Claim: The city’s infrastructure deficit is at an unmanageable level
Although various numbers have been ascribed to it over the years, it’s safe to say the City of Greater Sudbury’s infrastructure deficit is great enough to warrant concern at city hall.
It’s a topic that has come up a great deal in recent months, spurred in part by the upcoming Oct. 24 civic election and municipal candidates pledging to do something about it.
Last year, city administration released what Ward 4 Coun. Geoff McCausland referred to as a “beast of a report,” which clarified that the city would need to spend an additional $100 million on assets per year to keep them in their overall current state.
During subsequent 2022 budget deliberations, Mayor Brian Bigger sussed out from city administrators that council would need to increase the municipal share of property taxes by 33 per cent to meet this annual funding shortfall.
“It’s not something municipal taxpayers can solve,” he said at the time, adding that the city needs to find innovative ways of using their dollars more efficiently
“I don’t think council has any intention of delivering a significant increase like that on our tax levy to entirely eliminate our infrastructure gap.”
Complicating matters further is the city’s accumulated infrastructure deficit, which a KPMG report identified in 2016 as hitting $1.8 billion. They described this as “the estimated cost of infrastructure that is operating beyond its useful life and theoretically in need of replacement.”
In CAO Ed Archer’s latest quarterly performance report in April, he noted there’s an “almost certain” likelihood that the city’s “asset renewal investments may be insufficient to maintain acceptable condition and service levels,” citing its risk level as “Critical.”
Local advocates, many of whom are part of multiple groups with virtually identical membership, such as Our Towns Our City Institute and the Sudbury Concerned Citizens Group, have raised various alarms regarding the city’s infrastructure deficit.
Their upper-level estimates have claimed the infrastructure deficit is greater than $3 billion.
Although Archer doesn’t negate the fact that there’s a significant infrastructure gap to fill, these advocates seem to have extrapolated existing data inaccurately by taking the $1.8-billion infrastructure deficit figure from 2016 and adding to that number the underspending recorded in subsequent reports and the city’s $355-million debt load to arrive at that $3-billion figure.
“The work required to restore an asset's condition to the state that meets or exceeds a prescribed service level doesn't change just because more time has passed,” Archer said, clarifying that although the city’s 2021 infrastructure deficit estimate was $1 billion, even this is nebulous.
A deficit, he said, “reflects our asset condition, it reflects service-level expectations and it reflects, as well, risk and your risk tolerance.”
This, he added, can change over time pending things such as city council direction and which new variables are added to the equation. One of these variables is a growing understanding of what the impacts of climate change will be on municipalities.
The 2016 report highlighted an “initial estimate,” Archer said, clarifying that last year’s updated report “reflects the requirements of a new provincial regulation that came into effect after the 2016 KPMG report was produce,” and “reflects our refined understanding of service levels and asset management data requirements.”
The previous report also included an analysis of certain asset classes not covered in the 2021 report.
Estimates such as these provide city council with important context for spending decisions and “helps focus attention on elements of the service delivery process that might not otherwise get noticed until they fail and, therefore, prompt timely investments that avoid service interruptions,” Archer said.
As for lumping debt alongside deficit as though they are interchangeable terms, Archer clarified that these words mean two very different things.
“A debt comes from the acceptance of some benefit today in exchange for future payment,” he said, an example being the city’s current estimated debt load of $355 million.
“The deficit is the difference between what you expected (in terms of budgeted spending) and what you actually got, so it’s more of an operational term … so they’re really talking about two different things.”
Through emailed correspondence with Sudbury.com, Lakehead University economist Livio Di Matteo told Sudbury.com that Greater Sudbury might have an at least partial solution by drawing from its reserves, which at $156 million lag far behind the provincial average for municipalities.
“As well, both the federal and provincial governments have apparently committed billions in infrastructure spending over the next decade and municipalities will be able to access these funds also,” he said.
“There is always the potential to borrow for municipal infrastructure projects and my understanding is that Sudbury has already borrowed for many projects currently underway.”
Greater Sudbury is far from alone in facing an infrastructure deficit, with the Financial Accountability Office of Ontario estimating last year that Ontario municipalities faced an infrastructure backlog of approximately $52.1 billion and that approximately 45 per cent of municipal assets were in need of repair.
Even this was considered the “lower bound” of the municipal infrastructure backlog in Ontario, since it only accounts for infrastructure of a known condition.
As for what the city’s elected officials have done in recent years, the numbers show that they have been striving to fill the infrastructure gap. The city’s capital budget has almost doubled to approximately $200 million in this budget year from $110 million in 2015.
Meanwhile, municipal tax increases have ranged between 2.5 per cent and 7.5 per cent since 2002 (excluding 2015, when the city’s municipal tax increase was zero per cent), during which they have averaged approximately four per cent.
“Municipalities are relatively new to this,” Archer said, adding that during the ’60s and ’70s, many municipalities received a lot of facilities via federal and provincial money and didn’t factor in their replacement costs over the subsequent years.
“Now that we have to replace these things, the obligations for the municipal taxpayer are relatively new,” he said.
“We know that there are service needs that are unmet, and council has given us direction to try to address them, but they didn’t come up overnight and they won’t be resolved overnight.”
Despite this ongoing challenge, Standard and Poor Global Ratings recently announced that it had upgraded Greater Sudbury’s credit rating to AA+ from its previous AA.
“Although the city will continue to face operating challenges, its effective cost-containment efforts will help ensure robust budgetary performance throughout the forecast horizon,” the organization noted in last year’s credit rating report. “Its ambitious capital plan will necessitate some further borrowing in the next two years, but we believe that the debt burden will be very manageable, and that liquidity will remain very strong.”
Verdict: It is a fair assessment that the infrastructure deficit is unmanageable, in that tackling the problem head-on would require unacceptable or even unrealistic property tax rate increases, reduced service levels and/or funding from senior levels of government.
Fact Check Friday has been created as part of an ongoing effort by Sudbury.com to clarify information being shared with the public. Topics for future Fact Check Fridays can be emailed to reporter Tyler Clarke at [email protected] with “Fact Check Friday” as the subject.
Tyler Clarke covers city hall and political affairs for Sudbury.com.