Expensive News About Asset Management In South Frontenac
It's not a good sign when a council meeting starts with a warning from the mayor and from the director of finance
At the start of a three-hour session to hear the findings and recommendations from Watson and Associates about the cost of managing South Frontenac's physical assets (roads, bridges, buildings, stormwater and water systems) Mayor Vandewal said, “there are a lot of big numbers here, a lot of shocking numbers, but we aren't making any decisions today ... It's information that we need, to think about what we need to do in the future, and how we are going to get there.”
Director of Finance Stephanie Kuca then spoke about how the presentation is part of the township's obligation to follow asset management protocols set out in the provincial regulations, which have developed over time.
“The work before you today focuses on the condition of our physical assets, but also the level of service that the municipality can reasonably provide and sustain over time,” said Kuca.
“It's important to note,” she added, “that the regulation requires the municipality to identify current and proposed levels of service and document financing strategies, but it does not prescribe a specific service standard or spending level. These decisions remain with Council.”
With that she turned the meeting over to Peter and Suday from Watson, who provided the detailed report, based on extensive consultation and data gathering from township staff, mostly in the public works department.
The replacement value of the assets documented in the report is $593 million.
The largest part of that is $380 million in road and bridge assets. There are 167km of asphalt roads, 442 kilometres of surface treated roads, and 195km of gravel roads, 24 bridges, 21 structural culverts, and 57 non-structural culverts, in total.
The second major asset class includes 67 township facilities, including fire halls, at a total replacement value of $137 million.
The vehicle fleet, parks, stormwater systems, and Sydenham water system make up the remaining $76 million in assets.
When the Watson report talks about service levels, it does not refer to services offered at the township office, but service levels in terms of the average condition of roads within the township, and the state of repair of township buildings.
For context, this amounts to about $46,000 worth of municipal assets for each household, including seasonal properties, in the township.
“When I look at the facilities, 67, it seems like a lot for 30,000 people,” said Mayor Vandewal.
“It is a bit on the higher side, but not out of the range,” was the consultant's response.
The second aspect to the report was to look at what it will cost to maintain those existing assets at a “Fair or better condition, so that they perform as intended, meet their functional requirements, and provide a satisfactory user experience,” and that is accomplished by replacing assets in poor repair, regular maintenance activities on other assets, and conducting regular reviews of assets to know they are performing as anticipated or deteriorating faster than expected.
Director of Public Services Kyle Bolton used Rutledge Road as an example of what is at stake in these long-term decisions to maintain assets.
The section of road from Perth Road west for several kilometres is in poor repair and was slated for replacement in 2026, but that was put off for budget considerations. Bolton said that if certain work had been done on that road at regular intervals, including microsurfacing, it would still have 30 years of life instead of being in line for a rebuild.
The third part of the report deals with cost, and this is where the “big” numbers come in.
The report provides for a ten year or a 15-year phase-in. The 10-year phase in, which includes borrowing, would result in a 6.8% increase in taxation, for asset management purposes alone, each year for 10 years. A 15-year phase-in is cheaper each year, 5.6%, but the increases persist for 5 more years and the level of borrowing involved would be higher.
Looking at the ten-year phase in, it would bring local taxation, just the South Frontenac portion of the tax bill, from $1907 for the average valued home in the township (an MPAC property assessment of $278,000) to $3681 by 2036. This is without accounting for operating cost increases, due to inflation or staffing levels.
It might be cold comfort for South Frontenac ratepayers, but when looking at taxation levels in the township, the consultants point out they are among the lowest in the Province, for municipalities of a similar makeup.
Local township taxes on an average home in South Frontenac are $1907 per year, but when education and county taxes are added on, the total is just over $3,000 per year. This makes South Frontenac the third lowest of over 100 Ontario municipalities that Watson looked at, with the average being almost $5,000.
Even with the increases envisioned by the report, South Frontenac ratepayers would still be paying lower than average taxes.
Mayor Vandewal pointed out that the current council, or the next one, can change some of these numbers by making hard decisions about some of its assets that are in poor repair, are used sparingly, or both.
While the road conditions are central to the report, if for example the township cuts down on the number of fire halls, it would make a difference,” he said.
Chief Administrative Officer Louise Fragnito pointed out that the asset management report is only one factor in the long-term financial plan that the township has been operating under, and the financial plan is updated every year.
“We look at financial planning over a long period, and we account for everything, not just asset management, to smooth things out over time. This asset management deficit did not come about in the last ten or 15 years, so it may take longer for us to address it.”
Mayor Vandewal said that it would be helpful for Council and for the public to make a commitment to an increase every year for the ten years, so everyone knows approximately how much taxes will be increasing every year, instead of large increases of 7 or 8 per cent one year, and 3.5% the next.
“Whatever it is, at least it would be something people can count on and maybe budget for, although they also have other costs going up every year, as well.”
The level of tax increase resulting from this report may not be as great as indicated in the ten or fifteen year plans that were presented, but taxes will go up.
The consultants said that the province requires this plan to be completed, and that a financial plan to address it be developed, but how quickly the funding gap is bridged, and the level of service the township chooses to maintain, is up to the local township to decide.
