Municipal Loan Fund
The Municipal Loan fund, established 10 November 1852 in Canada West, was created largely by Francis HINCKS, co-premier of the Province of Canada, whose government's central policy was railway development. Hincks permitted municipalities to borrow on the province's credit to invest in important works; the fund itself would be created by anticipated municipal repayments to the province. By 1855, encouraged by promoters who predicted that railway-inspired development would generate the extra wealth needed to repay loans, 47 communities in Canada West, some mere villages, had borrowed over $7 million, at least 80% for investment in local and branch line railways.
Only a few railways proved economically viable. Laws passed late in 1854 cut off new borrowing, provided for repayment of some of the province's outlay from delinquent municipalities' shares in revenues from the secularized CLERGY RESERVES, and gave Lower Canadian municipalities access to a "fund" of equal value (of which only about $1.8 million had actually been borrowed when the whole scheme was terminated in 1859). Rates of repayment, never high, plummeted in the 1857-58 depression, and by 1862 arrears of interest had added another $3 million to the deficit. Thereafter the history of the fund merges with that of the Canadian PUBLIC DEBT.