Tuesday, April 21, 2015

Taking a Closer Look at Maley Drive, Part 1: Costs

Although the project proposal has been around for over 20 years, lately the Maley Drive Extension has really begun to divide the Greater Sudbury community. On the one hand, there are those that believe Maley will single-handedly get the ore trucks off of Lasalle Blvd., and MR 35 through Blezzard Valley as well. The plan is for Maley to reduce congestion along Lasalle and the Kingway, and have large sections of the City opened up for new development.

On the other hand, there are those, like me, who believe that we are being sold one of the largest and most fiscally unsustainable infrastructure projects ever undertaken by the City. We believe that there is no need for this road, and no money in the coffers to pay for it even if there were a need. Maley Drive would represent a monumental mistake on the part of our City, and shackle taxpayers to higher property taxes to pay for a road which will largely benefit the resource sector.

I believe that people like me, who oppose Maley Drive, are probably in the minority. Certainly during the last municipal election, there were few candidates who questioned the wisdom behind the Maley Drive project. After all, this project has been on the books since before 1995, when an Environmental Assessment was carried out. It became the previous Council's number one infrastructure priority, and they started to set aside dedicated funding to finance it. Our former Mayor, Marianne Matichuk, actively sought out provincial and federal funding partners to pony up some money to help the City out.

In the recent Sudbury by-election, the Progressive Conservatives, Liberals and New Democrats all said that they would fund Maley Drive. Some of these candidates cited opportunities for growth in the City should Maley be built. Only the Green Party's Dr. David Robinson, an economist, stood firmly against funding Maley Drive.

With so many seemingly onside for Maley, why listen to a complainer like me? Well, I certainly hope to provide you with some information that you may not be getting from the media, the Chamber of Commerce, and politicians (both elected and those who want to be elected). In this two part series, I hope to challenge your perceptions about Maley on the issue of costs (Part 1) and benefits (Part 2).

Scoping the Project

First off, finding out accurate information about the Maley Drive Extension project is difficult enough. From conversations that I've seen in social media, it’s clear that people are very confused about what it is that the City is intending on building. Quite often, people are confusing the Maley Drive extension with the Barrydowne extension – largely because Maley is being sold publicly as a way of reducing traffic in the Valley – something Maley might do (by providing an alternative route for ore trucks running between Garson and Levack which currently use a combination of roads including MRs 15, 80 and Radar Road), but not in the way that many people think it will (by building a new road between Notre Dame in Hanmer and Barrydowne in New Sudbury).

The City has some information about the Maley Drive project available on its website, but it’s spread out in such a way that it’s quite difficult to put the pieces together. There is an undated “Quick Facts” page, which contains a lot of unsupported feel-good statements about the benefits of Maley (unsupported in the sense that there are no attributions – there may be support for these “facts” elsewhere, but from a quick read of the Quick Facts, it’s not at all clear), along with an Overview document, also undated and unattributed, which pretty much says the same thing but has a decent map attached to it.

Of course, one should always be cautious when “Facts” – quick or otherwise - are presented about a project’s benefits, and just about everything about the costs are omitted. Upon accessing either of these undated City documents, you’ll find that you’re no further ahead in determining what the proposed construction costs are, other than to find out that “the financing for Maley Drive is largely in place”, so there’s probably no need to worry much, so why bother continuing your search? Of course, there is that statement near the end of both docs which says that the City has banked $10.5 million for the project. Oh, and it continues to budget $2.3 million a year (which works out to 20% of what it’s already accumulated). Perhaps those pesky concerns about costs aren’t so pesky after all.

How Much Does That Cost?

Just how much is this project going to cost the City? Well, that depends on what you mean by “project” and what you mean by “costs”. Let’s look at the “project” part first.

Since early 2009, the City of Greater Sudbury has had a pretty cool video available on YouTube. At last count, it had been viewed more than 10,000 times. The video takes a birds-eye look at the proposed Maley Drive project – or at least at the project as it looked back in 2009, and as it might some day look if it were ever completed.

In the west, a 4-laned Maley would intersect with MR 35 between Sudbury and Azilda in the location where the Lasalle Extension currently is. Heading west, a new section of Maley will be built north and east of Lasalle near the entrance to College Boreal (there will be a partial cloverleaf at Lasalle/Maley). Maley will continue heading northeast, crossing MR 80 north of the Notre Dame/Lasalle intersection in a cloverleaf, and continue eastward along to the existing section of Maley Drive which currently terminates at the northerly end of Barrydowne. New roundabouts will be built at an extended Montrose Avenue and at Barrydowne. Maley Drive between Barrydowne and Falconbridge – which is truly one of the worst roads in the City right now – will be upgraded, including a new roundabout at the Maley/Lansing intersection.

From Falconbridge, Maley will veer to the southeast, where a roundabout will connect it with Lasalle east of Falconbridge, and from there it will continue on southwards to the present intersection of the Kingsway with Highway 17. The idea is that Maley will become the northeast and northern sections of a ring road (with the Highway 17 by-pass forming the southeast and southwest sections – note that there are no plans for a northwestern section of the “ring” road).

But that’s not what we’re getting. At least not yet. Right now, we’re looking at something much less ambitious. Only the section between MR 35 and Falconbridge will be upgraded/built. There are no plans for pedestrian or cycling infrastructure included for the road. Indeed, gravel shoulders are currently proposed, which will force cyclists to share the road with the ore trucks, and likely slow down traffic flow.

Incredible Shrinking Costs!

Back in 2012, with anticipated costs having soared to almost $130 million for the project (up from $115 just a few years earlier in 2009), the City decided to divide the project into smaller pieces, because decision makers believed that by doing so, at least parts of the project would be more attractive to senior levels of government to fund (see: “Mammoth Maley Drive broken down into sections”, the Northern Life, August 12, 2012). It looks now like this gambit has paid off, as right before the recent provincial by-election, the Ontario Liberal government rode a white horse into town with a funding announcement (see: “Province vows to ‘fulfil” Maley funding promise”, the Northern Life, December 1, 2014).

So, with the province chipping in $26.7 million as its 1/3 share of the costs, we might be able to start getting a better handle on what those construction costs are. Add it all up and you get $80.1 million. Which is kind of interesting, because when you add up the various components that were identified for the same project area from the 2012 Northern Life article, you get $93 million.

Financing is Largely in Place

Of course, what you don’t get either way is how the City can possibly suggest that “Financing for Maley Drive is largely in place”. First off, although the province has added Maley to its list of funding priorities, this hasn’t yet been announced in any budget. Chances are that will change soon, as Sudbury will get rewarded for ‘doing the right thing’ back in early February when we elected Glenn Thibeault our MPP.

Second, the federal government hasn’t pitched in any funding yet. Until they do, it’s a complete stretch to suggest that financing is largely in place. This, too, might change should funds for Maley be included in the federal budget. With an election coming up in October, at least one Sudbury candidate has raised funding for Maley as an issue pre-budget (see: “Don’t fund Maley extension, Sudbury Green candidate tells Ottawa”, the Sudbury Star, April 15, 2015).

And finally, how about that municipal portion? The City’s website says the City has $10.5 million in the bank – which is rather short of $26.7 million. With $2.3 million being added a year, it’ll be another 7 years yet for the City to have all of its money available for this project. Or will it?

Challenging the City's Growth-Based Financing Assumptions

The City’s $2.3 million is coming largely from levies under the development charges by-law. Put aside for the moment whether you think this is a good use of development charges (I don’t), and let’s just assess whether it’s sustainable. With only modest development forecast over the next little while, and fears of an economic downturn and/or recession which is likely going to impact commodity prices, it’s not at all clear that the City is going to be on track to meet expectations regarding development charges.

Further, last year, City Council voted not to increase the charges after an acrimonious and confusing discussion about the by-law (see: “Sudbury development charges frozen for two years”, CBC News, June 11, 2014). The Sudbury and District Home Builders Association got in on the act, lobbying council to hold or reduce the charges, and during the municipal election, they invited all municipal candidates to come out and hear the Association’s thoughts on development charges. Throughout the municipal election campaign, many candidates – including a good number which were elected – expressed their opposition to development charges, with some saying Greater Sudbury should do what other jurisdictions in Ontario have already done: get rid of them all together (Greater Sudbury is one of a very few municipalities in all of Northern Ontario which levies charges under the Development Charges Act. It’s also one of the few municipalities in Northern Ontario which is experiencing growth).

You can read one candidate’s thoughts on the Maley Drive extension and the use of development charges to fund the City’s share at Robert Kirwan’s Valley East Today website. Kirwan clearly gave a lot of thought to Maley pre-election day, concluding that the “project will never be completed” due to a lack of funding (he was also one of the candidates who wanted to scrap development charges – a move which would almost certainly make his belief a reality. Candidate Kirwan won the election, and he now sits at the Council table for Ward 5. While he doesn’t appear to have changed his mind on development charges, he’s been singing a completely different tune lately on Maley. More on that in Part 2 of this blogseries.

Anyway, given what’s going on in the City with development charges, it’s not at all clear to me that this funding source is sustainable, and that we’ll make up the remainder of our $16.2 million in 7 years in order to chip in our one-third share. Yet the City insists that “the financing for Maley Drive is largely in place”.

Higher Future Costs?

And of course, none of this takes into account what might happen if the costs are higher in the future than they are now. Remember, back in 2009 the costs of the project stood at $115 million for the entirety of the Maley ring-road. Those costs jumped to almost $130 million in just three years. Typically, cost estimates don’t go down – although that’s what appears to have happened between 2012 when the sectionalized Maley was presented to Council with a total price tag of $193 million, versus the 2014 estimate of just $80.1 million.

Does anybody really trust any of these numbers?

Whether they’re trustful or not, what’s clear is that the federal and provincial funding partners won’t be the ones left on the hook to pay for anything more than they’re chipping in. If costs ultimately exceed estimates, it will be the City that has to pick up the bill. Municipal property tax payers will be on the hook for any cost increases.

But don’t worry. The City has it all figured out. “Financing is largely in place”.

Planning Ahead for Roads

How much will this new road add to the City’s operating budget annually? Some are already asking that question. The road has to be plowed, after all. And pot holes have to be filled in (potholes on a new road? Well, we are ostensibly building this road to get those heavy ore trucks off of Lasalle, right? And this IS Sudbury – I think it’s fair to say that there will be potholes). Certainly, annual operating costs won’t be as expensive as initial capital costs to build the road, but the operating costs will be borne exclusively by property taxpayers. The City isn’t looking at any alternative funding models, despite the City’s own Transportation Plan (2005) having suggested that it do so (see Recommendations, No. 12 – “Negotiate cost sharing agreements with major industries when these industries will benefit from the transportation improvement being implemented”, Transportation Background Study 2005, page E12).

Well, maybe there’s something about those operational costs in the Transportation Background Study too. There sure is. Another recommendation was for the City to develop an asset management strategy for lifecycle costing of roads (see page E3). In 2012, KPMG provided the City with a report, “Financial Planning for Municipal Roads, Structures and Related Infrastructure”, which looked at the City’s current roads-related infrastructure deficit based on anticipated capital and operating expenditures for the existing and funded roads network. Note that on Page 10 of this report, Maley Drive is identified as an “unfunded” road (to the tune of $94 million – but again, costs were higher in 2012 than they are today, right?).

(Note that the Transportation Background Study 2005 is in the process of being updated as part of the City’s 5-year Official Plan Review. The original intention was to have the new Transportation Plan available to the public for comment in 2013. As of April, 2015, the plan has not been released, and decision-makers and the public will have to rely on outdated data which is more than 10 years old now)

Our Fiscally Unsustainable Future for Roads in Greater Sudbury

You may be interested to know that KPMG expressed some pretty serious concerns about the long-term sustainability of the existing road system in Greater Sudbury. In 2012, capital and operating costs were at $75 million annually for the entire road system – all 3,600 lane kilometres. However, in 2012, the City was only spending $35 million on roads. With costs outpacing investments, a significant gap between the two already existed, and KPMG recommended the adoption of a financial plan that would see the gap narrowed over a period of ten years, during which annual expenditures would rise from $35 million to $75 million. To cover these additional expenditures, the municipal tax levy would need to increase between 3.3% to 3.5% every year. This plan includes only existing roads and one significant new piece of infrastructure: Maley Drive.

Clearly, there's a problem here. Greater Sudbury has already fallen behind with capital and operating expenditures needed to maintain the existing road system in good shape. A recommendation of an annual tax increase of 3%+ for roads alone is simply not going to fly with voters, no matter how much the need stares us in the face daily. This year, our new Council raided the reserves in order to gift Sudburians with a 0% tax increase. In light of the drastic measures KPMG recommended our decision-makers take regarding roads, 0% appears to be completely unhelpful, with or without Maley Drive.

A New Way Forward Needed

What's clear is that Greater Sudbury has to find a new way forward. I don't know what that way is – maybe user fees of some sort - but it's clear that for too long we've been leading a fiscally unsustainable existence – putting today's costs on the backs of tomorrow's citizens. That would mean that the costs of the benefits we are reaping today are being passed on to our children – those same children that we are trying to entice to stick around our fair City. To me, handing our kids the bill seems a strange strategy to help stem youth out-migration in our region.

Some have suggested that the way forward is dependent on growth. That certainly seems to be Mayor Brian Bigger's strategy (see: “Greater Sudbury needs to grow its economy”, the Sudbury Star, January 20, 2015). Unfortunately, relying on growth to cover capital and operating costs is a dead-end, especially for a community like Greater Sudbury where growth is projected to be limited over the next while. Even for cities which experienced considerable growth, like Mississauga, growth itself ends up contributing more towards a fiscally unsustainable circumstance. And of course, Mississauga invested in one of the most costly forms of growth available for a municipality to service: suburban sprawl.

Yet, the lessons which decision-makers should have learned from the Mississauga experience have yet to seriously affect the mindset of many municipal decision-makers. Many still delude themselves by insisting that growth more than pays for itself, when it is now obvious that the exact opposite is true.

Regarding Maley Drive, which won't facilitate any growth at all in our community, what is abundantly clear is that the expense of this road project simply can't be justified at this time – not for the sake of getting the ore trucks off of Lasalle, nor for the sake of shaving a few minutes of time off of the evening commute. The costs of this new project aren't ones which taxpayers can absorb. Our City has failed to look at alternative funding models which may assist somewhat with defraying costs. Contributions from the provincial and federal governments will only lock us into making a truly unwise, unsustainable decision to build a road that we don't need and can't afford, for growth which isn't expected to happen (there will be more on growth in Part 2 of this series).

(opinions expressed in this blog are my own and should not be interpreted as being consistent with the views and/or policies of the Green Parties of Ontario and Canada)

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