We need wriggle room to deal with 2020 budget pressures

Next week, on September 10, the Finance and Economic Development Committee (FEDCO) of Council is going to consider a document that will guide our budget-making process this fall. Called the “Budget Directions”, the document will give City staff their instructions on how to draft the 2020 budget.

This year’s budget direction will be trickier than in past, and it’s very important that residents understand the pressures that crafting this year’s budget imply. To take a look at the document itself, click below for a .pdf copy.

If passed, Council will set for itself a targeted tax increase of 3%. This is the overall tax increase (not including things like water rates), and it’s made up of several components. There is a city-wide component (where here I’ll include Library and Public Health), a transit component, and a police component to property taxes. Some unique circumstances this year means that those various pieces will see very different rates of increase.

In 2020, the proposal before Council is that the city-wide component will go up by just 2%, the transit component by 6.4%, and the police component by 3%.[1] Taken together, the entire tax increase will come out at 3%.

That overall 3% is the same as in the last budget, which represented an increase from the budgets we passed last term that were limited to 2%. The shift to 3% increases was approved in order to deliver on a promise to accelerate the repair of our infrastructure, particularly roads.

This year’s proposed direction has been crafted this way, with a very large increase in the transit tax offset by a much smaller increase in the citywide taxes, because of pressures created when the Province back-tracked on its promise to double the City’s share of provincial gas tax revenue. At the same time, there was a one-time increase in the City’s share of federal gas tax revenues. In a multi-part shift, federal gas tax revenues will now be used for promised infrastructure repair, and the missing money in transit will be raised through taxes. In order to keep overall taxes to 3%, non-transit taxes will only go up by 2%.

For the owner (in the city) of an average priced home ($404,000), this would mean they’ll pay $49 more in taxes for the citywide portion, $18 more for the police portion, and $42 more for the transit portion, for a total of $109 more and a total tax bill of $3,672. Double these amounts if you have an $808,0000 home.

Residents should be concerned. A 2% increase for non-transit purposes will leave the City in a tough spot to provide needed services. Year over year inflation in Ottawa in July was 2.08%, so even before the budget is crafted, the money available is less in real dollars than in the year previous (recognizing these are small amounts).

Adding to the pressure, Provincial cuts to public health, children’s services and long-term care could amount to as much as $13.8 million in money that has to be found elsewhere in the budget. There is supposed to be transition funding made available to cities to soften the public health blow, but no details of that have emerged from Queen’s Park.

To put that into context, a 1% increase in taxes in Ottawa adds around $16 million to our budget. The effect of these provincial cuts will divert around 43% of new tax dollars that we need to deal with inflation simply to replacing lost funding. New tax money from growth is expected to be just 1.5%, and in theory that will be swallowed up providing services to those new residents.

I realize these various numbers can be confusing, so can simply state in a nutshell that the effect of provincial cuts is to force the City to replace millions of dollars in lost funding in a budget that will already be stretched just to deal with inflation. Without some new source of revenue, the implication is that we’ll need to find cuts. So long as Council insists on a 2% citywide tax increase in order to maintain a total 3% tax increase, we’re going to find ourselves hard-pressed to deliver the services that residents expect.

I don’t sit on FEDCO but will be at the meeting and asking questions to confirm my understanding of the pressures we face. Today, I cannot fathom how we can support a budget direction capping the taxes available to fund city services other than transit and police at 2% when every indication is that this will result in real cuts or a much-diminished capacity to deal with real concerns such as traffic calming, parks improvements, taking care of our most vulnerable, improving our cycling network and more.

I believe the Mayor will want to follow through on his campaign promise to cap tax increases to 3% this term, and we have become accustomed to budgets passing nearly unchanged from their draft form. In the face of pressures originating from Queen’s Park, however, I believe it’s critical that we not handcuff ourselves to a 3% increase in this budget. At the very least, we need to be open to increasing the citywide portion by 3% to give ourselves a release valve.

Budget consultations will soon begin in earnest, and I look forward to hearing your feedback.