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Ministry of Finance
PROVINCIAL LOAN TO THE CITY OF TORONTO June 27, 2013 Toronto Loan
While continued provincial uploads and other sources of ongoing provincial support will more than offset the phasing-out of Toronto's Pooling Compensation, the province will provide further transitional support to the City by remitting the outstanding Toronto Debenture Loan over a three-year time frame. This will provide the city with a financial benefit of over $230 million by 2016. In 2004, the City of Toronto entered into a debenture loan agreement with the province. Both principal and interest are owing under the terms of the loan. The 2004 loan was a restructuring of loans made to Toronto in 1998 and 1999 to fund transition costs as a result of amalgamation as well as to make necessary investments. The City made its initial payments but ceased making payments in 2002. The Province agreed to restructure the loans. The City made one further payment following a 2004 restructuring of the Loan, but ceased payments again beginning in 2005. The City has missed 16 payments. Interest payments are in arrears, and additional interest payments continue to accrue under the terms of the loan. The City of Toronto external auditor was very clear in its report to the City’s Audit Committee in 2011 that the loan was not forgiven and the City was obligated to pay back the principle of $170 million and accrued interest owing to the province.. “…[P]ayment has not been made on the outstanding debt since 2005…[T]he City continues to record both the principal and the accrued interest on the loan in order to reflect the current amount legally owing to the Province. As a part of our audit procedures, we confirmed the loan balance with the Province….” PwC, Report to the Audit Committee for the year ended December 31, 2010. Prepared as at June 20, 2011.
Each year, the province has sent correspondence to the city making it clear to the city that it expects the city to repay the loan. “The Province charged an accounting provision against 2005-06 expenses to reflect the risk of non-collection of the balance owing. However, as was emphasized with City officials, setting up this provision does not forgive the loan, nor does it in any Page 1 of 2
way preclude the Province from continuing to pursue collection of the loan from the City of Toronto. It is important to note, therefore, that the existence of this accounting provision does not relieve the City of its legal obligations under the Loan agreement.” May 14, 2007 correspondence from the Deputy Minister of Finance to Toronto’s City Manager
FOR MEDIA INQUIRIES ONLY: Susie Heath, Minister’s Office, 416-325-3645 Scott Blodgett, Ministry of Finance, 416-325-0324 For public inquiries call 1-800-337-7222 (Toll-free in Ontario only)
ontario.ca/finance-news Disponible en français
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