Comment 37869

By A Smith (anonymous) | Posted February 05, 2010 at 18:24:49

According to the 2008 financial report, Hamilton had $1,231,673,000 in assets, $909,555,000 in liabilities and $322,118,000 in equity. In contrast, Burlington had $300,829,000 in assets, $130,110,000 in debt and $170,719,000 in equity. This means that Hamilton has a debt/equity ratio of 2.82, while Burlington's is 0.76. In other words, for every dollar of equity that the City of Hamilton is worth, it owes $2.82 in debt. In contrast, Burlington only owes $0.76 for every dollar of equity it is worth.

Even more telling is the cash position of each community. Whereas Hamilton had $39.084M in cash and temporary investments at the end of 2008, Burlington had $99.44M. That gives Burlington a cash/debt ratio of 0.764, while Hamilton comes in at a low 0.043. Therefore, for every dollar of debt, Burlington has 76.4 cents in cash and equivalent to pay it off. Hamilton only has 4.3 cents in cash/equivalents for each dollar of its debt.

If Hamilton had a track record of making good investments, we simply shouldn't have more debt than equity. The fact that we do indicates we need to rethink the role of government when it comes to taking on debt.

A much better way to approach the future would be to focus on being a net lender, rather than a net borrower. When you build up savings, they produce income, even when you sleep. In contrast, when you borrow, you end up working more, simply to pay back the interest. That's the position Hamilton is currently in.

Let's stop digging ourselves deeper into debt and start saving for the future. If Hamilton stopped swinging for the fences with grand ideas and simply took care of the basics, we will slowly, but surely create a wealthy community. This will require discipline and restraint, but in the long run, we will all be better off.

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