It would require an average $90 tax increase every year for the next decade just to stop the city’s infrastructure maintenance crisis from getting any worse. Staff warnings began more than a decade ago about the enormous backlog in fixing existing city roads, pipes and buildings that now has reached $3 billion, but councillors still seem to be having trouble grasping the problem.
The city’s first state of the infrastructure report was provided to council in 2005, and warnings of an underfunded water and sewer system date back to the previous decade. That first report actually won staff an award for the thoroughness of their life-cycle assessment work and the “sobering information” was recognized by then Mayor Larry DiIanni in a February 2006 city council meeting.
“There was genuine recognition of the very good job that Hamilton is doing in not only understanding the assets we've got, but planning for the replacement, repair and nurturing of those assets going forward,” DiIanni recalled from the ceremony in Ottawa that he had attended.
That 2005 assessment revealed an annual budget shortfall of $135 million. Subsequent reports were produced in 2006, 2009, 2011 and 2013 – some covering all city infrastructure and some focusing on specific elements. Today staff estimate that the accumulated deficit for maintenance of existing infrastructure is about $3 billion and growing by nearly $200 million each year with staggering tax implications.
Finance chief Mike Zegarac told councillors last month that just to reach half of this year’s needed maintenance in all infrastructure categories would require adding an extra 5% tax hike to the already expected 4.4%.
“To move every [category] to 50 percent we would require an additional $39 million annually,” Zegarac reported. “If we wanted to move them to 60 percent funded we would require an additional $65 million annually.”
In 2004, council allocated a bigger portion of taxes to the capital budget than it has at any time since. Zegarac blamed a focus on “tax competitiveness” for the significant drop during Eisenberger’s first term as mayor that included no increase at all in 2009. The tax share for infrastructure maintenance rose during the Bratina period before council again voted for no addition at all last year to keep taxes low during an election year.
The 2015 capital budget of $244 million is down nearly $50 million from last year and the finance chief is predicting further sharp declines over the next decade unless senior government levels provide more subsidies. The two most recent gifts came last year for the football stadium and in 2010 when the Harper government poured stimulus fund subsidies into construction of arenas and other recreational facilities despite council listing roads as the priority.
Those revelations from Zegarac didn’t stop Tom Jackson from asking the finance chief to ensure that more monies are dedicated to repaving neighbourhood streets, a desire quickly backed by Scott Duvall. Terry Whitehead agreed, complaining bitterly about the state of the roads in his west mountain ward and suggesting city staff priorities are out of whack.
“I don’t think you have to go far in anyone’s ward to find roads that might as well be gravel,” he noted. “In fact gravel would be an improvement over what they’re currently facing.”
Public works chief Gerry Davis acknowledged that even major arterial roads are suffering from the financial shortfall but contended the city has “one of the best processes probably in North America” for determining which roads should be repaired first.
“We just have priority roads that are pushed out because we don’t have the funding. We know they’re a priority and if the funding was in place we would deliver it,” said Davis. “But you have a hundred roads that are priority and I have enough money to do 50. So we can move one priority to another but they’re both required.”
The intensity of the budget squeeze has finance staff recommending that new initiatives such as waterfront redevelopment be financed by borrowing and only if they offer the prospect of generating new tax revenues to pay off that debt.
“That is our only financial capacity to move those programs forward exclusive of re-directing funding away from blocks and existing areas, and by doing so would simply create ever further pressures on our existing assets and would just increase that annual infrastructure deficit going forward,” said Zegarac.