The Urban Infrastructure
Challenge in Canada:
Focusing on Housing
Affordability and Choice
Presentation by CHBA – [Name] to
The Municipal Council of [Name]
June, 2008
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.
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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?
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1. What is “basic
urban infrastructure”?
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.
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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. )
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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.
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Risks of a lack of focus on
basic urban infrastructure…
Walkerton deaths due to
faulty water supply
system
Montreal overpass collapse
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2. What have patterns
of urban infrastructure
investment been over
recent decades?
Investment in basic urban
infrastructure on per household
basis declined after 1973:
Basic Urban Infrastructure Investment, Per
Household, 1961-2006
Constant 2006 Dollars
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
0
Source: Altus Clayton based on data from Statistics Canada: Fixed Capital Flows and
Stocks (Table 031-0002) and household statistics
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Average age of basic
infrastructure has increased:
Average Age of Basic Urban Infrastructure, by
Asset Types, Canada, 1963-2007
Average Age (Years)
26
24
22
Roads and Highways
Sewer Systems
Wastewater Treatment
Bridges
20
18
16
14
12
1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007
Source: Altus Clayton based on data from Statistics Canada, “The Age of Public
Infrastructure in Canada” (2006 and 2008) Catalogue no. 11-621-MIE
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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
Billion (2006$)
18
15
12
9
6
3
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
0
Source: Altus Clayton based on data from Statistics Canada: Fixed Capital Flows and
Stocks (Table 031-0002) *Including water and sewer utilities
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Users not charged full cost of
infrastructure they are using:
User Fee Revenue Per Household*, Selected Cities,
2005
Dollars
2,400
2,004
2,000
1,623
1,600
1,243
1,585
1,369
1,349
1,146 1,194
1,200
913
882
800
657
652
400
Vaughan
London
Hamilton
Ottawa
Toronto
Abbotsford
Halifax
Winnipeg
Saskatoon
Calgary
Edmonton
Vancouver
0
* Based on Occupied Private Dwelling 2006 Census
Source: Altus Clayton based on data from Ontario FIRs and Various Annual
Financial Statements
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Small proportion of municipal
revenues comes from user charges:
Municipal Revenue by Source, 2006
Others
11.4%
Government
Grants
17.3%
Property Taxes
48.9%
User Fees
22.4%
Source: Altus Clayton based on data from Statistics Canada (Cansim 385-0024)
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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
1990=100
250
Personal Income
Personal Spending on Consumer Goods & Services
225
Market Value of Buildings & Land
200
175
150
125
100
1990
1992
1994
1996
1998
2000
2002
2004
2006
Source: Altus Clayton based on data from Statistics Canada
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But effective property tax rates have
been declining for years now…
Effective Tax Rate for Consumption, Income and
Property Taxes in Canada, 1990-2005
Percent of Income/Retail Sales
Percent of Property Value
18
Consumption Tax (LHS)
Personal Income Tax (LHS)
Property Tax (RHS)
1.5
16
1.3
14
1.2
12
1.0
1990
1993
1996
1999
2002
2005
Source: Altus Clayton based on data from Statistics Canada
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Especially in Ontario, pressures on local
budgets arise from provincial government
“offloading” of social services onto property
tax base.
Provincial Program in
Ontario
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
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
3,225.6
3,919.6
Social Assistance
Total
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3. Who is paying for
what?
Here are actual amounts
provided by each investor:
Basic Urban Infrastructure Investment by Funding
Source, 2005-2006
Billions (Annual Average)
Federal*
$1.7
Total $14.3 Billion
Private
$5.1
Provincial*
$4.5
Municipal*
$3.0
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
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Largest single proportion of investment
provided by private sector through direct
works, taxes, fees, levies and charges.
Basic Urban Infrastructure Investment by Funding
Source, 2005-2006 (Annual Average)
Federal
11.9%
Private
35.7%
Provincial
31.5%
Municipal
21.0%
Source: Altus Clayton based on Figures 7&8
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Here is how the different
portions break down by source:
Basic Urban Infrastructure Investment by Funding
Source, 2005-2006
Total $14.3 Billion
Billions (Annual Average)
6
5
4.5
Total Private Sector $5.1 Billion
4
3.0
3
2.1
2
1.7
1.8
1.2
1
0
Federal*
Provincial*
Municipal*
(General
Revenue***)
Private Direct Development
Investment**
Charges
Other Levies
and Local
Land Transfer
Taxes
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
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Development charges have
been rising dramatically…
Municipal Development Charge Revenue and Direct
Investment in Infrastructure, 1988-2006
$ Million
2,000
Percent
30%
Municipal DC Revenues (left axis)
1,800
DCs as % of Municipal Direct Infrastructure Investment
(right)
1,600
25%
1,400
20%
1,200
1,000
15%
800
10%
600
400
5%
200
0
2006
2005
2004
2003
2002
2001
2000
1999
1997
1998
1996
1995
1994
1993
1992
1991
1990
1989
1988
0%
Source: Altus Clayton based on data from Statistics Canada,
Cansim (385-0024 and 031-0002)
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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.
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“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.
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Overall conclusion:
Development Charges
unfairly burden new
home buyers, restrict
affordability and choice.
4. What financing
arrangements would
most enhance housing
affordability and choice
in future?
A rational funding model for
core infrastructure would:
1. Be based on long-term planning and close links
2.
3.
4.
5.
6.
7.
between planning and budgeting.
Have industry fully engaged in infrastructure
planning.
Recognize that off-site infrastructure serves the entire
community, not just newly-arriving residents.
Ensure federal and provincial governments contribute
to reflect their role in overall prosperity, health and safety.
Charge appropriate user fees to maintain and upgrade
basic infrastructure.
Use debt-financing methods to spread payments over
present and future generations of users of urban
infrastructure.
Upload social services and social housing
expenditures to provincial, federal governments.
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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.
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Questions?
 For further information, contact:
[Local Executive Officer coordinates]
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