Financial Future of Our City

[polishavenger]

I've long been wondering how the suburban model of city building will ever be able to sustain itself. After reading Jane Jacobs, and watching and reading a lot of Kunstlers material, I've come to the conclusion that in my gut I had suspected for a while:

Without massive tax revenue increases, our predominant form of growth is a ponzi scheme that will eventually collapse on itself.

I havent done any detailed financial analysis, but the following link describes what I think is a similar situation here in Calgary, but in a simpler setting:

http://www.strongtowns.org/the-growth-ponzi-scheme/


How would this city fair if we didnt have such a massive revenue source from our core, which is predominantly driven by oil, and sees little to no investment back from all the money it contributes. What happens when outward expansion either stops, or gets so big we simply can afford the additional highways and lrt lines to service it? How close are we to the point when our first generation of infrastructure needs replacement, and the funds simply arent there?

[freeweed]

Originally Posted by polishavenger

How would this city fair if we didnt have such a massive revenue source from our core, which is predominantly driven by oil, and sees little to no investment back from all the money it contributes. What happens when outward expansion either stops, or gets so big we simply can afford the additional highways and lrt lines to service it? How close are we to the point when our first generation of infrastructure needs replacement, and the funds simply arent there?

While I'm far from an expert on this:

Calgary is not unique. Most cities in North America are built like this, and nearly all of them are not driven by oil. So that's a completely non-factor. Also, Calgary is very, VERY young compared to most cities. Plenty of places are long past the first generation of replacements, and they're surviving (so far). Most cities have maybe double the residential property taxes we have, and they manage. To be honest while it would suck for some, the majority of Calgarians could easily afford another $2000 in taxes every year. This is the city of mindless consumption after all.

I think the suburban sprawl will collapse due to excessively high fuel prices long before infrastructure concerns take it out. Infrastructure has already been replaced to suburbs in many cities, and they have not collapsed.

Like anything though - if our water lines stopped working, believe me, they'd get replaced. Taxes might go through the roof, but it would happen. Same with roads, same with electrical, same with everything. People wouldn't stand to let basic necessities disappear at any cost.

[Aegis]

One thing that's not being considered in the pure cash-flow doom & gloom predictions is the return generated by the infrastructure that we are building. Simply put, if the long-term return (net of maintenance cost) is greater than the cost, then it's sustainable. The fact that there is a large initial outflow (to add services/utilities to distant suburbs) is only part of the story.

The question is, how do we measure the return? Many of the benefits are intangible or not easily measurable. For example: increases in productivity and consumption from having an efficient transportation system, whether that be in roads or public transit, or (hopefully) both.

There is a point where the sprawl starts hurting the economy (large areas of the city falling into disrepair due to lack of funding), but I don't think Calgary is anywhere near that point.

[MalcolmTucker]

Calgary is in a much better situation since almost all of our utility functions are supported through fees, not taxes. Calgary if my memory is correct has the most expensive water in the country which has supported first rate treatment. Even looking at services, recreation centres in Calgary are much more expensive to use than in Toronto (it was scandelous when they increased user fees to pools to $3 in Toronto last budget cycle!)

The city survived the oil price plunge in the 80s, government pull backs in the 90s, and is roaring again (in moderation) after the financial crisis. The city is a pretty lean machine, and the revenue neutral tax system really helps, because in a crunch in a big downturn tax supported services will still have their funding, unlike cities in the USA that are reliant on sales taxes, and cities like Mississauga that have been reliant on development charges to fund city services.

[Radley77]

Originally Posted by Aegis

One thing that's not being considered in the pure cash-flow doom & gloom predictions is the return generated by the infrastructure that we are building. Simply put, if the long-term return (net of maintenance cost) is greater than the cost, then it's sustainable. The fact that there is a large initial outflow (to add services/utilities to distant suburbs) is only part of the story.

The question is, how do we measure the return? Many of the benefits are intangible or not easily measurable. For example: increases in productivity and consumption from having an efficient transportation system, whether that be in roads or public transit, or (hopefully) both.

There is a point where the sprawl starts hurting the economy (large areas of the city falling into disrepair due to lack of funding), but I don't think Calgary is anywhere near that point.

My one area of concern is that alot of the infrastructure that was built in Calgary is relatively new. The last big boom being 1976-1983 ish. When that infrastructure starts reaching it's lifespan in say 50-100 years there is going to be a lot of maintenance.
The tunnel underpass for example had only assumed $45,000 annually cost for capital maintenance (not including operating costs of ventilation, lighting, pumping station and emergency monitoring). At a capital cost of $258.8 million, it would be equivalent of entirely rebuilding the tunnel underpass every 5,751 years.

Yet so far, I haven't been able to identify what the planned lifespan of the airport underpass is. I'd be interested more in what COC's asset integrity division has on it's long term books (capital outlay versus time), as well as seeing this being evaluated as an economic factor before proceeding on a project. i.e.: How much does productivity gains exceed initial capital, plus cost of abandonment or straight line depreciation, plus operating costs, plus insurance costs, plus utilities etc....

[Doug]

Originally Posted by MalcolmTucker

Calgary is in a much better situation since almost all of our utility functions are supported through fees, not taxes. Calgary if my memory is correct has the most expensive water in the country which has supported first rate treatment. Even looking at services, recreation centres in Calgary are much more expensive to use than in Toronto (it was scandelous when they increased user fees to pools to $3 in Toronto last budget cycle!)

The city survived the oil price plunge in the 80s, government pull backs in the 90s, and is roaring again (in moderation) after the financial crisis. The city is a pretty lean machine, and the revenue neutral tax system really helps, because in a crunch in a big downturn tax supported services will still have their funding, unlike cities in the USA that are reliant on sales taxes, and cities like Mississauga that have been reliant on development charges to fund city services.

Don't underestimate the unicity municipal structure as a key to Calgary's success. Unfortunately, that advantage seems to be deteriorating as surrounding communities grow at faster rates and successive city councils erode the property and business tax advantages that Calgary once enjoyed relative to Airdrie, Cochrane etc.

[polishavenger]

When discussing the sustainable nature of infrastructure, you cant rely on anything intangible, because intangibles dont pay the bills. It may be challenging to directly attribute the revenue generation of certain pieces of infrastructure, but the bottom line is that the tax base needs to cover maintenance and capital replacement costs without relying on a ponzi sheme model of infinite and increasing growth.

Originally Posted by Aegis

One thing that's not being considered in the pure cash-flow doom & gloom predictions is the return generated by the infrastructure that we are building. Simply put, if the long-term return (net of maintenance cost) is greater than the cost, then it's sustainable. The fact that there is a large initial outflow (to add services/utilities to distant suburbs) is only part of the story.

The question is, how do we measure the return? Many of the benefits are intangible or not easily measurable. For example: increases in productivity and consumption from having an efficient transportation system, whether that be in roads or public transit, or (hopefully) both.

There is a point where the sprawl starts hurting the economy (large areas of the city falling into disrepair due to lack of funding), but I don't think Calgary is anywhere near that point.

[kw5150]

Originally Posted by Aegis

One thing that's not being considered in the pure cash-flow doom & gloom predictions is the return generated by the infrastructure that we are building. Simply put, if the long-term return (net of maintenance cost) is greater than the cost, then it's sustainable. The fact that there is a large initial outflow (to add services/utilities to distant suburbs) is only part of the story.

The question is, how do we measure the return? Many of the benefits are intangible or not easily measurable. For example: increases in productivity and consumption from having an efficient transportation system, whether that be in roads or public transit, or (hopefully) both.

There is a point where the sprawl starts hurting the economy (large areas of the city falling into disrepair due to lack of funding), but I don't think Calgary is anywhere near that point.

And I hope we never get there because of lack of foresight.

[DizzyEdge]

This is.. sort of related, something I've been pondering regarding muni taxes.

What about a system of taxation, where the non-school portion of what you pay is made up of two parts:

1 - essential services / bare minimum but functional infrastructure / through-roads for the entire city, fixed rate for everyone
2 - additional funds to enhance services/infrastructure in your community, as detailed in a budget voted on by community assoc members

This way all of the basics are taken care of by the city, and for example innercity people don't have to pay for all of the maintenance on 'local' roads that are full every rush hour + people never have to worry about the city "takin ma tax dollers" to pay for something fancy they're "never use"

Also this way, the more people who live in a community due to densification, the more they'll be able to afford nice things.

[MalcolmTucker]

Since the vast majority of the city operational budget is taken up by emergency services plus transit, and residential property taxes doesn't even cover half the operational budget, I don't think you are ever going to see much savings by moving to a system like that.

You would also loose economies of scale as recreation is moved down to the community level, and induce free rider effects. Also, do you really want to move more power to even less accountable people (even with more power, more people wouldn't vote), the community associations?

[DizzyEdge]

Well the community associations were just an extant example of a community body, the point was residents in communities could decide amongst themselves if they wanted to pay for more than the very basics. If extras though only make up a tiny bit then yeah it wouldn't be too useful.