Infrastructure budget approved
Image source: Samantha Craggs, 2019. cbc.ca.
The tax hike this year will be at least $39 per household after approval of the city’s 2020 capital budget. There will be more to come when the operating budget is finalized over the next few months, possibly much more. The increase in the capital charge is higher than usual, but still isn’t making a dent in the infrastructure maintenance deficit which will approach four billion dollars by the end of this year. The staff report candidly admits this is unsustainable.
“The 2020 capital plan’s state of good repair funding amount is critically short of an effective asset rehabilitation plan as the annual infrastructure deficit across all tax supported capital programs is approximately $195 million,” the report acknowledges.
Including the water and sewer budget the city debt levels are also forecast to peak later this decade to $1.33 billion. Two-thirds of that is classified as “debt for growth infrastructure” that the city expects to be able to repay from future collection of development charges on new growth.
In theory, the infrastructure costs of new growth are paid for with development charges, but those are usually collected after the servicing such as roads, sewers, libraries, fire stations, recreation centres, etc have already been built. Provincial restrictions also mean not all growth costs can be charged to developers.
The picture is further complicated by various development charge discounts and exemptions that are determined by council and which must be replaced with tax monies. This year’s capital budget includes an $8 per household charge to cover some of those discounts and exemptions.
The total capital spending this year of $400 million is higher than usual because of federal subsidies, but those are focused on transit and public housing rather than repair of existing city-owned facilities such as roads and buildings. And nearly a quarter of the monies that are being earmarked for roads this year are for new ones to accommodate expected suburban growth.
Spending on transit is the largest segment of the 2020 capital budget at $152 million, with most of that being provided by the federal government to specifically finance a new bus barn. Federal monies are expected to cover over 85 percent of this $260 million project with a third of that included in this year’s budget and most of the remainder forecast for 2021.
Most of the remaining transit spending this year will go for buses, with about half for the regular bus replacement program and the other half to expand the HSR fleet. Most of those monies will come from either federal or provincial subsidies with the remainder from city reserves.
The second largest category in the 2020 capital budget is just over $100 million for roads, bridges and sidewalks. The breakdown of that spending, however, only allocates $7.5 million for complete reconstruction of existing roads and a further $26 million for resurfacing.
Other large categories of roads spending include $23 million for new roads (mostly paid with development charges), $14 million for bridges and structures, and about $21 million for operations and maintenance, technical studies and engineering services staff.
Staff note that “the road network value is approximately $5 billion with a rehabilitation and replacement backlog of approximately $1.65 billion.” The city should be spending nearly twice as much as it will this year on roads to avoid increasing that portion of the infrastructure deficit.
Other municipalities are also confronted by large shortfalls, but staff explain that Hamilton’s situation is worsened by the fact it allocates only 13 percent of its total budget to capital spending while “comparator municipalities” are devoting 15-20 percent of their budgets for those purposes. The main cause was a decision at amalgamation to show savings by eliminating $25 million a year formerly directed to reserves.
