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December 11, 2013

New charges needed for infrastructure

Construction Corner | Korky Koroluk

It's become commonplace to observe that our Canadian cities need a different financial deal from senior governments. It's also common to decry the state of our infrastructure and the need for assured funding, not only to build it, but to maintain it for the long-term.

Politicians, of course, are quick to note that both federal and provincial governments are contributing large amounts for things like light-rail projects, and that gasoline taxes collected go toward roadwork.

But that’s just nibbling around the edges of the problem of vote buying.

We need cities to have long-term financial stability and that would mean changes to the tax structure, and likely changes in the role of the various governments.

Korky Koroluk

Constuction Corner

Korky Koroluk

The need for all this has been driven home in recent weeks.

First there was the release of a report, Climate Change Adaptation and Canadian Infrastructure, by the Winnipeg-based International Institute for Sustainable Development, with support from the Cement Association of Canada.

Then a second report, released at about the same time, by Sustainable Prosperity, a green economy think tank based at the University of Ottawa.

That one was titled Suburban Sprawl: Exposing Hidden Costs, Identifying Innovations. It provides an excellent outline of steps cities might consider as they face a future of rising — and often hidden — costs.

The report notes that whenever new development is approved for a city’s fringes, the city might gain additional revenue from property taxes.

But, with that development comes the need for new infrastructure and, with it, future infrastructure maintenance and replacement costs “that continue indefinitely, and rise over time.”

Cities collect development charges from developers, of course, but the charges don’t cover everything and, the study says, cities are just beginning to understand the burden those unrecovered costs place on them.

It cites Edmonton, for example, where the city pays all the capital costs of fire and police stations, plus portions of some road costs and recreation facilities.

It also covers all the costs of maintenance, repair and renewal of infrastructure, including pipes and roads.

That means the costs to the city exceed revenues by a large margin. It says that in just 17 of more than 40 planned developments, costs will outstrip revenues by nearly $4 billion over the next 60 years.

The study points out that in Peel Region, in the Greater Toronto Area, new development is not paying for itself.

It also notes that Calgary Mayor Named Nenshi has begun calling these hidden costs the “sprawl subsidy.”

That city, the study says, has found that by adopting a denser growth pattern that used 25 per cent less land, it could save $11 billion in capital costs alone.

Halifax has recently discovered that it “could save hundreds of millions of dollars” by reducing the expansion of low-density sprawling development and opting for more dense urban development.

The report isn’t all bad news. Part of Sustainable Development’s mandate is to develop innovative policy options that could help cities facing a future cash crunch.

It notes that some cities — Kitchener, Calgary and Ottawa among them, already have development charges that vary according to the area where development occurs.

Thus, Kitchener charges 74 per cent more for suburban development than it does for central neighbourhoods. Ottawa charges more for development outside its greenbelt.

The report also suggests possible changes in utility charges, property taxes, and subsidies for transit and car-sharing programs. More toll roads, like Highway 407 across the north end of Toronto, are another possibility.

So are increased gasoline taxes, with cities being given the authority to levy those taxes.

Suburban Sprawl is a thought-provoking document filled with observations and suggestions. It should be read by all politicians and builders.

Korky Koroluk is a regular freelance contributor to the Journal of Commerce. Send comments or questions to editor@journalofcommerce.com.

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