Infrastructure deficit can be managed, finance director says
February 15, 2012
Victoria's $500-million infrastructure deficit is daunting, but manageable, Victoria councillors were told Tuesday.
"We have a 20-year capital plan and there's not a lot of municipalities that can say that," Victoria's director of finance Brenda Warner said.
"The City of Victoria is investing in its infrastructure and we're doing an awful lot of work on this."
Warner's comments came during a capital budget orientation session.
The $500-million reserve fund deficit is the difference between what is in infrastructure reserves and what should be in the reserves based on an infrastructure replacement value of $1.7 billion.
The infrastructure deficit does not include $143 million in unfunded major capital projects, including replacement of the Crystal Pool, estimated at $58 million, and the $16.5 million replacement of the No. 1 Fire Hall.
Warner said the city is addressing capital funding through a multi-faceted approach, including:
- levying a 1.5 per cent tax increase every year (raising about $1.5 million) for capital reserves;
- transferring all new assessment revenue into infrastructure reserves;
- actively pursuing third-party funding (such as from the federal and provincial governments) for capital projects;
- where possible, only adding new debt in years when other debt issues are retired to minimize the impact on property taxes. Victoria's debt servicing costs for 2010 are $6.8 million compared with $7.5 million for average comparable cities, Warner said.
Still, capital reserves are forecast to decline by 15 per cent this year to $55,974,715 from $66,387,970 as capital spending outstrips reserve contributions.
Mayor Dean Fortin said municipalities such as Victoria need more financial help from senior levels of government for capital projects.
"If we receive just a little bit of support - one-third support from our senior levels of government - then we've managed this and it's workable and we will not have to increase taxes in relation to that [beyond the 1.5 per cent increase earmarked for capital reserves]," Fortin said.
"Really, traditionally, senior levels of government have kicked in anywhere from one third to two thirds of major capital projects and that ultimately is what cities have been saying. We need a commitment from the federal and provincial governments that they are going to be there to help the municipalities with this challenge."
After the meeting, Coun. Geoff Young said he wondered how sustainable is the annual 1.5 per cent tax increase for capital.
"The biggest vulnerability is the 1.5 per cent tax increase, that's the issue," Young said.
"Whether we can afford to continue to increase taxes to that level in order to fund capital when we have ongoing responsibilities in the operating budget. I think we really have to think about some of the things we're doing and whether we can afford to continue at the level we are."