Measuring fiscal health - At a glance

NRU
July 12, 2017
By Sarah Niedoba

There are many ways to measure the fiscal health of a city, but not all measurements receive the same amount of public attention. According to the University of Toronto’s Institute on Municipal Finance & Governance, Ontarians need to pay more attention to their cities’ infrastructure. To that end it has created a way to visualize the state of a municipality’s infrastructure at a glance.

Using provincial data the IMFG compared the “asset consumption ratios” of Sudbury, Toronto, Oshawa, St. Catharines, Windsor, Hamilton, Kitchener, Ottawa and Mississauga. The ratio measures the cost of needed repairs as compared to the original cost of the infrastructure asset.

It’s meant to show whether or not a municipality is maintaining its infrastructure— if it is, the ratio will be relatively low. If it isn’t, it will skew higher, and could mean significant costs down the road.

The highest ratio in the study is Sudbury, with 49 per cent, while Mississauga is the lowest, at only 18.

“When we were putting together the visualizations, we asked ourselves, how can we convey the state of a municipality’s infrastructure at a glance?” IMFG senior adviser Dina Graser told NRU. “These are not concepts that are necessarily accessible to a layperson, but they are important ones to understand.”

Graser says that the state of a municipality’s infrastructure is an indicator of fiscal health that isn’t always readily apparent on balance sheets.

“You might have a municipality that looks just fine-it’s paying its bills, isn’t in significant debt, that kind of thing-but there’s this iceberg you don’t know about, which is the state of its infrastructure,” she says.

Graser says that the IMFG ratios help to communicate to municipalities how they compare to their neighbours.

“I think many municipalities don’t have an idea how they relate to others around them,” she says. “So that’s why we put them side by side.”

Hamilton’s asset management manager Sam Sidawi disagrees with Graser, saying that Hamilton is all too aware of how it compares to newer cities-it has a ratio of 37 per cent.

“It’s not apples to apples when it comes to these things,” he told NRU. “You also have to look at the maturity of the municipality. In itself, the ratio might not tell you much, because you can’t compare a city like Hamilton that’s been around for over 100 years to a newer city that’s only been there 40.”

Sidawi says that, for an older city like Hamilton or Toronto, a ratio of below 40 per cent is a positive sign.

“To me, what I’ve gleaned from this information, is that we’re getting some positive returns on our infrastructure investments,” he says. “You’re never going to have a 0 per cent ratio, and infrastructure at 30 per cent is functioning perfectly fine. As long as you’re investing adequately into that network, you’re ok.”

Mississauga chief financial officer Gary Kent agrees. He says that Mississauga’s age plays a large role in its low ratio. Still, he says there are things the city has done to ensure that it stays on top of its infrastructure maintenance.

“One thing that council has done here is introduce a stormwater charge,” he told NRU. “That one charge covers the cost of a quarter of our [infrastructure] assets costs, and has allowed us to triple

our capital asset program. Councils have to make strategic investments in infrastructure.”

Kent says that it can be difficult to communicate the importance of infrastructure maintenance to the taxpayer, as it’s “not a sexy” issue. Mississauga has held town meetings and produced brochures on the subject in an attempt to keep its residents informed.

Graser says that IMFG is hoping that municipalities such as Mississauga can learn from the data visualizations, which she hopes will lead to a greater understanding of infrastructure maintenance, and spark a larger public conversation.

“One of the things that we’re trying to say to municipalities is, here are some interesting and engaging ways that you can put information out there about some of the fiscal challenges that cities face,” she says. “Most of the time the general public isn’t going to dig into this kind of information, so you need to highlight it in a way that they can understand.”