Budget 2013: Aiming for increase near 3%

Meetings Feb. 26, 28, 9:30am City Hall

Your taxes could go up as much as 6.5% this year, depending on which proposals by members of council are approved. Budget discussions take place Feb. 26. & 28, with March 5 & 7 if needed, for a final vote at council March 18.

My goal is to get us near 3% and no more than 4% – a challenge given the array of new requests.

Other than hospital, infrastructure and roads funding (which can be accommodated under 4%), most of the requests were not predictable in previous years.

A significant driver of increases this year are the requests from the city’s boards and committees, including the Burlington Public Library, Burlington Performing Arts Centre, Burlington Art Centre and Burlington Economic Development Corporation. Boards already get a 2% across the board increase but there are significant requests over and above that.

Several big-ticket items relate to new a new library and community centre being opened in the Alton community. As I’ve written about in the past, when new homes are built tax assessment alone does not cover the full costs of services required by these new residents. That’s why we need to continue to aggressively focus on expanding our Industrial-Commercial-Institutional tax base (as I wrote about recently here. Burlington’s growth has come primarily from the residential sector, which drives up taxes even though these are partially offset by new tax revenue.

Additional big ticket items include investment in transit and economic development, both of which I support (with some suggested modifications).

I’ll be keeping three principles in mind heading into budget week:

1. Economic environment

Our city budget must take into account the current economic environment and the ability of residents to pay.

The provincial, national and global economy is still in a slump, with inflation last year around 1.85%.

According to the January 23 report from the Bank of Canada, the slowdown in the second half of 2012 was more pronounced than the Bank had anticipated, due to weaker business investment and exports. High household debt levels have begun to restrain household spending. The Bank of Canada projects growth in 2013 to be 2%, and 2.7% in 2014. The total Consumer Price Index inflation is expected to remain around 1% in the near term. As a result, the Bank maintained its interest rate at 1%.

To provide an analogy, if the city budget is your household budget, when your income isn’t growing (or worse lose your job) you make spending decisions accordingly. Further, Burlington has a significant number of seniors living on fixed incomes who haven’t had a “pay increase” in years. Any tax increase for them can be significant.

Property taxes don’t take into account your ability to pay – you lose your job you don’t pay income tax, but you still pay property tax at the same rate. So the city must take ability to pay into account in our budget decisions.

Ability to pay is becoming more constrained, looking at the tough (and worsening) job market out there for residents.

Barely half of working adults in the GTA have full-time jobs with benefits and expect to be working for their current employer a year from now, according to a reportreleased last weekend by McMaster University and United Way Toronto. The other half are working either full- or part-time with no benefits or no job security, or in temporary, contract or casual positions. This “precarious” or insecure work in the region has increased by 50 per cent in the past 20 years, notes the report.

Many communities already support the notion of “ability to pay” as a criteria for budget decisions in essential service union negotiations. These unions, primarily fire and police, go to arbitration as members are not allowed to strike. In the past, contract arbitration awards focused on ensuring contracts were the same across communities, rather than considering the ability of each town to pay. The Association of Municipalities of Ontario (of which Burlington is a member) has pushed for contract awards to take into account local fiscal conditions.

One of the goals of our budget process this year was base budget increases tied to inflation. It was pegged to the 3yr rolling CPI (Toronto) average, which sat at 2.64%. We need to revisit that in light of Bank of Canada projections and actual growth.

2. Priorities over nice-to-haves

Our city budget must focus on priorities over nice-to-haves.

Priorities for residents include the hospital and infrastructure, including roads, community buildings and transit. These priorities were reaffirmed during public budget consultations at a city-wide meeting and an online survey (report here. In summary 69% support increasing the levy for Joseph Brant Memorial Hospital, to reduce reliance on debt to pay for the city’s share of the redevelopment; 63% support staffing and operating costs for the Alton Community Centre; 60% support staffing and costs for the the Alton Library; and 63% support expanded transit service.

I will be supporting these items during budget discussions.

In addition, the budget includes an increase in infrastructure funding, representing 1.25% of the total tax increase, which I also support.

Regarding the overall tax increase, 54% said they could support 4% tax increase, however 34% also said they would be “very unsatisfied” or “somewhat unsatisfied” (13.5%) with a 4% tax increase.

For a line by line discussion of proposed items in the budget, please see my earlier article on the budget here.

3. Improved budget principles

Our city budget planning process must encourage savings in the base budget and better detail in the business cases.

Last summer, council approved a budget process of base budget increases in line with inflation (“base budget” being services the city already provides), and business cases for items over and above that, for increases or decreases in services.

I supported that process, but seeing it in action this year believe we need to make some changes (and granted there have been some hiccups simply because we’re getting used to this new process).

First, automatic increases to the base budget do not encourage finding efficiencies, or reflect current economic realities. Many organizations have frozen (or reduced) their budgets.

To the city’s credit, staff did find $1.4 million in base budget reductions, however most of these were funded by increased revenues from a variety of sources including transit, planning and building, rental and programming revenue, and engineering rates and fees. Further, the city received additional income from new tax payers and increased tax assessment from property values going up, amounting to .87% of the tax impact.

Halton Region prepares a total all-in budget (with increases and decreases in service) in line with inflation, and then reduces the in-year tax impact with revenues from tax assessment and growth. Though there are some challenges to the Region budget that I’ve outlined publicly before, this is a budget planning a model we can consider for Burlington.

Second, some new services (though nominal in size) were included in the base budget – for example, provision to the Burlington Teen Tour Band annual trip.

This is not the intent of the base budget model which is to address inflationary increases for current activities. The primary inflationary drivers in the base budget are human resources compensation (salary, benefits and pension accounted for 2.17% of the total increase), commodity price increases of 4% (a .26% increase in taxes), general inflationary pressure (a .24% of the tax increase), and increased insurance premiums (a .16% increase in taxes).

Further, fee increases and other new revenue streams should be counted separately from the base budget, as we do at the Region, as offsets to the entire tax impact.

Finally, in many instances, the business cases did not provide either enough data, or the right kind of data, to evaluate their merits. “Outcomes” listed were often outcomes for the organization, as opposed expected benefits for the community being served. Further, the brevity of the reports required much additional research on the part of council, staff and organizations alike and must be improved for next year.

In conclusion

Many (though certainly not all) requests for funding in this year’s budget have merit. They would be supportable in an improved economic climate, or if we were not contemplating a potential 6.5% tax increase. However, given the economic climate and the potential increase for necessary items, our budget must reflect priorities and need to haves. I’ll be voting on that basis.

City budgets are like home budgets: if your kitchen is 20 years old and in poor shape, you may want to replace it for return on investment, enjoyment and improved resale value – all good and worthy reasons. But if the roof is leaky and the furnace is beyond useful life, those take precedence, and you find ways to make do with the old kitchen. In some respects, we’ll need to ask our staff, boards, and ourselves to “make do” for now, while we take care of priority needs.

Your Take: What’s your preferred tax increase (if any) for this year, and what items would you fund (or cut?). Post a comment below‎ or email me at .