The accumulated spending deficit on roads and other city assets is “approaching $3.5 billion” according to the staff report accompanying the 2016 capital budget. The sobering document points to the reluctance of council to raise taxes as a key factor in the worsening crisis, but also links it to the amalgamation deal fifteen years ago.
Shrinking reserves mean this year’s infrastructure spending is $45 million less than last year and even the ten-year projections don’t include plans approved last year to expand HSR routes over the next decade. By 2020 staff expect the total capital budget will fall by another $60 million a year to a level barely half of what it was in 2014.
While councillors spend months debating the city’s operating budget – even setting aside one meeting to hear submissions from residents – the capital budget was finalized in the middle of last month with no public input and minimal media attention. Its main decision was the same as in the last several years – to increase taxes by half a percentage point ($16 per average household) in order to top up the shrinking infrastructure spending envelope by a little less than $4 million.
On a couple of occasions in the past decade, staff have recommended a one percent increase, but that has never been endorsed by council and that option now appears merely as an alternative in the staff report. The resulting shortfall will add nearly another $200 million to the accumulated deficit in the maintenance and renewal of roads, recreation facilities, social housing, parks, trees and other city assets.
In the face of inflation and other pressures, the annual half percent increase also means infrastructure spending comprises a smaller and smaller portion of the city’s total budget. This year it has fallen below 12 percent for the first time in five years – far below “comparator municipalities” and where it used to stand before amalgamation, according to the report.
“A healthy capital to operating ratio is around 15% to 20%,” it warns. “That is where the pre-amalgamation ratio was for the combined City before reserve provision transfers were reduced to provide amalgamation savings.”
The report also blames a reduced industrial/commercial tax base in Hamilton and fewer subsidies from the provincial and federal governments. The latter appears to simply recognize that the grants for the football stadium that boosted last year’s budget numbers are completed. The city continues to receive $32 million a year in federal green infrastructure funding that it utilizes almost exclusively for roads – funding that is used by nearly all other Ontario cities for transit and environmental improvements.
Again in repetition of previous years, the report concludes that “The city cannot solve its infrastructure funding gap from own source revenue. It will have to rely on significant stable funding from the senior levels of government.”
But it also notes the “fiscal pressures” facing the province and the fact that the Wynne government has made clear “that future funding commitments to municipalities will be based on focused investments which address needs rather than wants.” That’s echoed in the LRT and GO funding Queen’s Park has committed to providing to Hamilton – but council’s lukewarm support of transit appears out of step with this decision.
Roads funding once again tops council’s infrastructure spending in 2016 at $91 million out of the $216 million total. New roads at $16 million consume one-sixth of this budget segment – with the largest part being $7.5 million toward the Waterdown bypass project.
The budget report also warns about rising city debt levels and states that staff “will hold the line on increasing the city’s tax supported external debt past the current debt peak forecast” of over $900 million in 2019. City debt currently sits at just over $800 per person and 2016 repayments will consume nearly $50 million – just over half the $98 million being used this year from property taxes.