Thunder Bay city council hears about high debt, infrastructure gap at budget talks

City councillors in Thunder Bay, Ont., got a surprise when administration started projecting how much the city will spend in the future, just to maintain its current assets.

Administration said the city has a $20M annual infrastructure gap. It means the city could spend up to $20M more per year, for the next decade and a half, before city roads and facilities are at an acceptable standard for maintenance.

• Thunder Bay's 2019 budget proposes 2.95% tax increase

Mayor Bill Mauro questioned those standards, saying perhaps the standards themselves are too high. He said roads could be maintained to the provincial Highway Traffic Act, while other standards, such as buildings, were perhaps out of line with what is necessary.

The city's standards for maintenance, as well as the methodology used to calculate the infrastructure gap, were disclosed by administration to council. It involves calculating values in the future, as well as replacement costs, and depreciation.

"Have we taken on an infrastructure deficit since amalgamation in 1970, or has there been a point where we have fully funded [infrastructure] ever?" asked Coun. Cody Fraser.

City manager Norm Gale said administration doesn't have information going that far back, and he was unsure if the city has ever actually been caught up with its maintenance.  

"I understand it's a work in progress, but, it could just as easily go up than down, as you refine it," said Coun. Mark Bentz, referring to the projected long-term infrastructure deficit. 

"So, I'd really like some clarification on this annual spend. If that's an annual spend, we have a big, big problem."

City debt, affordability

Another major topic of discussion was the city's debt load, currently pegged at $206M. That figure will rise to $216M over the year, before slowly decreasing.

Administration said the city is still pegged as an affordable place to live, with the value of a home to the annual household income lower than the provincial average.

The city said it also does well when scoring the percentage of income used to pay property taxes, which has also decreased. However, the city is still higher in its tax rates for residential, commercial and industrial properties compared to the provincial average.

Projecting until 2024, administration said taxes could go up by 3.83% next year, using a number of assumptions, like annual growth in assessment of $0.9M, no changes in services, and 0% departmental budget increases (less wage increases).

While the 3.83% figure is not completely accurate, it gives council a taste of what future budgets could look like over the next four years in office.

Administration also suggested reinvesting any savings from debt services costs, which are currently about $6M per year into capital, to help pay down the infrastructure debt.

Council will hear public reaction to this year's budget proposal on Thursday night at 6:30 p.m., with full deliberations starting next Tuesday.