Niagara considering $274M catch-up capital budget
Past zero budgets have created funding shortfall, says council
Years of underfunding capital projects in Niagara came to a head this week and while approving in principal the largest capital budget in Niagara’s history, several regional councillors were primarily concerned about the debt the Region could face in years to come.
“This isn’t sustainable,” said Lincoln Coun. Rob Foster, while councillors met Thursday to discuss a proposed $274-million capital budget — nearly $90million more than the Region’s $186 million annual average capital spending for the past six years.
And with record-setting capital budgets expected to continue for the next few years, Foster said the previous council should have been setting aside funding to pay for projects rather than focusing on cutting taxes.
Foster said councillors during the last number of years took “great pride in zero per cent budgets or whatever it was they were putting through,” resulting in the funding shortfall the new term of council is now dealing with.
If approved on Feb. 28, this year’s capital budget would provide funding for 168 projects — including $21.1 million to upgrade the Decew water treatment plant, $21 million for an expansion of the Region’s environmental centre to consolidate waste management operations, $16.1 million spent on Martindale Road work, $13.9 million investment in Niagara Regional Transit to replace aging buses and
$12-million to decommission a lagoon at Niagara-on-the-Lake’s sewage treatment plant.
It would also add $60.9-million to the Region’s debt, bring the total debt-load to $388-million.
Even then, Niagara’s debt payments would only amount to about eight per cent of income — far below the province’s cap of 25 per cent of income spent on debt payments, and about 1.3 per cent less than average among regions of similar size.
The Region will also draw $57.1-million from development charges, with the remainder coming from the federal gas tax, area municipalities and other sources. But since the budget would also take $131 million from Niagara’s $160-million reserve fund, Foster was one of several councillors concerned that the Region could incur significantly more debt in years to come.
“There’s significant debt coming in 2020 and there’s a pretty darn extensive amount of debt going on in 2021,” Foster said.
In an interview, Foster added “it seems like there’s just an absolute ton of things that have to be done over the next couple of years.”
“My concern … is that our overall debt level is going to be at a stage that it’s going to be creating havoc on the operations side of things,” he said.
“What were they doing with the reserves?” he said referring to the former council. “Obviously, with what we have now seen with the numbers that are coming out, is that they were using it to offset tax increases. Now we’re stuck having to deal with that.
“I’m not saying whether it’s good, bad or indifferent what they did, but it certainly has tied our hands on what we can do.”
During Thursday’s meeting, Fort Erie Mayor Wayne Redekop said the Region’s 10-year capital forecast predicts $457 million in spending in 2020, followed by $323 million in 2021, required to meet Niagara’s asset management plan.
Considering the upcoming expenditures, Redekop said Niagara will likely be borrowing a lot of money in years to come, too.
“I think it would be very helpful to have an understanding of where we’re going to be in 2021 in terms of how much debt we have and the ratio with reserves.”
Despite remaining below the province’s 25 per cent limit, Redekop said, “No responsible municipality gets anywhere close to it.”
St. Catharines Mayor Walter Sendzik said many municipalities have self-imposed debt limits.
“In the city of St. Catharines we can’t go above 10 per cent of the operating budget,” he said.
The Region’s financial management and planning director Helen Chamberlain said the Region currently has no such policy in place, although past practice has been to maintain the debt limit at below 10 per cent.
Niagara’s enterprise resource management commissioner
Todd Harrison said council will be looking at long-term plans while developing its debt management strategy, working in conjunction with lower-tier municipalities.
“This is a regional issue that we need to address,” he said.
Although regional staff were asked to limit the 2019 tax increase to no more than two per cent, Redekop suggested it ought to have been more.
“Maybe the guidance is wrong. Maybe it should be three per cent.”
Chamberlain said staff were instructed to bring in a zero per cent budget increase in 2016, and a one per cent increase a year later.
Redekop also urged staff to look for additional efficiencies within the Region’s operations.
“Recently there were some employees who were removed from the employment complement. Are there are other opportunities for the complement to be adjusted?”
Acting CAO Ron Tripp said several reviews have been done to identify efficiencies, “and we will continue to do so.”
Port Colborne Mayor Bill Steele said his city staff update councillors about debt repayments, showing how much debtroom is available as past debts are paid off.
He asked regional staff to do the same.