Major cities across Canada are choked by congestion and gridlock. Most communities are faced with the challenge of rehabilitating crumbling infrastructure. Every municipality is trying to stretch its last dollar to the utter end of its budget’s breaking point.
I’ve harped upon these issues before in the context of how “decentralized urbanization” could help to alleviate the burden for Canada’s growing cities. But that previous post only touched upon one aspect of the much broader infrastructure crisis facing our country.
Organizations such as the Canadian Chamber of Commerce have repeatedly lamented the lack of a “long-term, national infrastructure investment plan that includes strong and diversified funding models and increased private sector involvement,” and the impact that this lack will have on the economy as a whole.
A century of poor decisions
But I contend that the problem doesn’t begin with how we go about fixing what we have in an efficient and strategic fashion. The true issue arises from the fact that we have too much infrastructure to begin with that is underutilized, the result of a century of construction decisions made for public policy rather than economic reasons.
Take transportation infrastructure as an example.
It is overbuilt by a factor of at least three times the actual economic demand. Few projects, such as bridges and roads, were ever built with reserve funds that would provide for eventual repair and replacement.
Such a forward-looking mentality seldom existed at the public policy level, despite the common knowledge that bridges are things with a predictable life expectancy and will eventually collapse if not repaired or replaced.
It’s sort of like buying a fleet of fighter jets without taking into account the ongoing operating costs.
The Government of Canada has expressed, more than once, its awareness that our national infrastructure is overbuilt.
Transport Canada reported a few years ago that:
* 94 per cent of all air passengers and cargo use only 26 of 726 airports;
* 84 per cent of all rail traffic uses only 33 per cent of the railway lines;
* 80 per cent of all marine traffic passes through only 30 of 300 public ports.
And while the federal government continues to divest itself of many such facilities and otherwise offload its own financial burden, billions are still sunk each year into various subsidies to support this vast, bloated and underused transportation infrastructure.
Meanwhile, the Canadian Chamber of Commerce reports that 30 per cent of municipal infrastructure is at risk due to wear and tear.
A big part of the problem as I see it is that most cities encourage urban sprawl even if deep down city planners realize that it actually might be smarter to stop issuing building permits.
Population density is too small; this leads to the construction of more and longer roads, more cars travelling greater distances and more congestion.
The usual answer to congestion is to build another road, but this just leads to even greater congestion and more infrastructure to care for, without any new revenue to pay for its repair and maintenance.
More sustainable idea
A more sustainable idea is to increase density and adopt more road tolls which together will reduce the need for extending roads, as well as water, sewer, gas and power services. Down the road, pun intended, the tolls could be used toward some of the inevitable cost of repair.
In the short term we’re in a mess that took a century to create. Changing in a fundamental way how we approach future urban development does little to address our existing mess of crumbling concrete and rusted rebar.
Governments, at all levels, must to come to grips with the facts.
We have too much municipal infrastructure, no revenue base to pay for it, and economic growth, meantime, is being materially hampered.
Limited though they are, those billions in federal subsidies could be redirected and more efficiently applied to address the critical infrastructure needs of communities across Canada, but need to be spent only on replacing infrastructure in a way that is tied to a more efficient future.
To discuss this or any other valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.
About John Clark: With over 30 years of experience in the national real estate appraisal and valuation industry, John Clark (BA, AACI, P.App., FRICS, Chartered Valuation Surveyor) is a leading expert on real estate matters that impact the value of commercial, institutional, residential and other special use properties. He joined The Regional Group of Companies Inc. in 1988 and has served as Vice-President of Valuation and Consulting since 1990. He is a Fellow of the Appraisal Institute of Canada and served as its National President, 2001-2002.