That’s a lot of money for a city with a population of just more than 5,000 people
I’m sure the members of Duncan’s city council found it quite sobering to be told that unless the municipality dramatically increases the money it is setting aside for infrastructure to cover future costs very soon, councils and taxpayers down the road are going to be in for a financial shock.
Christopher Paine, from FIT Local Government Consulting, a firm specializing in local government finance and asset management, told council at its meeting on Oct. 9 that much of Duncan’s water and sewer systems, as well as other infrastructure, are currently 65 per cent through their useful life, on average, and the replacement costs of these assets are estimated to be approximately $524.5 million.
Paine said the annual sustainable funding required to replace the city’s infrastructure is estimated to be between $8.3 million and $9 million, but current funding is approximately $4.1 million, leaving an annual funding gap of between approximately $4.2 million and $4.9 million.
Left unchanged, Paine said, this may lead to a 100-year funding gap totalling approximately $490.4 million.
That’s a lot of money for a city with a population of just more than 5,000 people, and it took most council members by surprise.
After months of discussions and finding ways to cut costs among staff and council, the city passed a budget for 2024 earlier this year with a 7.54 tax increase, which was preceded by an 8.9 per cent tax increase in 2023, so I expect that the last thing council wanted to hear is that it might have to consider even larger tax increases in the coming years to deal with city’s infrastructure needs.
In fact, Paine recommended that the city implement an annual tax increase of 1.75 per cent over a 15-year period dedicated just to general infrastructure replacement, which would be on top of whatever other tax increases the city will have to consider to remain financially stable over that time.
As well, Paine suggested the city introduce 15 years of 1.75 per cent water-user fee increases, and implement 10 years of one per cent increases of sewer-user fees for existing infrastructure, on top of other measures, to deal with the burgeoning infrastructure costs.
Coun. Garry Bruce said later in the meeting on Oct. 9 that he received a shock when told of the city’s financial deficit in replacing its infrastructure in the coming years, and that he wouldn’t support the city’s purchase of a new $519,000 street sweeper (the only council member to vote against it, I might add) and stop contracting out the service because he saw it as too much of a luxury in light of the infrastructure needs.
It’s certainly a conundrum for the city, but I’m sure it’s not the only local government in the Cowichan Valley, and beyond, that are facing similar challenges.
I don’t recall if the Municipality of North Cowichan or the Cowichan Valley Regional District have done any thorough reviews of their infrastructure like the City of Duncan has, in recent years but I’m sure if they did, the story would be the same.
Local governments are under increasing pressure to keep property taxes as low as possible each year as their residents face unprecedented housing, groceries and other burgeoning costs, so adding on significant amounts of money to each year’s budget to build up infrastructure reserves would not be very politically popular.
In fact, the CVRD faced a tax revolt last winter when they were considering a whopping 19.33 per cent tax increase in 2024 that saw approximately 200 people gather in front of the district’s main office on Ingram Street waving signs and demanding that the CVRD’s board and staff go back over their budget for the year and make adjustments to lower the tax increase.
At the end of the day, the board lowered the tax increase to 16.33 per cent, which is still very high and I’m sure the district’s taxpayers will be very diligent this year to see what their local government has planned for them in the budget for 2025.
So I expect that the tendency of most council and board members in our local governments will be to kick the infrastructure cost issue down the road and let future councils and boards, ones they are not part of, deal with it.
In other words, the problem won’t go away and it will be up to the next generations to come up with solutions.