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How to Finance Growth and Prosperity
The Canadian Home Builders’ Association (CHBA) recently retained Altus Clayton to provide an analysis of the economic, environmental and social benefits of basic urban infrastructure on the community. This is an important area of study since the emergence of cities was coincident with community investment in basic infrastructure systems from at least the time of the Roman Empire.
As communities have evolved, so has the scope of basic urban infrastructure. It’s no longer limited to hard services such as sewer, water and roads, but now includes such diverse elements as public health and safety, local economic development and the delivery of public services to the community.
The benefits of infrastructure are overwhelmingly community-wide where assets such as roads, fire hydrants, highways, bridges, water and sanitary systems become the foundation of a community, supporting daily social and economic activities. Traditionally, the cost of developing new basic infrastructure in growth areas and maintaining existing infrastructure across the urban area was seen as a community responsibility funded ultimately through property taxes.
In recent decades, the inherent relationship between the provision of infrastructure and the concept of ‘community’ has become less distinct. This has led to underinvestment in both the maintenance and expansion of community infrastructure and a growing ‘infrastructure deficit’. As new economic and fiscal realities have emerged, particularly in the aftermath of the world financial crisis, there has also been a growing disconnection between ‘communities’ infrastructure needs, and fiscal policies required to underwrite these needs. Approaches to infrastructure financing that are inadequate or inequitable such as development charges undermine the long-term viability of our communities.
In order to address the question of how basic urban infrastructure should be created and maintained, it is first necessary to revisit the nature of the benefits it provides within communities.
Well functioning basic infrastructure promotes community-wide public health and safety through: :
- Good water supply and wastewater treatment systems prevent the spread of communicable diseases;
- Good roadways and effective transit systems improve community health by reducing traffic congestion and accidents;
- Adequate community fire suppression infrastructure, facilities and equipment save live and reduce property damage in fire situations; and
- Well maintained health facilities, which themselves depend critically on well-functioning basic urban infrastructure, are directly connected to the health of the residents in a community.
Investment in basic urban infrastructure generates numerous community-wide economic benefits:
- It is essential for productivity growth in a community. Public infrastructure is responsible for some 9% of the growth in labour productivity in Canada over the past several decades, and a $1 increase in public infrastructure investment generates about 17 cents of cost savings per year to the business sector.
- It reduces traffic congestion and saves billions of dollars for the economy because people and goods can move efficiently. Congestion costs Canadians close to $4 billion or more in lost productivity per year.
- It supports economic development by facilitating the exchange of goods and services. The World Back finds that a substantial increase in the quantity and quality of a country’s infrastructure can raise annual growth prospects by 3 percentage points per year.
- It directly supports economic development through construction and related spin off jobs. A recent $19 billion public investment plan in Ontario is estimated to create over a quarter of a million new jobs.
- It promotes private business investment. $1 of additional public capital increases private investment by 45 cents; and
- It improves functioning of the labour market by improving regional accessibility and reducing commute times
Approaches to infrastructure financing that are inadequate or inequitable such as development charges, undermine the long-term viability of our communities and create conflict between factions of what was once a cohesive whole. By politicizing infrastructure funding and making false claims about the cost of growth, elected officials have succeeded in pitting inner city residents against suburban residents and this conflict will only increase as infrastructure demands grow. We need to facilitate choice in housing and life styles rather than dictate one set of standards deemed acceptable by the state.
The city of Ottawa should be managed as one ‘community’ where all residents are treated equally. We need to take the initiative and begin discussing financing methods other than just development charges if we want to continue building a cohesive community where all residents are working together towards a common objective.
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