Target practice

Last night, for the second night in a row, I found myself in the public gallery at City Hall. This time it was to observe Committee of the Whole deal with initial budget targets.

When I was on council, these were dealt with by Board of Control and then on to Council. Under the new arrangements, this discussion goes to the whole council, meeting as a committee of the whole. A bit more relaxed than Council; no suits or ties. In fact, many of the staff and councillors were wearing jeans in honour of National Denim Day as part of the Breast Cancer Awareness campaign.

The afternoon started off quite formally with a powerpoint presentation on the global economic context by Aaron Gampel, Vice President and Deputy Chief Economist for Scotiabank. He painted a somewhat sobering picture of what had happened in the last few years and what the economic outlook for the next little while was likely to be. His was a message of muted optimism, given the slow recovery in the US, the shift in growth to what we used to consider developing economies and the recent devastation in Japan.

On the Ontario front, he noted that we had been hard hit by the loss of manufacturing and the recovery would be slow given the increases in energy prices and the higher levels of inflation we are currently experiencing. Home renovations are likely to slow and consumers are reluctant to take on big ticket items. Governments have incurred significant debt and will not likely be injecting any cash infusions.

When asked about the Southwest area in particular, he pointed out that we are not resource rich, that the north is likely to outstrip us, although we may benefit from the fact that Torontohas a high cost of doing business and there may be some out migration. We should focus on retaining our existing businesses (“they have their ears to the ground”) and our strengths in education and health care. Despite efforts by some councillors to encourage him to denounce tax increases, he pointed out that they may at times be inevitable, if not desirable. You have to maintain your infrastructure.

“Balance your books,” he advised. “Run solid balance sheets. Let the world know about your strengths.”

He noted that in Ontario we have limited means for raising revenue. Tax increases are sometimes necessary although one should focus on realigning services wherever possible.

Ward 9 Councillor Dale Henderson had an idea: why don’t we limit gas prices to 75 cents a litre? That would make us competitive in the global markets, he suggested. It was unclear how he proposed this should be done but it was his perception that “We are being raped on Free Trade.”

His suggestions were followed by observations by Councillor Sandy White that we are too dependent on government subsidies. She was advised to take advantage of them if they were available. Then Councillor Harold Usher wondered if we were taking sufficient advantage of private enterprise in our health care system. 

The speaker noted that opportunities for privatization are controlled by intergovernmental negotiations which would be taking place when the Canada Health Act was being redrawn with the provinces. He also noted that with an aging population, health care services would be a growth industry.

I must confess I was a little taken aback by some of these suggestions. In the past, we have been interested in having other levels of government do more funding of some of these basics rather than less. It’s hard to maintain a reasonable property tax rate when higher levels of government download programs to the municipality.

Then came the actual presentation of the budget targets being proposed by staff. Basically, it amounted to a 2.4% increase in the tax levy before the application of assessment growth. If growth came in at the anticipated rate of 1% and all of it was applied to keeping down taxes, the overall tax increase would be 1.4%.

With inflation running at 3.6%, how could this be achieved? And what about the tax freeze so broadly touted by the mayor and many on council?

What staff was proposing was a freeze (the third in as many years) for most civic departments: culture, parks and recreation, environmental programs, planning, etc. as well as transportation services including London Transit.

For the protective services such as ambulance, fire and police, an increase of 4.5% was projected. This is nearly 2 per cent less than what those areas themselves are projecting so it is unclear how that would be achieved.

For health and social services, a cut of 4.7% was projected, primarily as a consequence of lower than anticipated caseloads for Ontario Works and continued uploading of the costs to the provincial government.

The main discussion focussed on the disparity in the treatment of civic departments (over which council has control) and the agencies, boards and commissions which set their own budgets through their respective boards. Councillor Joe Swan suggested that they be told to simply find a way to maintain the current service levels within their existing budgets. If they want to give raises to police, they need to find a way to pay for it, not come running to the taxpayer.

A prolonged debate also focussed on the appropriate use of assessment growth. Councillor Paul Hubert wanted to know if using assessment growth to lower taxes would short change the level of service available. After all, if there are more homes and businesses to service, won’t that cost something? Staff acknowledged that in the long run some services could be eroded by applying assessment growth entirely to tax relief.

Then there was the Economic Development Levy pegged at 0.5% to invest in projects and programs that would result in growth, possibly at a rate of 2.5%. Councillor Steve Orser suggested that perhaps this could be doubled so that the growth rate would be 5%. Unfortunately, that is not likely to occur anywhere except on paper. And certainly not within the fiscal year!

Councillor White wondered whether there weren’t assets that could be sold off to generate more revenue. She was advised that staff were looking into the possibility of renegotiating the London Hydro dividend, which could be an ongoing source of revenue. Selling off assets is a short-lived benefit.

When Councillor Joni Baechler expressed her concerns about the effect that prolonged adherence to a tax freeze could have on the liveability of the city, a clap of thunder punctuated her remarks. All sides wanted to claim that as a sign of support for their respective positions.

Councillor Henderson had another idea. Recently, the province gave our local industries and businesses an education tax reduction. What if the city put a special levy on industry and business to take back the money that the province had returned to them? He was advised that to do so would be illegal.

And so it went. Many wanted a tax freeze. After all, wasn’t that what they had run on during the election?

But others were more concerned about protecting and enhancing services and the long term effects of protracted tax freezes. It looked like a stalemate.

How would they get out of it?

That’s a story for another day.