Three messengers with one message to council: make a five-year plan for budgeting and stick to it. The current budgeting by the seat of your pants just isn’t workable.
The three organizations—the Chamber of Commerce, the London Public Library and the London Transit Commission—may have different areas of interest but they do have this in common: whether representing business or public services, they have to be able to plan ahead and know what they have to work with.
The current council, with its obsession with a zero tax increase and its tendency to make policy on the fly, is making it impossible for private and public businesses to allocate resources in a measured and strategic way. As all three pointed out, this council has moved from a five year plan to a year over year approach to spending and the various agencies and departments don’t even know how much they have to spend until well into the new year, when one-sixth of the budget year has already passed. It makes it hard to look ahead and get the best bang for your buck.
This message was echoed by city treasurer Martin Hayward when he appeared before the Strategic Priorities and Policy Committee on Monday afternoon to present a report on the 2013 budget. After the fiasco of the 2012 budget hammered out a few months ago, when council managed to bring in a zero percent increase by raiding the reserves and using a number of forms of one time money, including the surplus, council members asked staff to bring back information providing three possible scenarios for 2013: a budget with a 3.8% increase over 2012, another at 2%, and finally one a 0% increase.
This Hayward and his staff had provided. The presentation noted that to maintain services at their current levels would take a 5.5% rate increase. After all, $8M had been carved out of the budget in 2010 and another $16M in 2012. To continue along that path would require chopping another $25M. Even at a 3.8% increase, $8.1M would have to be found in cuts or increased revenues, and at a 2% tax increase, another $8.3M on top of that. No matter which of the three scenarios was chosen, there would be cuts.
And it’s not as if you can order cuts across the board. For the last four years, the civic administration has been held at a zero per cent increase because the boards and commissions are often untouchable because of legislative requirements. You just can’t cut them. And even if you can, the council has often been reluctant to do so, particularly in the case of the Police Services Board. So, if you are to achieve an overall zero, some areas will actually have even deeper cuts in order to allow others to get more.
Hayward stressed the need for multi-year budgets. He had costed them out for the next five years.
“All boards and commissions agree that we need to develop multi-year target,” he advised, pointing out that doing so sets the expectations of community in line with economic realities. “I don’t recommend clipping and shaving,” he quipped. “You get a funny haircut that way.”
His presentation had been brief, but packed with information about the impact of the decisions they would have to make.
Bill Armstrong kicked off the question. He cut to the chase pretty quickly. How many layoffs would there be under each scenario? He had noted that 73 police officers jobs would be gone under the zero tax increase. But what about the civic administration and other boards and commissions? How many jobs would be lost there?
Hayward didn’t want to hazard a guess; he hadn’t done the budget. There would be some, you couldn’t couldn’t do it without some cuts. Certainly any decrease in service hours would affect casual employees. But he didn’t want to set panic throughout the organization.
Steve Orser didn’t like any of the scenarios. He wanted to see one which allowed for selling off city assets. That way they could pay off debt and save on the carrying charges. He had in mind the convention centre.
Hayward reminded him that once you take out a debenture, you are locked in. You can’t just pay it down. What you can do is avoid taking on new debt with money you have on hand. Unfortunately, during the last budget debates, the majority on council had insisted on using money that is normally used to avoid debt—the surplus and contributions to the reserves—to bring in a zero per cent tax increase. Besides, it takes time to sell assets and forestall debt, so it wouldn’t be much help for the 2013 budget.
Orser also thought that a potential windfall from the Western Fair Board in the form of the OLG revenues should be thrown into the mix. Hayward suggested that, until he had a firmer deal in hand from OLG, he wouldn't want to gamble the city budget on that.
Dale Henderson was excited and didn’t want to be depressed by what he was hearing. He had a number of solutions to the dilemma. There was a great opportunity since most of the managers were new to their jobs and could be told what to do. They should rent buses instead of buying them or sell stuff and rent it back. Assessments went up every year; that was money that could be pocketed; it didn’t require the city to raise the rates. They could contract out some services, they could hire more engineers instead of hiring consultants, there was money coming from the naming rights to the JLC. They wouldn’t have to make any service cuts and could build a ring road.
The ideas came fast and furious; I couldn’t keep up with them all. I do know, however, that changes in assessments are revenue neutral. While they may make some shifts in what an individual property owner pays, they have no impact on the revenue that goes to the city.
Denise Brown, too, thought that service cuts could be avoided. Why not introduce a green bin program but reduce the frequency of garbage pick up?
This in fact had been recommended to council years ago but it takes a financial outlay to get started and time to implement. This council doesn’t have either the time or money to put this in place for 2013.
The mayor had his own complaints. The council had done a great job, save the taxpayers hundreds of dollars. The problem was the funding arrangements. Getting only 8 cents of every tax dollar was not sustainable. The higher levels of government had to pony up. And nowhere in the projections did he see council’s plan to increase assessment growth to two or two and a half per cent. And what about private sector investments? And didn’t they have an $8M surplus last year? All of this should be factored into the revenue side of the equation.
Hayward reminded him that assessment growth, unless it comes from intensification and infill development, requires additional services. You can’t just decide to collect taxes from new subdivisions and not pick up their garbage or clear their streets. As for the surplus, it accounted for less than 1% of the total budget and was composed primarily of one time occurrences such as unexpected revenue or an unseasonably mild winter. You can’t count on it for subsequent years. As for privatizing, it still costs money whether you contract out or do stuff in house. And, in some areas, such as snow clearing, you still need a basic stock of plows and operators, although they may be supplemented by contracted services.
Joe Swan seemed to think the problem was that the boards and commissions were unreasonable and wouldn’t cooperate with the city to share resources and save money. Hayward reminded him that they are boards and commissions for a reason and have their own legislative requirements. From his perspective, the city had very good relationships with all the boards and commissions.
But Swan was dubious. He wondered why the boards and commissions didn’t have to justify their increases. Why they didn’t just accommodate to a zero increase within their existing budgets, in short to suck it up (my expression)?
Paul Hubert identified the real issue: were they going to identify a target tonight? He saw no point in staff wasting its time preparing more detail around budgets in which council had no interest.
Orser disagreed. He wanted to see a budget that took into account a potential sale of assets. Everything should be on the table.
Joni Baechler was fed up. Budgeting for this council was like a game of Snakes and Ladders, she felt. Every move forward was undermined by an even greater reversal. They had approved master plans and initiatives only to gut the very systems they had endorsed. She pointed out the letter from the Chamber of Commerce asking for long term planning. She had served on the Service Review Committee whose new job it was to prepare the budget for council since its inception. That committee had even won an award for the groundbreaking work it had done. The committee had brought forward recommendations only to have its work overturned by the “zeroes” [those who are determined to have a zero per cent tax increase] who failed to show up for the meetings or provide any input. She was done.
Judy Bryant and Nancy Branscombe agreed. They too had served on the committee; sometimes it was hard to get a quorum.
Branscombe had chaired it from the beginning but it was a disappointing exercise. In the end, all the work was undone by people raiding the reserves and hiding behind an in camera session. The idea that money would drop out of the sky was ridiculous, she exclaimed. As she spoke, Bud Polhill leaned behind Bill Armstrong to whisper to and giggle with Joe Swan.
Denise Brown noted that there was not a resolution on the floor. She put forward a motion to go for zero, and Orser promptly seconded it.
Bill Armstrong indicated that no way would he support the motion; hundreds of people would lose their jobs.
At this, Orser felt he was personally being attacked and demanded an apology, but Armstrong declined. The mayor intervened to say that “hundreds is only your opinion” and that “it has not been determined how many jobs will be lost.” But he didn’t deny that jobs would be lost, and this from someone who campaigned on creating 10,000 new jobs.
Swan put in his oar. He does fundraising for Orchestra London and the private sector has told him that they are cutting back by 20%. Giving a 3.8% increase to the city made no sense. If people couldn’t accept the decision of the council for a zero per cent increase, they shouldn’t be on the Service Review Committee. But he knew what the problem was: the council was composed of boosters and cutters. But the boosters were on the Service Review Committee and the Cutters on the Investment and Prosperity Committee, which he chairs. They were on the wrong committees. They should trade places.
And then, looking at Joni Baechler, he continued, “Perhaps I should have called you a snake, but I didn’t go there, I wanted to be more respectful.”
There were a few other speakers before Baechler could respond. When she did, she pointed out the context of her Snakes and Ladders analogy. She concluded by saying that she looked forward to the new composition of the Service Review Committee. I doubt, however, that she will replace it with Swan’s committee.
At this point, Orser, whom Swan would categorize as a cutter but is certainly an Orser-booster, suggested that if everyone were a full-time councillor like himself working so long and hard each and every day on behalf of his constituents, they could all spend more time together and have a more harmonious relationship. He even apologized to Armstrong whom he claimed to "love as a brother"; he just didn't want to be tarred with having supported cuts to jobs.
Fontana ignored his comments, but he didn’t miss the implications of Baechler’s challenge. A few people have worked long and hard at Service Review Committee, but they are not among Fontana’s eight. If they resign from the committee, the council will be hard pressed to find councillors who are willing to put in the time and effort. “Work to rule doesn’t sit well with me,” he said, suggesting that if people wouldn’t volunteer for some committees it might just be that council had to appoint them where they were needed against their will. Whether he was referring to the boosters or the cutters is hard to say.
In the end, all the debate, argument and name-calling was for naught. The biggest cutter of them all, Paul VanMeerbergen had failed to show up and so the council was deadlocked.
The matter now goes to council where a zero target is certain unless someone else fails to turn up.