Waterloo Region: Debt and Cost of Growth

How Do Long Term Liabilities Work

The Region manages its long-term debt through a sinking fund, essentially a savings pool used to repay bonds upon maturity. On average, this fund represents less than 10% of total liabilities - meaning 90% remains exposed to future revenues.

Historically, the Region issued much of its debt on behalf of local municipalities and school boards, carrying contingent liabilities for repayment. In 2009, these made up half of the Region’s total long-term debt; today, they account for about 18%. The Region now bears more of its own borrowing risk directly

How the Region Plans to Repay Its Debts

As of 2024, approximately $700 million of long-term debt is scheduled for repayment over 25 years:

• 52% funded from property taxes and general municipal revenues

• 38% from Development Charges

• 10% from wastewater rate revenue

This repayment plan depends significantly on steady growth in Development Charge collections, but that framework is subject to change and provides instability for long term planning. 

Development charges are one-time fees levied on new developments to help pay for the infrastructure those developments require. The Development Charges Act, enacted in 1989, has undergone several overhauls in the past decade that have reshaped how, when, and what municipalities can collect. Key reforms in 2015, 2019, 2022, 2024, and 2025 have alternated between tightening and loosening eligibility, changing when payments are due, and expanding or restricting exemptions for specific housing types.

These shifts have repeatedly changed both when and how much municipalities collect in Development Charges. For Waterloo, this means unpredictable cash flow precisely when it needs predictability to service its debt. The Region itself has warned that an “unstable development charge regime … weakens our ability to adequately invest in infrastructure.”

Sustainability and Intergenerational Equity

Relative to peer regions, Waterloo’s long-term debt remains high on a per capita basis, second only to York Region. Its reserves and reserve funds, meanwhile, are low relative to both infrastructure value and outstanding debt. New asset retirement obligations (for landfills, asbestos removal, and water network decommissioning) have also begun appearing on the balance sheet in recent years, adding to the long-term fiscal load.

Additionally, the Region’s heavy reliance on development charges to fund long-term debt echoes a deeper structural concern often called the “Growth Ponzi Scheme” - a term popularized by the Strong Towns movement. In this model, municipalities fund today’s infrastructure with fees from new development, assuming that growth will continue indefinitely. Each new subdivision brings temporary fiscal relief through upfront fees, but also introduces decades of future maintenance costs for roads, sewers, and services.

When development slows or when provincial policy erodes Development Charge collections, the model collapses under its own weight. Municipalities are left servicing debt and maintaining sprawling infrastructure without the new revenues they expected. Waterloo Region’s repayment plan, with nearly 40% of its long-term obligations dependent on DC revenue, places it squarely in this risk zone.

This dynamic raises a difficult question: are we truly paying for growth, or just deferring its costs to the next generation? That combination of mounting liabilities and uncertain revenues limits flexibility and creates what financial planners call an intergenerational equity problem: future taxpayers will pay for today’s infrastructure, often without equivalent benefit.

Has Revenue Kept Pace?

From 2011 to 2020, total long-term liabilities increased by 135%, while total revenues rose 110%. In short, borrowing has grown faster than income. The surge in capital spending during the early 2010s (especially the ION LRT) pushed debt upward faster than the Region’s revenue base could expand.

Meanwhile, operating expenses have accelerated as well:

• Police services: +53%

• Transportation & transit: +81%

• Environmental services: +49%

• Health services: +55%

• Social & family services: +31%

• Social housing: +52%

• Planning & development: +200%

Population grew just 25% over the same period, meaning service costs have far outpaced demographic growth.

Closing Thoughts

The Region of Waterloo’s debt-financed growth strategy has delivered tangible assets: new transit lines, wastewater plants, and urban infrastructure that supports a growing population. Yet, the numbers tell a cautionary story: liabilities rising faster than assets, reserves shrinking relative to obligations, and key revenue sources (such as Development Charges) under legislative flux.

Without stronger intergovernmental transfers or new, stable revenue tools, the Region risks trading today’s prosperity for tomorrow’s constraints. The next part of this series will explore transfer payments in more detail.

Financial data sourced from Region of Waterloo Annual Financial Reports (2009–2024) and related council documents