the urban infrastructure challenge in canada: focusing on housing affordability and choice...
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The Urban Infrastructure Challenge in Canada: Focusing on Housing Affordability and Choice
Presentation by CHBA – [Name] to
The Municipal Council of [Name]
June, 2008
The Urban Infrastructure Challenge 2
Background to this presentation: Major report on infrastructure financing
prepared for CHBA by economic consulting firm Altus Clayton…The Urban Infrastructure Challenge in Canada: Perceptions and Realities.Our aim is to get key findings out.
Report analyzes municipal funding and governance in Canada in a balanced way.
Uses data from Statistics Canada and Infrastructure Canada regarding respective financial participation of different levels of government and of the private sector.
The Urban Infrastructure Challenge 3
Key questions addressed:
1. What is “basic urban infrastructure”?
2. What have patterns of urban infrastructure investment been over recent decades?
3. Who is paying for what?
4. What financing arrangements would be most suitable to enhance housing affordability and choice in the future?
The Urban Infrastructure Challenge 5
Why we need to define this term according to Altus Clayton:
Wide range of definitions of “public infrastructure”, many of which include items better described as “amenities”.
This takes focus off basic urban infrastructure as a key component of public sector stewardship of urban growth and community well-being.
Policy development will benefit from a focus on assets most closely affecting health and safety of population.
Facilitates setting priorities and achieving measurable results.
The Urban Infrastructure Challenge 6
Priorities for inclusion in “basic or ‘core’ urban infrastructure”:
Roads and highways Bridges Public transportation system structures and
equipment Water supply systems Sewerage collection and treatment systems
(The term “core infrastructure” is used by the National Round
Table on Sustainable Infrastructure as well as Infrastructure
Canada and the National Research Council of Canada. )
The Urban Infrastructure Challenge 7
Why should these be priorities for infrastructure investment?
Focus on facilities essential to human beings functioning effectively in modern cities.
Give highest priority to public health, safety, natural environment, and future prosperity.
Stress infrastructure typically owned by municipalities/local utilities.
Recognize that such infrastructure is vital to quality of life and must be built well, operated efficiently, and maintained to a high standard.
The Urban Infrastructure Challenge 8
Risks of a lack of focus on basic urban infrastructure…
Montreal overpass collapse
Walkerton deaths due to faulty water supply system
The Urban Infrastructure Challenge 10
Investment in basic urban infrastructure on per household basis declined after 1973:
Basic Urban Infrastructure Investment, Per Household, 1961-2006
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
19
61
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
Constant 2006 Dollars
Source: Altus Clayton based on data from Statistics Canada: Fixed Capital Flows and Stocks (Table 031-0002) and household statistics
The Urban Infrastructure Challenge 11
Average age of basic infrastructure has increased:
Average Age of Basic Urban Infrastructure, by Asset Types, Canada, 1963-2007
12
14
16
18
20
22
24
26
1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007
Roads and Highways
Sewer Systems
Wastewater Treatment
Bridges
Average Age (Years)
Source: Altus Clayton based on data from Statistics Canada, “The Age of Public Infrastructure in Canada” (2006 and 2008) Catalogue no. 11-621-MIE
The Urban Infrastructure Challenge 12
After a period of less investment in basic urban infrastructure, it has been growing again in recent years, in part due to federal return to funding programs for local infrastructure.
Investment in Basic Urban Infrastructure, Governments*, 1961-2006
0
3
6
9
12
15
18
19
61
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
20
06
Billion (2006$)
Source: Altus Clayton based on data from Statistics Canada: Fixed Capital Flows and Stocks (Table 031-0002) *Including water and sewer utilities
The Urban Infrastructure Challenge 13
Users not charged full cost of infrastructure they are using:
User Fee Revenue Per Household*, Selected Cities, 2005
1,349
1,623
657
882
652
913
2,004
1,585
1,369
1,146 1,1941,243
0
400
800
1,200
1,600
2,000
2,400V
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Dollars
* Based on Occupied Private Dwelling 2006 CensusSource: Altus Clayton based on data from Ontario FIRs and Various Annual Financial Statements
The Urban Infrastructure Challenge 14
Small proportion of municipal revenues comes from user charges:
Municipal Revenue by Source, 2006
Others11.4%
Government Grants17.3%
User Fees 22.4%
Property Taxes 48.9%
Source: Altus Clayton based on data from Statistics Canada (Cansim 385-0024)
The Urban Infrastructure Challenge 15
Tax bases of income, consumption and property taxes have all increased at about the same rate…
Growth in Tax Base for Income, Sales and Property Taxes in Canada, 1990-2006
100
125
150
175
200
225
250
1990 1992 1994 1996 1998 2000 2002 2004 2006
Personal Income
Personal Spending on Consumer Goods & Services
Market Value of Buildings & Land
1990=100
Source: Altus Clayton based on data from Statistics Canada
The Urban Infrastructure Challenge 16
But effective property tax rates have been declining for years now…
Effective Tax Rate for Consumption, Income and Property Taxes in Canada, 1990-2005
12
14
16
18
1990 1993 1996 1999 2002 2005
1.0
1.2
1.3
1.5
Consumption Tax (LHS)Personal Income Tax (LHS)Property Tax (RHS)
Percent of Income/Retail Sales
Source: Altus Clayton based on data from Statistics Canada
Percent of Property Value
The Urban Infrastructure Challenge 17
Especially in Ontario, pressures on local budgets arise from provincial government “offloading” of social services onto property tax base.
Provincial Program inOntario
Costs to Municipalities ($M) (Figures adapted from Association of Municipalities of
Ontario
2003 2005
Public Health 266.4 292.0
Ambulance 312.7 394.7
Social Assistance 1,330.9 1,500.6
Senior Services 242.5 302.7
Child Care 193.4 220.2
Social Housing 879.7 1,209.4
Total 3,225.6 3,919.6
The Urban Infrastructure Challenge 19
Here are actual amounts provided by each investor:
Municipal* $3.0
Provincial*$4.5
Federal* $1.7
Private $5.1
Basic Urban Infrastructure Investment by Funding Source, 2005-2006
Total $14.3 BillionBillions (Annual Average)
Notes: *Net of Transfers. Source: Altus Clayton based on data from Fixed Capital Flows and Stocks (Cansim 031-0002), Transfer payments by Infrastructure Canada (Public Accounts of Canada) and National Accounts (Cansim 385-0024 and 385-0002), and consultation with StatCan staff
The Urban Infrastructure Challenge 20
Largest single proportion of investment provided by private sector through direct works, taxes, fees, levies and charges.
Private 35.7%
Municipal 21.0%
Provincial31.5%
Federal11.9%
Basic Urban Infrastructure Investment by Funding Source, 2005-2006 (Annual Average)
Source: Altus Clayton based on Figures 7&8
The Urban Infrastructure Challenge 21
Here is how the different portions break down by source:
1.7
4.5
3.0
2.11.8
1.2
0
1
2
3
4
5
6
Federal* Provincial* Municipal*(General
Revenue***)
Private DirectInvestment**
DevelopmentCharges
Other Leviesand Local
Land TransferTaxes
Notes: *Net of Transfers. **On-site infrastructure to be transferred to municipalities.***Including water and sewer charges.
Source: Altus Clayton based on data from Fixed Capital Flows and Stocks (Cansim 031-0002),Transfer payments by Infrastructure Canada (Public Accounts of Canada) and National Accounts (Cansim 385-0024 and 385-0002), and consultation with StatCan staff
Basic Urban Infrastructure Investment by Funding Source, 2005-2006
Billions (Annual Average) Total $14.3 Billion
Total Private Sector $5.1 Billion
The Urban Infrastructure Challenge 22
Development charges have been rising dramatically…
Municipal Development Charge Revenue and Direct Investment in Infrastructure, 1988-2006
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
0%
5%
10%
15%
20%
25%
30%Municipal DC Revenues (left axis)
DCs as % of Municipal Direct Infrastructure Investment(right)
Percent
Source: Altus Clayton based on data from Statistics Canada, Cansim (385-0024 and 031-0002)
$ Million
The Urban Infrastructure Challenge 23
Comments on Development Charges by Altus Clayton: Development Charges place a major burden on
new home buyers, reducing affordability and choice.
User charges and debt financing for infrastructure are more equitable and efficient.
The local property tax base has increased, but is not being used effectively.
Development Charges have detrimental impacts on urban form and efficiency.
Social services program expenditures not appropriately borne by property tax base, but basic urban infrastructure is.
The Urban Infrastructure Challenge 24
“Growth paying for itself”… the facts:
All residents benefit from urban growth.
Off-site infrastructure is used by all community residents, and by industrial concerns, not just by new residents.
Overall conclusion: Development Charges unfairly burden new home buyers, restrict affordability and choice.
The Urban Infrastructure Challenge 27
A rational funding model for core infrastructure would:1. Be based on long-term planning and close links
between planning and budgeting.2. Have industry fully engaged in infrastructure
planning. 3. Recognize that off-site infrastructure serves the entire
community, not just newly-arriving residents.4. Ensure federal and provincial governments contribute
to reflect their role in overall prosperity, health and safety.5. Charge appropriate user fees to maintain and upgrade
basic infrastructure.6. Use debt-financing methods to spread payments over
present and future generations of users of urban infrastructure.
7. Upload social services and social housing expenditures to provincial, federal governments.
The Urban Infrastructure Challenge 28
What the new home building industry is ready to do: Develop with municipalities alternative
models for infrastructure financing. Support municipal presentations to federal
and provincial governments seeking infrastructure funds.
Support uploading social services and programs to provincial governments.
Participate in community-wide planning processes.