Pitt Meadows got a failing grade on its report card on infrastructure management.
Council also learned that city contributions need to rise by $1.6 million per year to fund the maintenance and replacement of city buildings and the sanitary sewer system.
The “report card” was issued by consulting firm Public Sector Digest, an Ontario-based company that specializes in asset management.
Vice-president Matt Dawe gave council his findings on Tuesday evening.
The report looked at the replacement value of the city’s buildings, with the most expensive being Pitt Meadows Arena ($24 million), the family recreation centre ($11.6 million), South Bonson Community Centre ($5.6 million), city hall ($5.4 million), fire hall ($3.3 million) and numerous other buildings for a total of $59 million.
The firm found that the city has an annual funding deficit of $1.4 million for buildings – because $2.2 million is needed to sustain the building inventory, and its current annual funding is only $800,000. So in its report card, the city received an “F” for “funding vs. need.”
Overall, however, the buildings are currently rated “in very good condition,” so Dawe gave the city a passing grade on its asset management of buildings – a D-plus is a pass in Ontario.
The city got C-plus grades for how it manages both sanitary sewers and heritage buildings.
The sanitary sewer system is “generally in great condition,” said the report, but there is a funding shortfall of $200,000 per year.
That brings the combined funding increase to $1.6 million per year for buildings and sanitary sewers. That would result in a tax increase of 8.3 per cent to get to the funding level necessary from taxpayers.
The total replacement cost of both buildings and storm sewers is $97 million, or $14,000 per household.
Mayor John Becker acknowledged the city “has not been socking enough away.:
He added, “The City of Pitt Meadows wants to get ahead of the curve and be more forward thinking in its asset replacement plans.”
The report recommends tax increases of one per cent per year for each of the next four years, and then 0.7 per cent per year for six years, to bring funding for asset management to the appropriate rate over the next decade.
Becker said making greater contributions for asset replacement does not necessarily mean taxes will rise, because council could find the means via spending constraints or new growth.
What’s more, the mayor said the city need not save the full replacement cost of its facilities. He compared that approach to a new home buyer saving $500,000 to purchase a house, rather than carrying a mortgage. He said the city can combine capital reserves with borrowing to fund building replacements.
In that scenario, present-day taxpayers would not be paying both debt servicing for existing assets, and the cost of their replacement at the same time.
“The costs of borrowing are paid by the people who are actually enjoying the asset,” said Becker.
He said the report does not address borrowing, and called it a very conservative report, “which is appropriate for local government purposes.”
Municipal governments are changing the way they look at assets. Dawe told council that the Ontario government requires municipalities to have detailed asset replacement plans as a condition of receiving grant money. Becker said B.C. and other provinces will likely follow suit.
The federal government would then look as asset management in determining a municipality’s gas tax eligibility.
Councillors asked Dawe for comparables, and he said Ontario municipalities generally did not have adequate funding for asset replacement. The company has been through the process with 120 local governments in Ontario.
“No one did that well on the funding side,” he said, noting some municipalities needed tax hikes of 60 per cent.
Dawe’ group will be looking at replacement of the roads network, bridges and the storm sewer system.