South End Rock Tunnel May Have Revealed Tax Duplication Problem

Robert Kirwan
Valley East Today

Who is going to pay for the rock sewage tunnel in the south end will have to be decided some time, but in the meantime, some residents are concerned with an underlying problem that appears to have surfaced.

The total cost of the 6.5 km sewer tunnel will be $31 million. There is little doubt that the construction of the tunnel is needed in order to provide for new development in the south end of the city.

We thank Councillor Ron Dupuis for providing us with a breakdown of where the money will be coming from: 

$14,248,300.00   Previously approved through Capital Budgets
          965,000.00   Previously approved through Capital Budgets
Marcel/ Bouchard lifts
       8,400,000.00   committed from the Province
          340,000.00   culvert work to be funded from the Roads Capital
Envelope - 2006
          106,700.00   from the Sewer and Water Payments Reserve Fund
       1,000,000.00   from the 2006 Wastewater Capital Envelope
       1,000,000.00   from the 2007 Wastewater Capital Envelope
       1,015,000.00   from the 2008 Wastewater Capital Envelope


With the total cost of the tunnel being estimated at $31,075,000.00, this leaves a shortfall of $4 million.

On the surface, this does not look that bad, but in reality:

bulletThe province has kicked in $8,400,000 for the project.
bulletNormally, in such a project, it is customary for any costs above the funding received by the provincial government to be split between the developers/people who will benefit from the project, and the city. This means that about $11.3 million should come from the City (revenue generated from municipal taxes) and the balance of $11.3 million from the developers/new residents.
bulletThe City of Greater Sudbury has already committed $18,675,000 to the project, or some $7 million more than it should have been expected to contribute.
bulletThe latest proposal is that the additional $4 million should be paid by charging new developers an additional $3,760 for each new house and $2,260 for each new apartment.
bulletAs it is now, the city charges new developers $2,612 per lot to help pay for services regardless of where the development is. This means that the new development in the south end would have to pay the extra cost in addition to the current $2,612.

The biggest argument coming from developers is that the extra $3,760 would make new homes in the south end less attractive and scare professionals from moving to the city. This argument is not holding much water with residents who live in other areas of the city for the following reasons:

bulletThe average price of new homes in the south end is well above $250,000, therefore, anyone who can afford to purchase one of those expensive homes can well afford the additional $3,760 development fee. If not, then there are plenty of other great developments taking place in Valley East.
bulletRatepayers all across the region, many of whom could never even think of living in a $250,000 home, are already contributing a portion of their municipal taxes to help come up with the almost $19 million that the City is putting into this new rock sewage tunnel. This is already $8 million more than our share and is money that could be put towards improved roads and snow removal.
bulletIt has been argued that the increased assessment from the south end would benefit the entire city. However, there will be increased costs to service the south end of the city and those expenses will effectively wipe out the increased tax revenues. 

What Councillors appear to be debating at this time is whether or not commercial and industrial properties should also chip in with new development fees. Arguments are forthcoming from a number of sources stating that these development fees would deter business expansion. This does not hold much water either since businesses will locate where they feel the market will support them. New development fees are a small price to pay to be located near their market.

As it stands now, it would also appear as if the City is prepared to dig into the Wastewater Capital Reserve Fund for the $4 million and recover the money over a 40 year period. This in itself is causing concern for many ratepayers. For example, over $1 million per year is already scheduled to come from the Waste Water Capital Envelope in 2006, 2007 and 2008. The City is now prepared to borrow from the Waste Water Capital Reserve Fund to pay for the rock sewage tunnel in hopes of recovering the money in the form of new development fees over the next 40 years. Financial advisors may wish to give some advice to the City on the merits of turning over that amount of money and losing the interest earning power it could otherwise generate. 

This situation has created so many difficult issues that it is hard to comprehend.

The biggest thing on the minds of people living in Valley East is that with so much space and infrastructure already in place here, why would we ever want to pay additional taxes to cover the expenses of developing a new area in the south end of the City to help out people who can afford $300,000 and $400,000 homes? Perhaps we should take the $19 million and spend it developing the North End. Or just save the $19 million and put it to other uses and allow new developers to pay the full shot. If they want to live here, they will gladly pay.

It would appear that there is little support in a decision that will see local ratepayers having to come up with any additional funding for the south end - many feel we are already paying twice for this development.




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