City plans to take on debt to cover billions in infrastructure repairs

Some city councillors are worried about how much debt the city may take on over the next decade to maintain everything it owns, from water pipes to roads to the nozzles on fire hoses.

At a finance committee meeting Tuesday, councillors discussed two reports: one that takes stock of the condition of all the city's assets and a second that lays out a plan for how the city will pay to repair and renew a portion of them.

One of the reports shows a whopping $10.8-billion gap over 10 years between how much money the city needs to maintain things like roads and rec centres — and the funding it is currently able to spend.

"It's just such a large number to wrap your head around how we're going to finance this," Coun. Riley Brockington said.

According to the report, that gap is driven by factors felt in municipalities across the province, such as the effects of climate change and the rising costs of construction.

City staff also laid out a plan for how it will fund infrastructure work it pays for through water bill revenue. The plan for work paid for through property taxes is expected in the fall. Neither plan has been updated since 2017.

Councillors approved the city's plan to maintain Ottawa's aging water infrastructure by taking on new debt and increasing water rates, an approach staff described as "prudent" but that some councillors and advocates slammed as short-sighted.

"Given the massive amounts of debt that we are loading on, is there not a message here to get back to basics?" Coun. Shawn Menard asked at the meeting.

Raise rates, issue debt

Water infrastructure is just one chunk — though a big one — of what the city owns.

The city needs $4.8 billion over the next decade to address "priority needs" in its water, wastewater and stormwater services. Nearly all of that money will go to repairs, with a sliver set aside for new projects.

But the city is short on funds. It has to drum up $169 million more each year for the next 10 years. It plans to do it by charging more for water service and taking on more than $1.7 billion in new debt.

Water rates are now set to increase by five per cent per year, or about five dollars per month for the average household.

'Good debt,' mayor says

Staff say the approach is sound financial management.

"We knew this was coming ... for quite some time," said Cyril Rogers, the city's chief financial officer. "If you look at our reserve balances, we've been actually investing, investing. Saving, saving, saving."

City staff don't expect the approach to exceed the city's self-imposed threshold for spending to service its debt until 2030.

Mayor Mark Sutcliffe said investments in necessary infrastructure count as "good debt."

"If we were using debt to cover our operating expenses, that would not be ideal. But if we're using debt to pay for assets that we will use over decades, then that's a responsible way to approach things," he said. 

'Sunsetting' properties

Residents who spoke at the meeting were unconvinced.

James Murchison, a representative of the local chapter of non-profit group Strong Towns, called the level of deferred maintenance a "tsunami."

Carolyn Mackenzie, a member of the Glebe Community Association, said she felt the city's approach fails to "meet the moment."

And Neil Saravanamuttoo, executive director of CitySHAPES, said in an interview he thinks people should be "very concerned" about the funding gap.

He worries the city will eventually be forced to hike property taxes or close some facilities altogether to raise the money needed. 

The reports were approved at committee and will go to full council on June 11.