Aging infrastructure a concern as Victoria releases its draft financial plan

“For the average household, there would be an annual increase of $22 for water, $7 for sewer, $26 for stormwater, and $13 for solid waste,” the draft plan states. Utility fees could go up in the coming years as the City of Victoria deals with various external pressures and aging infrastructure that must be addressed, according to its draft financial plan released on Monday.

“For the average household, there would be an annual increase of $22 for water, $7 for sewer, $26 for stormwater, and $13 for solid waste,” the draft plan states.

The draft plan outlines the city’s operating and capital budgets for 2024 to 2029. It details the city’s projected operating revenue sources and line-by-line expenditures as well as anticipated capital projects over the next five years.

The city cites significant cost increases across both budgets due to supply chain challenges, labour shortages, increased interest rates, and inflation. To combat rising costs, the city's council is also considering expanding its revenue-gathering options. As a result, residents may experience a significant increase in utility fees for 2026 and another one over three years in property taxes, beginning in 2028.

Victoria’s draft 2025 global operating budget is $365.6 million and the draft capital budget totals $94.6 million.

Building the draft plan

The plan reflects the integration of multiple guiding documents, policies, and reports, including its official community plan (OCP), climate leadership plan, housing strategy, equity framework, and systems master plans. The draft plan is the result of a lengthy planning process that will culminate in a final report due in April.

The city draws on several revenue sources including property taxes (59%), utility fees, construction permit fees, and property leases to operate its roughly 200 services which include recreation, road maintenance, the provision of clean water, land-use planning, solid waste collection, arts and culture programs, parks and playground maintenance, and public safety. Most of these services are delivered by city staff and so the largest percentage (53%) of its operating costs relate directly to staff salaries and benefits.

Its capital budget covers programs, projects, and infrastructure related to the operation and maintenance of public works.

Avoiding new programs and pausing new initiatives to reduce tax increase

As a means to balance the budget, a motion was forwarded directing staff to explore reducing the city’s portion of 2025 and 2026 tax increases by focusing on ongoing programs, avoiding new ones, avoiding impacting existing assets, and pausing new initiatives to reduce tax increases. The precise amount of the tax increase cap was brought to the floor for discussion. Coun. Jeremy Caradonna had some concerns about the possibility of negatively impacting staff with service cuts. He suggested the options be reduced to between 5.5% and 7%. Initially, the options for the minimum hike caps were for 4% through to 7%.

“I think that there's definitely some belt-tightening that needs to happen, but it doesn't come even close enough to making the reductions to get down to these percentages,” he told the council.

“So, that means we're almost certainly looking at reductions in service, and when you're talking about major reductions in service, there can be corresponding and correlating impacts on staff,” Caradonna said.

Speaking to the council, Mayor Marianne Alto said the upper limit of 7% was untenable, although she entertained Coun. Susan Kim’s suggestion they go as high as 8% and 9%.

“There is no doubt that wherever we end up, it’s going to be a challenge. I appreciate staff's willingness to be able to look at a broad range of options from a very low point to a moderate point, which is what I think even 7% would be would allow us to see the breadth of that and be able to make some hard decisions that are before us about what's possible in 2025 and certainly in 2026,” Alto said.

‍ Taxes slated to increase by 6.75% in 2026

Susanne Thompson, the city’s director of finance, reminded councilors that taxes are currently sitting at a scheduled increase of 6.75% in 2026. Thompson suggested a higher cap would allow the city to fast-track its work on assets. Overall, Thompson said she felt it was too soon to determine what the precise impacts of each of the suggested tax increase amounts would be—and that staff be allowed to explore each of those further.

Next year, for households with a property value of $1 million, $124 of property tax revenues will go to capital investment, $154 to operational service delivery, and $98 to VicPD.

The costs of aging infrastructure

Victoria owns $3.6 billion in infrastructure assets that include structures (Johnson Street and other bridges, retaining walls), facilities (admin and operations facilities, community and senior centres, and events facilities), parks and sports courts, roads, sidewalks, signals, storm and wastewater facilities and water works, city, fire, and the police fleet.

One of the biggest challenges the city faces is how to manage, upgrade, and rehabilitate its aging infrastructure. Victoria, like other cities in the region, is scrambling to deal with aging infrastructure and the “appliance effect”, where washers, dryers, and dishwashers, all bought at the same time for a new house begin to deteriorate at the same time.

Its aging assets pose a growing and costly challenge that will require proactive strategic planning and short- and long-term investments by the council. Some of these are deteriorating to the point of needing major maintenance and upgrading investments to sustain the service levels currently being received by residents. Because of its admitted gaps in comprehensive data collection and monitoring, the city admits it has a lot of “unknowns” when it comes to condition and risk and so decision-making around budgeting and prioritization for infrastructure has not been adequately assessed. According to the summary, 66% of asset value remains unassessed for condition-based risk.

Most concerning is the state of its stormwater mains and wastewater mains whose average age is 106 years. Next worrisome are vehicular bridges whose average age is 79 years, followed by recreation facilities and municipal parkades (59 years).  According to the city’s 2024 Corporate Asset Management Summary, these have already well exceeded their design life span.

The summary rates the condition of Victoria’s stormwater pump stations, fibre optic systems, traffic signal systems, and stormwater mains infrastructure as “very poor,” reflecting advanced deterioration, failures, and inadequate performance. Residential and bulk water meters measure rate is overwhelmingly “poor” in their condition—meaning that while they may be meeting current service delivery requirements, they show signs of advanced deterioration and may, in the short term, fail.

According to the review, the projected cost of stormwater and wastewater replacement combined comes in at just under $1.4 billion.

$700M to repair, restore, replace infrastructure

The report estimates that the cost to repair, restore, and replace assets listed as being in poor to very poor conditions is roughly $700 million—the bulk of which is dedicated to wastewater infrastructure. Of that, $310 million is designated in the summary as either “high” or “extreme risk.” Owing to a lack of consistent data collection and monitoring, the summary puts unknown risk replacement costs at roughly $2.3 billion.

Because of lagging infrastructure, service delivery performance in Victoria structures, facilities, and transportation are suffering—measuring consistently, according to the summary, around 67% of optimal capacity in these three areas. The summary blames inflationary pressures on municipal budgets and the increasing frequency of extreme weather events as the core sources of strain on its capacity to manage infrastructure and the increasing demand for climate change resilience.

To draw a boundary on overspending, the city has implemented a financial sustainability policy debt limit of $12.7 million. A revitalization of the aging Crystal Pool would push the city well beyond that to $28 million. It is unclear, from the summary, given this new debt limit policy and the exorbitant cost of the replacement, whether the pool will be replaced, although the city has moved forward with a plan and an upcoming referendum on borrowing up to $168.9M to build it. That decision may depend on whether the city receives the $25 million provincial Inclusive Community Buildingsgrant the council voted to apply for in September.

The city will receive the remainder of its portion of the $1.6 billion of the Canada Community Building Fund, administered by the Union of BC Municipalities. Since that program’s inception in 2005, Victoria has received $57 million.