Halifax councillors approve plan to boost debt to cover climate change, transit, active transportation projects

Halifax regional council’s budget committee voted Wednesday in favour of a plan from municipal finance staff to pay for the kinds of transformative projects council has approved over the last few years.

The staff report, by Bruce Fisher, manager of fiscal planning and policy and Crystal Nowlan, manager of asset management, said the city’s capital budget, averaging about $150 million annually, hasn’t kept up with population growth, inflation in construction costs or council’s big-ticket priorities.

As a result, a focus on the big stuff — HalifACT2050, the city’s climate change plan; the active transportation-focused Integrated Mobility Plan; and Halifax Transit’s Moving Forward Together, fleet electrification and Bus Rapid Transit plans — means other capital assets, namely roads, are deteriorating. And there have been “delays in funding growth related and strategic projects.”

“Without a planned approach to financing these projects taxpayers will be subject to spikes in the tax rate in order to move these initiatives forward or the infinitives may simply falter,” Fisher and Nowlan wrote.

Finance staff have created a strategic initiatives funding plan in response to pay for those projects, defined as “those whose implementation would require a discernible increase to the tax rate in order to move forward.”

The total price tag for those strategic initiatives, which also include the Windsor Street Exchange redevelopment project, is expected to be $1.5 billion over the next 10 years.

The plan is to set aside $10 million annually, starting in the 2021-2022 fiscal year, to be used for debt servicing costs on an extra $150 million in debt to pay for these projects.

Halifax is currently about $235.7 million in debt, and it’s been paying it down aggressively over the past several years. Maybe too aggressively, staff suggest.

“HRM has done a very good job of reducing its debt levels. Its emphasis, however, has been on reducing the debt that is outstanding as opposed to looking at what an appropriate level of debt should be for an organization the size of HRM,” Fisher and Nowlan wrote.

“HRM debt policy has focused on reducing this debt in favor of capital for operating, in order to support asset renewal. It did not focus on the use of debt for growth purposes and city building initiatives. This has left HRM with insufficient capital funding to maintain assets and support growth and strategic projects.”

Coun. Becky Kent expressed concern on Wednesday that this plan would lead to tax increases above the target of a 1.9% increase to the average property tax bill set by council last week.

“I just want to understand, what’s on the table today, that is within the envelope of what was presented and what was approved, the 1.9? If that should fly, if that should get approved, that is fully within that, correct?” Kent asked.

“Think about this as a tax avoidance plan,” chief administrative officer Jacques Dubé replied.

“At the end of the day what this is all about is putting a plan in place so we can avoid tax rate increases on the general rate.”

Dubé explained the municipality will put money aside to build up a savings account, then borrow money and use the savings account to pay the borrowing costs.

“It’s prudent financial management and it’s prudent fiscal policy in order to try to address the major things that we have to do as a regional municipality in order to respond to growth pressures, increased housing levels and all that,” Dubé said.

Municipal staff will come back to council with a review of all of the municipality’s reserve accounts this summer, along with a fiscal sustainability strategy “with revised debt levels and measurement and their relationship to the Strategic Initiatives.”