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Former mayor Susan Fennell, left, became embroiled in scandal, allowing Linda Jeffrey to win the 2014 election.

J.P. MOCZULSKI/The Globe and Mail

Brampton faces "financial storm clouds" on the horizon if it doesn't quickly address its infrastructure funding gap and ballooning operating costs, according to an auditor's report released Tuesday.

Former provincial auditor-general Jim McCarter, appointed by council last month to review the city's books, found Brampton's finances look good for the short term but its financial flexibility has been deteriorating over the past decade.

"When I first looked at the annual report, I got the impression that, wow, these guys are just in outstanding financial condition," Mr. McCarter said, as the city has "excellent liquidity" of $829-million – though most of that cash isn't available, because it is already committed to expenditures.

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"When you actually got into it … there's sort of a number of things which I think really need to be on council's radar."

He identified three main challenges facing the city:

  • The cost of maintaining and adding infrastructure is expected to rise as the city grows;
  • Operating expenses, two-thirds of which are staff salaries and benefits, are climbing at a rate faster than the city’s population and household growth;
  • Reserve funds are stagnant or declining even as the population grows.

Mayor Linda Jeffrey asked Mr. McCarter to review Brampton's finances in one of her first moves since her October election, as a fulfilment of her election promise to improve transparency and accountability at city hall.

The report comes as the Ontario Provincial Police continue investigating expenses filed by the previous council, based on a scathing external audit that found numerous breaches of spending rules. The scandal ultimately cost former mayor Susan Fennell her job as voters chose instead to elect Ms. Jeffrey.

"The report addresses what I believed to be anecdotally true," said Ms. Jeffrey, who has long been skeptical about the city's economic health. "It's tough medicine."

But she said Mr. McCarter's report also provides a few options on how to move forward.

Brampton, where the population and number of households grew by 39 and 31 per cent respectively in the past 10 years, could learn from targeted measures taken by other municipalities to funnel money specifically toward infrastructure funding.

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While Brampton has included a 1-per-cent infrastructure levy on tax increases each year, the revenue generated hasn't filled the funding gap. Brampton's infrastructure backlog in 2014 reached $120-million and the 10-year estimated requirement is more than $300-million, Mr. McCarter wrote.

He suggested "a slightly more aggressive but well-communicated property tax strategy may warrant consideration by council." He said residents should be prepared to pay for services they're currently receiving rather than burdening future generations with more than their fair share.

Ms. Jeffrey said, "If we don't take some pretty tough actions, we're not going to be in a position to compete with any other municipality in the GTA."

She pointed to other municipalities' use of borrowed money to pay for repairing infrastructure without adding pressure on property taxes.

"That's certainly something this council, I believe, is interested in finding out more about," she said.

Mr. McCarter's report also confirmed Ms. Jeffrey's doubts about Ms. Fennell and city staff's assertions that Brampton is debt-free. In fact, a $215-million mortgage over 25 years for City Hall's southwest quadrant revitalization technically counts as debt, Mr. McCarter wrote.

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