A tale of two cities: Why Guelph’s policies will never overcome its $250 million infrastructure deficit

By Gerry Barker

January 27, 2017

Thanks to an observant reader, I have received an expert analysis from a U.S-based organization called Strong Towns (http://www.strongtowns.org).

The comparison of Lafayette, LA, population 125,000 and the City of Guelph, population 121,000 are strikingly similar revealing the real reason both cities have no money.

Both cities have the problem of repairing and replacing aged infrastructures costing billions. Guelph has one advantage over Lafayette in that the median home price is $300,000 that is double that of Lafayette. Similarly, the median household income for the city is $41,000. The median property taxes there are $1,500.

The Lafayette report states that there is barely enough revenue to spend on infrastructure needs, thereby the city is barely treading water on the issue.

But let’s start with how Lafayette showed the real problem. The report authors with the assistance of the city staff determined that within ten years it would cost $32 billion to replace the city infrastructure. Then by adding up the entire tax base for that period, it revealed that only $16 billion would be received.

The report states: “It’s obvious to me why this is fatal, but for those of you for whom it is less clear, let me elaborate.

“The median house in Lafayette costs roughly $150,000. A family living in this house would currently pay about $1,500 per year in taxes to the local government of which 10%, approximately $150, goes to maintenance of infrastructure (more is paid to the schools and regional government). A fraction of that $150 – it varies by year – is spent on actual pavement.

“To maintain just the roads and drainage systems that have already been built, the family in that median house would need to have their taxes increase by $3,300 per year. That assumes no new roads are built and existing roadways are not widened or substantively improved. That is $3,300 in additional local taxes just to tread water.

“Using ratios we’ve experienced from other communities, it is likely that the total infrastructure revenue gap for that median home is closer to $8,000 per year.”

That does not include underground utilities – sewer and water – or major facilities such as treatment plants, water towers and public buildings. Using ratios we’ve experienced from other communities, it is likely that the total infrastructure revenue gap for that median home is closer to $8,000 per year.

Make the situation worse, jack up taxes

After ten years of neglect of needed infrastructure repair and replacement, Guelph’s current city administration recently recommended a special, five-year tax levy of 1 per cent added to property taxes.

Unfortunately, city council decided otherwise and doubled the levy with half going toward “City Buildings.” It was never explained how that money would be used.

All they accomplished was to build another slush fund for use in the 2018 election year. That’s an estimated revenue stream of $5,600,000 over the two budget years, by the October 2018 civic election.

It’s still light years away from addressing the problem that has resulted in neglect of the most important element that makes the city work.

Instead, the previous administration wasted more than $50 millions on mismanagement, (Urbacon $23 million, GMHI $26 million and counting), it is a personal agenda of extreme social engineering that has left a legacy that will take years to over come.

But the council‘s decision to continue spending reminds us of ”One flew over the Cuckoo’s nest.” We are the nest and getting the bird. The administration cannot continue to ask citizens, owners, renters, businesses, and the poor, seniors on fixed incomes, to support an agenda that has problems in which there are solutions. What is required is recognition of the situation and the political will to ameliorate the problems.

Predicaments have solvable outcomes; make no mistake that or the past ten years we have been faced with dire outcomes.

It has to start somewhere and most people have lost confidence in this council and administration.

The long road back to rebuilding a city in an organized fashion that serves all the people and not just the minority who presently control the agenda. It requires a new council that is prepared to repair the multi-million losses of taxpayer money sensibly with a strong rebuke of the policies that are still financially choking our city.

How do you wipe out misguided spending of more than $1 million? Oh! The majority of council will deny this as if it has never happened. For the past ten years the millions in city reserves have been used to cover-up operating and capital spending. The city’s own audited statement as expressed by Coun. Leanne Piper six years ago, stated there was $77 million in reserves. Today, that figure has dropped to around $11 million.

Guelph’s problems of financing the growing infrastructure deficit are not unique across our continent.

Guelph, however has built itself into a huge financial dilemma.

It is one that will not go away and only increases in both costs and a dwindling ability to serve the citizens.

The empirical financial management of the past ten years only pursues an agenda that was bungled. Those millions of misspent funds will never return.

Our city administration, council and senior staff has just laid a financial responsibility on future generations.

The sad part is not even they are capable or courageous enough to take the necessary steps to solve this growing problem

When you have a growing deficit in the 200-year old infrastructure and use a tax levy as a band-aid, you know we have a serious problem.

But council went ahead and hired 13 new employees and tucked in $5,000 in the budget to promote a visiting band.

These are just some of the real reasons why our city has no money to build a Wilson Street Parking garage, a new downtown Library or a South End recreation Centre.

The tale of two cities in different countries that share the same problems points to similarities and the lack of political will. Now, there will be criticism of the comparison. Our infrastructure does not compared to Lafayette. We are in a four seasons climate area while Louisiana in the sub tropics. It makes no difference because the infrastructure needs in the South are more vulnerable to climate stresses such as tornados, hurricanes, flooding and excessive rainfall.

So let’s not use that comparison. They still have to fix the roads, storm water drainage, potable water supply and wastewater treatment, waste, including recycling and solid water processing, first responder financing, schools, and security.

Scale has little to do with it. Our problem is our costs, for ten years, are way too high compared to similar sized communities in our jurisdictional area.

Nothing will change as long as we have a majority bloc on council who fails to understand the real problems and persist in defending the mistakes of the past.

Let’s stop kidding ourselves.

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18 Comments

Filed under Between the Lines

18 responses to “A tale of two cities: Why Guelph’s policies will never overcome its $250 million infrastructure deficit

  1. guelphspeaks reader

    Considering the province is getting tougher on spending and revenue, as seen in the move to sell the Jail Lands sitting idle while the city dithered for years, council should be even more interested in financial diligence, which does not mean just offloading business as usual to raising property taxes. If they try to sell Guelph Hydro, as the province sold off Hydro One, it’s just going to compound the longterm burden for residents.
    If Wynne’s poll standing continues, the next provincial gov’t could make Mike Harris look like Santa Claus. And that will be downloaded into infinity.
    While this may be scary talk not yet realized, the rose coloured glasses approach does no good. People who can’t afford the taxes taking second mortgages is not exactly a prudent plan.
    The feds are talking positive in the face of Trumpian protectionism, but that too has yet to begin. Raised tariffs and trashing Nafta isn’t going to do Ontario any favours.

  2. Ron Minogue

    You ain’t seen nothing yet-Is there a city/town/village that is not in the same dire condition that is Guelph. Taxes increasing at 2 or more times the inflation rate-housing prices ballooning to the stratosphere-where does it stop? Somehow we need to hit the reset button and no one wants to do this as the consequences would be 1932 all over again. Sadly or happily, I am at an age where I will not likely live to see the results of the “my generation” but I feel sorry for not only my children and grand children but generations to come!!!

  3. Gerry you consistently hit the nail on the head. Its sad there it is so difficult to get the word all of Guelph’s citizens, they would be justifiably outraged.

    Now that Mark McKinnon has been turned into a socialist, if he ever was a financial conservative, as he campaigned to be, there is even less likelihood that real change will happen under the current council.

    We need that block out.

  4. Joe Black

    I’m sure the the water and sewerage is not 200 years old.

  5. Eric

    Do businesses have to pay the new levy or is that just for homeowners? At Linamar where I work, they are already talking about closing Guelph production and moving it to the US to avoid disruptions in their supply chains should Trump follow through on his promises. – That means, I will be unemployed (along with others) and not sure how I could afford to pay these increases. I would assume if Linamar closes a plant or two that would also hit the revenue the city gets from their property taxes.

  6. Deanna

    Yes Gerry we need to vote the group of seven out.
    Who is there to replace them?
    It’s only a year away and I have no idea who would be better.
    I certainly won’t voye for the present ward six councillors.
    They listen to none of their constituents and aren’t bright enough to do the right thing.

  7. geo

    The ward system is supposed to ensure that all the taxpayers in Guelph get equal honest representation and that no small special interest group can hijack council. Instead, here in Guelph we get the exact opposite results, as in GHMI, bike lanes nobody uses, $35,000,000 to renovate police headquarters because God forbid it should ever leave the Downtown, buses that roll around empty on Sundays and holidays because the same 12 guys make a stink, promises to hold tax increases to inflation that are never kept, incompetent , grossly overpaid staff, that are never held responsible we’ll just hire some more so it’s even harder to figure out who did what and on and on and on it goes. The ward system had got to go. If you want to spend my money then I get the opportunity to vote for or against you no matter where in Guelph you live!

  8. Laura

    Don’t forget Geo that originally police headquarterss was supposed to move to Clair Rd. That never happened. one wonders how much empty/wasted space there is in that building. They do have public meeting space but not enough parking is available for the maximum number of people the space can accomodate. Go figure yet another poorly planned outcome from the city and another waste of our tax dollars.

  9. Joe Black

    Just got the first two instalments I’m broke

  10. geo

    Laura
    If you want to see the ultimate in wasted space and tax dollars walk through the main entrance at City Hall and look to your left keeping in mind this space has to be heated and cooled with our money.

  11. Laura

    It’s true but the hall was to preserve the heritage wall of the old building were you aware that the living wall was leaking and had to be repaired I notice that the living wall itself has been altered since it was built how much did this cost?

  12. Laura

    Gerry thanks I am not surprised it costs so much to maintain the living wall.
    what about those investments the city lost when the had to write off the asset based paper derivatives in 2008 2010. I am not sure if they ever wrote them off completely or if they still have them a portion of them on the books?

  13. Laura

    Gerry for more info on the asset based commercial papers see the Items for information of Sept 23 2016 interim investments performance report. Pg. city holds these with a book value of $2,066 million market value is $1.908
    Impairment provision is $157,664. There is market for these papers which do not mature until 2056. As I recall the city all ready wrote off the value some of these commercials papers after the markets fell in 2008. It is interesting to note that Waterloo region was prohibited from purchasing ABCP but Guelph as a stand alone city could and did purchase these papers along with many cities in the USA. There is a very good article in the KW record dated Dec. 12, 2012 “Ontario municipal rules saved cities from investment crash”. The article mentions Guelph lost “a couple of million dollars”.
    It appears from the September 2016 report that city is continuing to lose money on these derivatives and in fact holds worthless investments that they cannot sell.

    • Laura:Thanks for bringing this up. I was not aware that the city invested in the same so-called asset backed securities that nearly caused a total collapse of the global economy in 2008. You are right that this paper had no true value as the underlying mortgages (assets) were worthless. So, why are they still sitting on the city books? I guess that when the city goes through four CFO’s between 2008 and 2014, it would indicate there was a lack of continuity and responsibility. That a recipe for financial mismanagement of public funds.

  14. Laura

    Sorry about the typo it should read that there is no market for these so called assets.

  15. Laura

    It is interesting that the information about these assets was in the items for information that went directly to city council and the mayor. I don’t recall that there was any mention in the 2017 budget even though the investments are bringing in no income to the city. I wonder where the purchase money originally came from ? Out of what reserve.

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