Development Charges Reserves - Roads

In this Development Charges for Roads research post we described how the City has calculated the amount of money that is included in charges for new developments to cover the costs of road expansions.

These funds are allocated into a reserve fund and that fund is used as one of the main funding sources for new road expansions.  Money in this reserve is not allowed to be used for other purposes.  Each year as part of the City's annual budget process, a report is provided on the money flowing into and out of this roads reserve fund and its expected  balance at the end of the year.

Ed Note: Jan 2016 Update:  As suspected when this post was originally written back in 2012, the worsening financial position of this roads development charges reserve fund has indeed been materializing and the City will need to slow down its pace of road expansions.  Hopefully this tightening of funds will lead to a more rigorous (ie. cost/benefit evaluation) and more open planning process for prioritizing future road expansions.  

Original 2012 Post: The chart for the 2012 year is shown below and it can be seen for the line item "Roads and Structures" that this fund is anticipated to be in deficit by 47m$ by the end of 2012.

This chart also shows that the contribution to the fund is 33m$ in 2012.  This amount is reasonably unchanged from year to year as it is dependent on the amount of new construction in the city although it has been declining and in Jan 2016 an Ottawa Citizen article reported that the City has reduced it's projections down to 26m$ of annual funding from development charges for roads.

What is interesting to note is that the budget also provides a projection of likely road capital (expansion) projects for the next 3 years as well. In the 2012 budget the following road expansions are anticipated:

    2013:  34m$  = 20M$ greenbank rd, 5m$ campeau dr, 4m$ tenth line, 5m$ earl grey/centrum
    2014:  65m$   = 27m$ campeau,  15m$ blackburn hamlet bypass, 11m$ Kanata Ave,  11m$ strandherd
    2015:  79m$  = 43m$ Prince of Wales, 15m$ Hope Side Rd,  10m$ Jockvale Rd, 
                           5m$ Hwy 174, 6m$ Greenbank

Based on these numbers it would appear that the deficit position of the development charge reserve fund for road expansions would continue to worsen and could be in as much of a deficit as over 100m$ by the end of 2015.

Since there seems to be insufficient funds available from development charges to cover these costs, it is unclear what source of money the City intends to use to fund these new roads,  all of which are located outside of the Greenbelt.

Since 2015, the  funding for new roads in the annual budgets has finally started to decline to be in line with 'reality'.  The 2016 version of the chart from above provides evidence of this:

Comparing the differences between this 2016 view of the world and the same view from back in 2012 it can be observed that for the row "Roads and Related Services" the 2016 capital expenditures has declined to 27.9m$ (down from  75.2m$).  It should also be noted that the funds 'deficit position' has continued to worsen and now sits at 71.1m$ deficit (up from 46.7m$ in 2012).

It is bad enough that new development inside the Greenbelt is assessed an equal development charge amount to fund these 'outside the Greenbelt road expansions' (see here for details).  It would be even worse if the general tax base (especially those who live inside the Greenbelt most of whom would seldom use these expanded roads) would have to pay for them.

Watch this development charge reserve fund, and the source of funding for these new road projects carefully over the 2012 and onward timeframe.