BEPPLE – Cities need new deal with Ottawa on infrastructure costs

LAST WEEK, I was in Ottawa. I spent the week with about 100 other local government elected officials from across Canada.  Our goal: to make it more affordable for our communities’ residents and businesses.

I spent the week in Ottawa as part of Advocacy Days of the Federation of Canadian Municipalities (FCM).  FCM is a pan-Canadian organization of 2000+ local governments.  Its mandate is to work together on issues that affect communities related to the federal government.  For example, railway safety, internet connectivity, and immigration.

But the number one issue we worked on this week is the rising cost of infrastructure from one end of the country to the other.

The goal of Advocacy Days was to speak to as many Members of Parliament (MPs) from all parties as possible.  The primary topic was talking about a new fiscal deal between the federal government and local governments.  Especially, a new deal relating to infrastructure funding.

Across the country, the federal government has identified the need for more than 5.8 million housing units to be built by 2030.

Kamloops is the third fastest growing municipality per capita in Canada, so no doubt we need housing.

Both the federal and provincial governments want more housing to be built.  The provincial government has gone so far as to dictate that the City of Kamloops needs to facilitate more than 800 housing units a year built.

But whether in Kamloops, Moose Jaw, Toronto or Moncton, housing is just a storage unit without infrastructure.  Every new home needs water, sewer, roads, street lights, and hopefully parks.  Every new home needs infrastructure.

The FCM calculates that for each new housing unit, on average, there is $107,000 in infrastructure required.

The $107,000 is a tremendous cost that cities have only two main ways to fund.

First, cities collect development cost charges (DCC). Those charges, applied to new construction, make builders pay for the share of infrastructure needed.  Builders pass the cost of DCCs onto buyers, increasing the costs of new homes.

Second, cities collect property taxes and utility fees from homeowners.

Cities have very limited ways of raising funds. Building new housing means building new infrastructure.

Infill allows for use of existing services, to a point.  But even infills have infrastructure costs.  For example, more and more apartments in the Kamloops downtown core has required addition services such as the upgrading of the sewer main and lift stations along Lansdowne Street.

Greenfield (building where no buildings or roads existed before), is the most expensive.  All new roads, water, sewer and more must be built.

In either case, once built, infrastructure needs to be maintained.  Recent water rate increases were directly related to the need to increase reserve funds, to pay for upcoming infrastructure costs. Pumps need to be replaced, filtration systems updated, pipes updated or they will eventually burst (especially in the dead of winter).

Local governments collect only 8 cents of every dollar of taxes in Canada, but are responsible for 60 per cent of all infrastructure.  Short of ever increasing home costs as DCCs rise, and ever increasing property taxes and utility rates, a new funding model is needed.

The federal government does give communities funds, but much of it is in the form of grants.  In the case of the City of Kamloops, only about 30 per cent of grants applied for are granted and rarely cover more than half of a project’s costs.  The rest of the cost of infrastructure is borne by local taxpayers.

Cities need infrastructure, but so does Canada as a whole.

That’s why FCM is calling on the federal and provincial governments to look at other funding models.

In both Quebec and Saskatchewan, local governments now get a portion of the provincial sales tax.  Both provinces did it without raising their sales tax.  Their provincial governments saw the importance of providing local governments with a growing source of revenue as the means to build and maintain infrastructure.

Infrastructure costs don’t go away.  They can be deferred, if we don’t fill potholes or maintain water mains.  They can be reduced, if we focus on infill development instead of greenfield.  But they cannot be eliminated.

The goal of the federal government is to build 5.8 million homes nation wide.  The goal of the provincial government is for 800 more housing units per year to be built in Kamloops.

The goal of the FCM is to get a new fiscal agreement with the federal and provincial governments.  The goal is to help homeowners across the country, to keep housing costs lower, and reduce the burden of property taxes on homeowners.

There are 2,000 communities across the country, through FCM, asking for a new Municipal Growth Framework, a new way of funding infrastructure so that housing can be built.  Watch for more news on the framework over the next months, as FCM representatives like myself work to help keep communities affordable.

Nancy Bepple is a Kamloops City councillor with a strong interest in community building projects.