from it. No. Cash it out.
The Progress Fund should be used towards paying off existing debts in the city, with the balance funding other projects to get them completed. The city’s plan for converting some outdoor pools to splash pads would be a good start.
The city’s loan on the Benson Centre project was 10.4 million. That has lowered with the Progress Fund’s annual income. Pay it out, and be debt free on the Benson Centre. Fund and build the two-million dollar expansion for a gymnasium and soccer fields as well. Take the remaining balance and apply towards the upcoming loan for the wastewater treatment plant.
Rolling up the fund may sound like a bad idea, so is letting it die on the proverbial vine. The fund is not able to grow to keep pace with inflation or the decline in the value of money. The fund does not cover the loan obligations it has been earmarked to pay. The only way to grow the fund is to commit to setting aside part of the income to reinvest and grow the fund principle. There is as much interest around the council table to do that, as there is to settle the fluoride debate. Plus those large payments for the Benson Centre would still need to be paid.
The best alternative would be to wrap up the fund. Pay off the debts, expand the Benson Centre to have more activities, pay for some of the wastewater treatment plant, then call it a day.
The fund continues to shrink in its ability to cover the payments it has been pledged to cover. Cashing in now sets Cornwall on the right path in the future.