INFRASTRUCTURE IS ESSENTIAL FOR THRIVING CITIES
The question facing all levels of government is, who pays for it?
We all take infrastructure for granted —until something goes wrong.
Remember the infamous blackout of August 2003, when most of Ontario and the northeastern United States were plunged into darkness? The power outage was caused by a deteriorating grid that buckled under the pressure of increased demand.
More recently, in July 2013, the worst flash flood in Toronto’s history dumped 126 millimetres of rain on Canada’s largest city, cutting power to hundreds of thousands of homes, halting subway and GO Train service, flooding roads, and causing over-loaded pipes to backup into people’s basements.
Both are harrowing examples of circumstances where aging and under-funded infrastructure couldn’t keep up and Toronto, the nation’s economic powerhouse, was all but shut down as a result.
FUNDAMENTAL TO CIVIC GROWTH
“Infrastructure enables our cities to function, yet you don’t think about it until there’s a problem,” says Giovanni Cautillo, executive director of both the Ontario Sewer and Watermain Construction Association and the Greater Toronto Sewer and Watermain Contractors’ Association. “When things are working fine everyone takes infrastructure for granted.”
Infrastructure like the kind Cautillo and his members deal with on a daily basis—the pipes that bring us fresh clean water and take away the dirty stuff—is, not something we notice, even though it’s fundamental to our daily lives.
The same could be said of the roads that move people and goods, the transit we take to work, the bridges that connect our communities, and the electricity that keeps the lights on. All of it is infrastructure and it is also necessary for the development of new communities and to support growth, and it is essential to the economic prosperity of our city, region and nation.
FUNDING FAILURE
However, we have a problem with infrastructure, a big problem that no one can agree how to fix. Infrastructure is expensive and not only do we need more of it to meet the demands of our growing cities, we also have a serious infrastructure deficit. Much of our existing infrastructure is old and nearing the end of its useful life.
Canada’s municipal infrastructure deficit is estimated to be more than $123 billion, according to the Federation of Canadian Municipalities which represents more than 2,000 municipalities.
At the provincial level, an estimated $5.1 billion is required just to replace Ontario’s aging infrastructure, according to a recent study of 93 municipalities by the Association of Municipalities of Ontario.
Today much of our infrastructure is funded and put into place through the development process as part of building new communities.
There’s been a lack of funding support for infrastructure at the federal level, with just $5 billion a year currently earmarked for the entire country. The scarcity of funding is more acute in the GTA, which is growing by up to 100,000 people and 50,000 jobs annually.
“The small amount that goes toward the immense challenge of tackling our nation’s infrastructure deficit is not enough, especially in the GTA as it continues to grow,” says Bryan Tuckey, president and CEO of the Building Industry and Land Development Association.
“We need more pipes in the ground, roads for moving goods and people, and transit to provide an alternative transportation method that eases congestion. Continued prosperity in the GTA depends on it.”
Both the federal and provincial governments need to invest to ensure communities have stable, long-term and predictable funding for municipal infrastructure, Tuckey added.
The federal government used to invest in infrastructure. It used to provide more money to the provinces for infrastructure, which was in turn funnelled by the provinces to municipalities. But since the 1960s, there’s been a dramatic shift in responsibility.
Back then, the federal, provincial and local governments each owned a third of their infrastructure assets (see the chart outlining “Share of Infrastructure Responsibility”). By 2005, amid soaring health care and education costs, local governments were saddled with supporting 67 per cent of assets.
“There has to be more assistance from the federal government,” agrees Cautillo. “Municipalities shouldn’t have to shoulder the burden of paying for the infrastructure all on their own. Everyone in the country benefits when urban centres like the GTA flourish.”
To close the infrastructure funding gap, local governments have introduced significant increases in development charges and other fees over the last decade.
These are taxes on new development, ultimately paid for by new homebuyers. A study done by Altus Group for BILD several years ago shows government charges and fees amount to one-fifth the cost of a new home on average across the GTA.
“It is unreasonable and unfair to put the cost of infrastructure on the backs of the new homebuyers when it really benefits all of us,” says Tuckey. “We agree with the principle that growth should pay for growth, but the new homebuyer and employer are already paying more than their fair share.”
Complicating matters is the fact that often the infrastructure projects that come as a result of a housing development — whether it’s new systems or upgraded existing ones — improve the lives of more than just new residents.
“The existing community and surrounding residents benefit when new transit comes on- line, new sewers or water mains are put in, or new parks or community centres are built,” says Gary Gregoris, a senior vice-president with Mattamy Homes, one of the country’s largest homebuilders. “These newer facilities, and more facilities, come as a result of new development and are largely funded by new homebuyers, but everyone should be paying a portion of the costs.”
Funding infrastructure through development charges and fees that new homebuyers must pay is adding significantly to the high cost of homes.
“We’ll be running into an affordability problem soon in the GTA,” says Gregoris, “if we’re not already there.”
The small amount that goes toward the immense challenge of tackling our nation’s infrastructure deficit is not enough, especially in the GTA as it continues to grow.
Bryan Tuckey, presidentand CEO, BILD