City staff suggest levy, selling aging facilities to fix aging infrastructure in Ottawa

An infrastructure levy on property tax bills could help address a multi-million-dollar gap in the infrastructure budget over the next 10 years, according to City of Ottawa staff.

A report for Tuesday’s finance and corporate services committee outlines ways to pay for $4.8 billion in capital requirements to repair and replace aging roads, parks, recreation facilities, enhance services and build new infrastructure between 2026 and 2035.

“It focuses on the funding strategies that are required to provide for the renewal and maintenance of the City’s existing asset base in a safe and functional state,” staff said.

While the City of Ottawa has increased the capital budgets for infrastructure from $152.4 million in 2017 to $331 million in the 2026 budget, staff say there is a $229.1 million a year gap in funding for infrastructure.

To help fund the estimated $479.7 million a year in infrastructure funding, staff recommend doubling the existing $6 million annual contribution from the tax increase in 2027 and 2028 to $12 million, a one-time funding boost of $32 million from capital reserves, allocate 0.15 per cent of growth in property tax revenue, and the city to take on additional debt over the next 10 years.

The report notes funds from a dedicated infrastructure levy introduced in a future budget could help fund infrastructure projects. Staff point out that Toronto, Vancouver, Hamilton and Mississauga have introduced infrastructure levies or “other forms of earmarked revenue to address their growing infrastructure deficits.”

“A dedicated infrastructure levy could help address the City of Ottawa’s identified priority infrastructure needs and funding backlog,” staff said.

“The City’s tax-supported assets have an estimated replacement value of over $39 billion and a dedicated, predictable source of funds to supplement a long-term funding strategy would be beneficial for preserving service levels for residents.”

According to the report, a one per cent infrastructure levy would add $46 a year to the average property tax bill.

In a letter to Mayor Mark Sutcliffe last week, former Coun. Alex Cullen said Ottawa’s aging infrastructure “is a problem that cannot responsibly be put off any longer.”

Cullen notes the average age for Ottawa’s arenas and rinks is 45 years old, while aquatic facilities are an average age of 40 years and community centres and field houses are an average of 39 years old.

“I believe a specific dedicated levy to address this important problem would be acceptable to most taxpayers, particularly if it meant their pools, rinks, community facilities and other infrastructure would be maintained and even improved,” Cullen writes.

The City of Ottawa introduced a capital levy in 2008, generating $20 million to address the funding gap for renewal needs. The levy has not been applied since 2009.

Staff say an infrastructure levy would “help to provide long, term predictable funding.”

“Possible solutions that can be decided as part of the annual budget process include adding an infrastructure levy, funding within tax targets, or reallocating from unspent.”

Selling off buildings

Another option suggested to help build new City of Ottawa facilities is using revenue generated from the sale and disposal of existing facilities.

The report recommends any revenue generated from facility disposals be made available for capital prospects identified in the Facility Replacement Plan.

“A fully funded facility replacement plan, guided by the criteria laid out by the Facility Management Governance Group, has the potential to reduce infrastructure needs identified in the Asset Management Plan and generate revenue from facility and land disposal,” staff said.

“By systematically retiring or replacing high-maintenance, low-criticality assets, the City can stabilize its portfolio and ensure it is ‘right-sized’ to service delivery requirements within affordability constraints.”

Infrastructure funding gaps

The report outlines the funding gaps for infrastructure renewal, including roads, growth, service enhancements and replacing aging city facilities.

There is a $1.23 billion funding gap for the renewal of existing city assets, including roads, structures and traffic assets, totaling $122.9 million a year.

According to the report, the city needs to spend $198.3 million a year on roads, $70.7 million on buildings, $28.6 million on IT and 419.7 million on parks.

To accommodate growth with new roads and infrastructure, there is another $20 million gap in funding. The city has an average need of $50.1 million to spend on growth requirements, but only $29.4 million in funding confirmed.

Another $62.8 million a year needs to be found to help pay for “service enhancements” to accommodate Ottawa’s population, including roads, buildings, climate change and parks.

And the city is looking to spend $231 million over the next 10 years to replace 40 city facilities. Staff say 99 of Ottawa’s over 130 facilities are currently rated as “fair” or lower condition, but only 40 facilities justify full replacement.

“It is not feasible to replace all 40 facilities within the identified $231 million CRV. The $231 million in needs for facility replacements is therefore also a priority need.”

In a Facebook post on Sunday, Coun. Laine Johnson urged residents to “pay close attention” to the debate on capital spending to maintain and expand city infrastructure.

“Every year, the city spends millions of dollars to repair and upgrade community centres, swimming pools, office buildings, libraries, and much more. And every year, the city has fallen behind,” Johnson said.

“It’s an issue that I’ve raised several times in budget meetings. It’s a kind of deficit. And with inflation, the capital spending deficit gets worse year after year. This report shows that we need to spend about $229 million more than our current taxation allows.”

Johnson admits that an infrastructure levy on tax bills or not building new facilities will not make Ottawa residents happy.

“Doing nothing won’t make us happy, either,” Johnson said.

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