Bleak best describes Barrie’s fiscal forecast for the next 20 years.
Climbing property taxes and higher water/sewer rates for homeowners, soaring costs to maintain city infrastructure and pay for its expansion for growth, too much pressure on city reserves and much more debt are some of the scenarios Gary Scandlan of Watson and Associates Economists presented in Barrie’s long-range financial plan earlier this week.
“I call it the most important and yet most frightening presentation,” said Coun. Sergio Morales, chair of the city’s finance and corporate services committee. “It’s kind of a big wake-up call for myself personally. This is unsustainable.”
“It’s a bit of a downer, actually,” said Deputy Mayor Barry Ward.
“One positive thing, when we look at the last forecast that we did (a decade ago), the actual rate increases (taxes, water/sewer) are lower than what we had anticipated,” Scandlan said.
“It is good to know we’re in better shape than we expected to be 10 years ago today, but as always, the cliff ahead of us is a steep one,” said Mayor Jeff Lehman.
Simply put, the long-range financial plan looks at the city’s costs until 2041 and how they can, or should, be paid for — whether through the contributions of developers, tax assessment increases, city reserves, debt or property taxes.
The plan forecasts capital expenditures of $8.4 billion from 2021 to 2041.
Watson and Associates, for example, have forecast property tax increases of about four per cent in the plan’s first five years, about 3.2 per cent in the second five years, then running below three per cent for its final decade — plus the dedicated infrastructure renewal fund, which adds another one per cent to tax bills.
“You know, four per cent tax increases, realistically it’s not happening,” Morales said.
“What our residents actually care about is the tax increase and is growth paying for growth. There’s the key thing,” Lehman said. “If growth is not paying for growth, then our residents are shouldering the burden of additional development whether that’s in the secondary plan areas or intensification areas.”
The forecast water/sewer rate increase is 4.25 per cent next year, 4.5 per cent from 2023 until 2030 and just above two per cent from 2031 to 2041.
Scandlan also said development charges (DCs) need to increase by roughly eight or nine per cent. And sooner rather than later.
“We would suggest that be a priority for the city to take a look at increasing the DCs at the earliest opportunity in order to increase the cash flow,” he said.
“It’s not that we’re not charging enough for growth, not taxing enough, it seems that we are addicted to the wrong type of growth, and the wrong type of growth… is the unsustainable low-dense growth,” Morales said.
DCs are fees the city charges developers for the recovery of growth-related capital expenditures.
Watson and Associates have also forecast city debt during the next 20 years — $360 million next year, growing to about $750 million in 2028 before sliding back to just more than $600 million in 2041.
Ward pointed out that much of Barrie’s current debt is from one or two major projects — building the surface water treatment plant on Royal Parkside Drive and expanding the wastewater treatment facility on Bradford Street.
In the first half of the forecast, significant debt is required to fund growth-related expenditures, while in the latter half of the forecast, debt is addressing asset management needs, the Watson forecast says.
Municipalities are limited in the amount of debt that can be issued; debt charges cannot exceed 25 per cent of total net revenues. The city’s own financial framework sets an upper limit on debt charges to not exceed 20 per cent of total net revenues.
By 2029, the city’s policy limit would be exceeded, Watson says, and higher debt burdens may lead to pressure on the city’s credit rating — making it more expensive to borrow money.
One reason for the city’s debt forecast is that the amount of development is far less than predicted a decade ago, so the amount of infrastructure built to accommodate that growth is less, Scandlan said, which means city revenues from developers have been less.
But it’s not only what happened, but how it has happened.
“You build a pipe big enough for 500 homes, we expect 500 homes to be built to pay for the pipe, and when only 50 are built, it doesn’t pay for the pipe,” Lehman said. “That’s the problem. Eventually, 500 homes will be built, but in the meantime, the city’s on the hook and the only tool we have to cover that is debt.”
Scandlan not only pointed out the challenges in Barrie’s long-range financial plan, but possible solutions. They include increasing contributions to capital reserves, ensuring growth infrastructure is not pre-built too far in advance of actual construction and having developers front-end their infrastructure contributions to a greater extent.
“Pushing the front-loaded infrastructure is going to help down the road, for our growth plan to alleviate some of this burden on the tax levy,” said Coun. Robert Thomson.
“We had an agreement with (the former Innisfil) area landowners that they would, through voluntary contributions and the gearing of infrastructure expenditure with revenues, pay for growth. And so our taxpayers…at least the pressure wouldn’t come from growth,” said Lehman, mentioning other pressures such as maintaining roads and rising operating costs.
“What I took away from your (Scandlan’s) presentation tonight is that’s not really happened, in part because the pattern of development did not occur the way that the MOU (memorandum of understanding with developers) anticipated, and so your recommendation tonight — (it’s) the whole premise of gearing the pace of infrastructure development to the pace of development revenues, so that growth pays for growth, and our taxpayers don’t," he added.
But Lehman also questioned the city’s ability to control the pace of development.
So the question of what can and will be done remains unanswered, which raised concerns with some councillors.
“I don’t want to get to 2029 and our situation is what you (Watson) predicted, or worse,” Morales said.
“It’s clear this went wrong,” said Coun. Mike McCann. “What can the city of Barrie not do again to set us up for success in the future?”
City staff will present their version of Barrie’s long-range financial plan at a subsequent meeting.
