RSS Feed for This PostCurrent Article

Town needs extra $28M for capital plan

Thanks to a $30 million bonanza from slots revenue starting in 1999, Fort Erie made strong headway to replace aging infrastructure and to build new facilities. But with the closure of the slot casino at the Fort Erie Race Track last year, the free ride is over.

Slots revenue kept taxes in check while the Town aggressively attacked projects that had been deferred for years while repair costs mounted.

Now taxpayers are faced with a $28 million bill over the next 11 years to pay the difference between what town council has been setting aside for replacement and what needs to be done.

That is called the “infrastructure gap.”

Town staff estimated that a 2.5 per cent increase in taxes each year for the next five years is required to keep pace — or close the infrastructure gap.

“We’re not saving the money we need to replace infrastructure at the same rate that we’re using it,” said acting-CAO Ron Tripp.

“We’ve recommended an additional $500,000 every year for the past few years but it’s the first thing that gets cut,” he said.

At the current rate of reserve contributions, it will take 28 years to meet the current 11 year plan.

“Councillors think from year to year but it will end up being the next council’s problem,” Tripp said. “Who wants to be responsible for a tax hike?”

There are other sources of funding for capital investment. Most notable of them are debentures, development charges, water billings and grants from senior levels of government.

Debenture is a fancy name for a loan, and Town policy calls for debentures to be used only for new projects, although that is not hard and fast.

Provincial regulation puts a limit on debenture financing so that loan payments do not exceed 25 per cent of the total tax levy which is about $20 million in Fort Erie. Currently, the Town is a tad under 5 per cent which is the limit to what the province designates as low risk. Higher risk results in higher interest payments.

Development charges are mandated to be used only for projects that accommodate growth or new development, not replacement.

Water and sewer charges can only be used for water and sewer projects.

Provincial and federal grants are dependent on the will of those governments to pour money into municipalities.

The last big grant program came in response to the global financial crisis of 2009. To a large degree, this program “bailed out” municipalities which were habitually deferring renewal projects — a cross-your-fingers-and-hope plan.

The new provincial grant program is “miniscule compared to other years,” Tripp said, noting that he has experienced 11 programs in his years in the public service.

Viable and sustainable financing plans for future infrastructure renewal are now a requirement to qualify for provincial funding, he said. Not only must there be a plan, municipalities must show that they are working their plans.

Tripp said many municipalities are deficient in their plans and the work that they are doing to finance renewal — all in the hope that once again, as has happened before, the province will bail them out.

However, the province has been clear that it won’t throw money around willy-nilly unless municipalities are prepared to do the heavy lifting to address the infrastructure gap.

Part of that is the development of asset management plans that address the costs to replace every single brick, load of asphalt and metre of underground pipe that municipalities own.

Tripp says it’s a positive development because municipalities who manage their affairs responsibly will be rewarded.

Council has not made a decision for the 2013 budget to allocate the additional money to the reserves. That will come at the end of January.

Trackback URL

Sorry, comments for this entry are closed at this time.