Burlington’s 2014 budget proposed at 4.1%; additional cuts could reduce that to 3.5%

In the next two weeks, council will decide the 2014 budget at several specially scheduled meetings of the Corporate & Community Services Committee, Feb. 11 (capital budget), Feb. 13 (public delegations), and Feb. 20 (discussion and final vote).

The starting point for discussions is a staff proposed increase of 4.1%, down slightly from staff’s original proposal in December of 4.7%. At the request of council, staff have also provided options (not all of them recommended) to achieve a 3.7% increase. If approved, and once combined with Regional and Education taxes which comprise 60% of your tax bill (both at zero increase), the total tax increase would be 1.68%, or $15.08 per $100,000 of assessment.

You can view the budget books, staff reports, and presentations here.

Spending increase of $6 million

The total increase in spending is about $6 million, net of revenues from fees and other sources.

Council is encouraged to focus our discussions on about 17 items defined as service enhancements, detailed in a series of forms called “business cases.” But these items only account for about half the total increase in spending. There are $3 million worth of items that staff included in increases, some of which could also reasonably be considered service enhancements or changes.

We need to review all items related to spending increases (or decreases).

Review of budget process

The approach of focusing budget discussions only on 17 pre-selected items was also criticized by residents at the public budget meeting, and by members of the Ward 2 Citizens Advisory Committee when we discussed the budget. Residents want to know all of the items driving the spending increase as well as the starting point – i.e. what’s in the “base” budget, and could savings be found there.

Our current budget books, as comprehensive as they are at 250 pages, roll up costs into categories (eg. “purchased services”) without additional detail, and spread them across departments, which makes it difficult to determine why some line items are increasing or decreasing, especially when activities and costs are transferred between departments. A decrease on one page, may lead to an increase somewhere else.

This necessitates extra digging and questions to understand the large and small causes for increases, and where opportunities for savings were found, and may yet exist.

Until we change our budget review process and provide greater detail on line items, it will be difficult to find additional savings in the base budget.

At least once per council term we need to go through a “zero-base budgetting” exercise, where the entire budget is reviewed from the ground up, line by line, looking for savings.

Big ticket items, and suggested cuts

I focused my review of the budget on all the items contributing to the increase, and also looked for savings, finding about $1million in savings, offset by just over $129k in new items. Based on a detailed review, below are the main drivers of the increase for 2014, as well as suggested cuts.

Hospital, infrastructure, economic development, residential growth

Over half of the $6m increase ($3.5m) comes from proposed new activities and services. Included in that figure is

• $1.2m additional levy for the hospital;
• increase in the dedicated infrastructure levy ($643k)
• extra funding for the Burlington Economic Development Corporation ($275k)
• increases related to the Haber Recreation Centre ($375k) and the new Alton library ($295)
• a heritage planner ($107k), heritage tax rebate program ($103) and manager of cultural services ($136k);
• and the Ontario1Call program of locates downloaded from the province ($111), as well as a series of smaller items.
• Increased charges and salaries, lower revenues

The rest of the $2.5m increase comes from:

• increases in salaries (capped at 1% for non union employees) and benefits ($219k);
• significant increases in corporate expenses of $826k (including increased insurance premiums, tax writeoffs, debt, service charges and other fee increases);
• across the board increase to boards and committees of 1.5% ($193k); includes the library, museums, art centre, performing art centre, tourism, and BEDC;
• increases in the fire department of $296k (largely due to wage increases of $600k offset by savings and staffing changes);
• increases to planning and building costs of $236k largely due to a new landscape technician position and decreased revenue from residential subdivisions due to greenfield buildout;
• increases to the transit bus cleaning contract ($100k);
• increases in legal costs of $100k, largely due to reduced volume of tickets/fines from Halton Court Services; and other items.

Savings

A number of departments (notably fire, transit, information technology, parks & recreation, roads and parks maintenance, and transportation services, among others) have also reduced expenses and tried to find savings, and where they underspent their 2013 budgets have reduced their 2014 budget request to reflect actual spending for 2013. These strategies are commended.

That said, I’ve found $1,058,000 in proposed savings, offset by $120k in additional spending, which I will be presenting to the C&CS committee for consideration. These changes would bring the total tax increase to roughly 3.5%.

My proposed changes are detailed below.

Supported Items

Economic development, infrastructure, hospital

Our focus for extra spending must be on economic development, infrastructure levy and the hospital levy. These three items together account for $2.1m in additional spending in 2014.

NOTE: Regarding BEDC, the most effective step we can take to accelerate a focus on business attraction is to get BEDC out of the networking lunch/event business altogether. Though they generate revenue, these events take a great deal of staff time away from business attraction. The additional investment in BEDC to make up for lost event revenue (net of expenses) is $61k.

Further, BEDC is still in transition and council won’t receive a report until April outlining their new structure and plans. And they haven’t yet reported back to council on how they used the close to $300k increase in last year’s budget. We can’t let our interest in economic development keep us from asking tough questions and requesting solid data on results – namely leads generated and jobs created. No one gets a blank cheque without scrutiny. Until council has a full account of results from our first investment, and what our return on the second investment will be, funds should not be built into the base but offered as one-time only.

Costs from residential growth

We also must fund items related to population growth, namely the new library and community centre in Alton, additional crossing guards, and transit service to this area. Together these costs equal $816k.

NOTE: Assessment growth from new taxpayers is only increasing by $745k, not enough to cover the services above, much less road and sidewalk clearing, roads and parks maintenance, and other services required by this new community. For every $1 the city receives in residential property taxes, it costs $1.40 to service that community, and the cost of these growth items tell part of that story. A slowdown in residential growth will help our bottom line, as will a focus in increasing industrial/commercial/institutional tax assessment, which costs less to service than the tax revenue we receive, netting the city a profit.

Unavoidable costs

The province has downloaded Ontario1Call locates of $100k. We are also required to increase of Ontario Municipal Employees Retirement contribution (budgeted at $600k), insurance has gone up by $300k, and there are increased costs from vacancy rebates. These items are unavoidable and amount to $1.1m.

Neighbourhood enhancement

Several items enhance our neighbourhoods, including the heritage planner, tax rebate for heritage homes, community gardens program, increased Sound of Music investment (due to increased city/region costs), keeping the John St terminal open, and converting the contracted museums special events assistant to full time. The last three items are not currently in the staff proposed budget. Together these items are worth about $343k. Regarding the John St. terminal, the rationale for closing it was that the transit staff washrooms and lunchroom are moving to the newly renovated space at the Burlington GO station. However, residents also use the washrooms, and the building is a warming or cooling area while waiting for a bus. Keeping this open is a direct benefit to residents.

I also support a review of the Community Development Fund, a $5,000 fund the city uses for one-time expenditures for groups (for example, to help them incorporate). This fund could be enhanced, with appropriate city-wide criteria, to assist with community programs like the one in north Burlington run by Community Development Halton, instead of simply continuing this grant to only one organization.

Suggested Cuts:

1. Defer hiring of Manager of Cultural Services: I will propose that staff develop a Terms of Reference for council approval for a Cultural Citizens Advisory Committee, patterned after Heritage Burlington and/or Sustainable Development to provide co-leadership and connection with the community. Reduction of $128k in base, plus $8830 one time. I prefer cultural spending go straight to the front lines – instead of an administrative position, use funding for grants for local groups for performance and display space. I still hear from artists and performers that there are few cost-effective places to display art work, and the Burlington Performing Arts Centre is too expensive for many groups, even at the local, non-profit rate. Staff are working on a “granting” report for later this year, so we’ll have an opportunity to explore this idea further.

2. Remove “Revenue Shortfall” funding for the Burlington Performing Arts Centre. In the 2013 budget, council authorized $449k in one-time funding over two years to help the centre become more financially sustainable (which I did not support at the time). There were two contract staff positions in that amount. Also included was $225k in “revenue shortfall” funding to ensure a sustainable operational budget at 2013 year end, should the centre not meet revenue targets. The rationale for offering the funding at the time was that the centre was in its first full year of operations and still learning the business and building the audience.

The BPAC did not require the full amount – only $117,991 was used in 2013. But the Centre is proposing to keep the balance ($107k) and roll it into 2014 operations. This isn’t what the money was intended for, so I’ll be proposing this be returned.

The BPAC is projecting that for 2015 and beyond, the city contribution will need to be more than $800k (up from $650k in 2014), essentially making the bulk of these “one-time expenses” into permanent funding.

We have to be diligent about “one-time-item creep” that these items don’t become base budget items in the future just because they are already there and have momentum. But that’s what we’re seeing with the 2014-2017 projected budget.

Revenues (other than city funding) are lower than expected this year, but are projected to increase over the next few years.

The budget summary is as follows dating back to 2011. The two contract positions and the revenue shortfall are also funded by the city.

2011:
City contribution: $480,700

2012:
City contribution: $490,314
Development position parking levy, janitorial
& contracted serv. $134,500
Total city funded: $624,814

2013:
City contribution: $637,310
Two contract positions: $131700
Revenue shortfall: $225,250
TOTAL city funded: $994,260

Projected 2013 Actuals: $ 820,301

2014:
City Contribution: $650,056
Two contract positions: $131,700
Revenue shortfall: $107,259*
TOTAL city funded: $994,260

▪ carried over from unspent funds in 2013

2015 Budget:
Two contract positions: $ 66,700
City Contribution: $823,700
TOTAL city-funded: $890,400

2016 Budget:
City Contribution: $813,700

2017 Budget:
City Contribution: $807,800

3. Eliminate second leaf pickup S of the QEW – North of QEW already gets only one pickup (savings of $65k). Sometimes leaves haven’t fallen for the first pickup. Also, every year I get complaints about people putting out leaves too early. They blow around, make a mess on the street, make roads and sidewalks slippery, and sometimes get frozen. I support resident bagging some of their own leaves, and getting some pickup, similar to the north.

4. Phase in OMERS provision to base over three years. Instead of $600k this year, add $400k. Savings of $200k

5. Decrease a variety of departmental expenses to reflect 2013 actual expenditures: savings of $50k.

6. Remove free employee parking benefit ($217k) from base starting in 2015; fund 2014 contribution to reserve from surplus or tax rate stabilization. Remove free employee transit benefit ($16k) from base starting in 2015; fund 2014 contribution to transit from surplus or tax rate stabilization.

To promote alternative transportation and lead by example, I believe everyone should pay their own way for parking and transportation, as other employees in the downtown do.

Currently, the city (through taxes) pays into the parking reserve fund the equivalent of the parking benefit, based on number of permits in each lot at market value. The city, through taxes, also makes a contribution to the transit fund for the monthly market value of employee passes distributed.

Residents are subsidizing city staff parking and transit, at a time we are raising parking rates for others, cutting bus service in some areas and contemplating cutting free transit for CNIB, ARC and some students. We need to take care of our residents first, before we take care of ourselves with taxpayers dollars. To put it in perspective, the money spent on parking could fund the bulk of our contribution to the library, or economic development, and half the funding for the Haber recreation centre – direct front line services to residents.

Taxable benefit

The transit benefit is a taxable benefit for employees who receive it, however, the parking benefit is not.

This not only penalizes transit users – an activity we want to encourage – it puts the city – and taxpayers – at risk in my view. A decision in Kitchener in 2010 led to the municipality paying $1.4m in back taxes on behalf of employees for the employee parking benefit, and the municipality ultimately ended the paid employee parking program, saving taxpayers $300k annually.

You can read the article here.

In its decision regarding back taxes owed, Canada Revenue Agency said a parking space supplied by an employer is a taxable perk if the employee does not use their vehicle for work, and if parking has a market value in the same area. Both conditions would be true in Burlington for the majority of city employees.

At minimum, parking should be a taxable employee benefit, to protect taxpayers from picking up the bill for back taxes, as happened in Kitchener, and I will introduce a motion to that effect.

Summary of Proposed Decreases/Increases:

Decreases

▪ remove parking benefit $217,000
▪ remove transit benefit $ 16,000
▪ delay cultural planner $128,000
▪ remove second leaf pickup $ 65,000
▪ phasein OMERS increase $200,000
▪ reduce departmental expenses $ 50,000
▪ remove BEDC from base; 1-time $275,000
▪ remove 1-time BPAC revenue shortfall $107,000

Subtotal reductions: $1,058,000

Increases

▪ add Museums Assistant $36,000
▪ phase in Sound of Music increase $15,000
▪ Keep John St terminal open $8,000
▪ Phase out BEDC events $61,200

Subtotal additions: $120,200

Total Net Reductions: $937,800
Tax impact reduced to about 3.5% increase.

My Take: The items that have been highlighted through “business cases” as the focus for council’s decision-making, for the most part, are reasonable or even unavoidable. But there doesn’t seem to be consistency in the type of items that are pulled out specifically for council discussion, and which are simply included in the general increases. It does appear that the items offered for council discussion are the ones most difficult to say “no” to; namely items that would decrease direct services to residents. Until we commit to reviewing our entire budget and all the items contributing to increases, and putting the needs of our residents first, we won’t fully know where there are opportunities for savings or efficiencies.

Going forward, I will also be suggesting a review of the automatic increase to boards and committees (this year pegged at 1.5%). In my view, increases should be tied to actual spending and need, with detailed supporting documents. I will also recommend board and committee salary increases are aligned to city-wide increases (this year at 1%).

Your Take: Let me know your thoughts. What would you increase or decrease in this year’s budget? Leave a comment online, or email me at .