Ottawa Business Journal
Published: Monday, December 17, 2007

If you think this year's budget was painful ...

With last week's passage of a 4.9-per-cent tax increase for the 2008 city budget, along with parking hikes (50 cents more per hour), transit hikes (30 per cent over three years) and a horde of user fee increases, the time has surely come bid farewell to our old friend: R.I.P., Zero means Zero. As for Zero's much younger cousin, officially known as "the 1,000 days of transformation," well, his future is also in some question.

In response to outside consultant Gordon J. Hunter's report on internal administrative efficiencies released in mid-November, city manager Kent Kirkpatrick (for whom this author has much respect) asserted that the report was "structured to support a pre-determined conclusion." At the risk of being glib, last week's city budget debate was equally an exercise which reached a pre-determined conclusion.

To be fair to the 23 councillors, unlike the mayor, none of them campaigned on Zero. However, most councillors did campaign to keep annual tax rates at or near the level of inflation, so property and business taxpayers should ask their respective councillors, what gives? Now, as for the ability of the long-range financial planning sub-committee to work with an external "challenger" to identify in-year administrative savings for 2008, as laudable as the exercise is, don't hold your breath.

Sadly, the larger issues of budget process, budget structure and the municipal fiscal imbalance remain not only unresolved but also largely unaddressed. Admittedly, the municipal fiscal imbalance is an issue of national intergovernmental importance on which council has spoken about - and even marched to Parliament Hill in a snowstorm - repeatedly, but the issues of budget process and structure are actually within council's sphere of control.

Yet again city hall was besieged by over 120 delegations - most of them representing recipients of city funds - pleading with council not to axe their programs or services. While some will argue that this is democracy in action, these groups represent (at most) two per cent of the city's annual $2.1 billion operating budget. Real savings will never be found by decimating the dribs and drabs of taxpayers' cash these organizations receive.

The infuriating part of this spectacle was the unanimity expressed by councillors during the transformation meetings at Pineview Golf Course last spring.

Their 2008 directive budget rhetoric was clear: Let's tackle the big line items of compensation and transit first; We must devote more time to the capital budget; We need to prioritize our needs once and for all. And on and on it went ... into the record of those meetings and never ever to resurface as an actual new process.

As for a sustainable budget structure and the so-called fiscal framework, at best, tepid steps were taken in this direction. The city's tax stabilization reserve fund is again dangerously low - sitting at one per cent of the operating budget instead of 2.5 per cent - with prayers aplenty that old man winter keeps the clouds closed as each new snowfall jams the city's fiscal position even tighter.

Furthermore, if it weren't for the city manager scolding council to tell them there was no more money for capital projects last Wednesday, a line item for Santa's salary would have needed to be added to the city payroll so he could plant mythical money trees as part of the Lansdowne Park design competition, but I digress.

Even more troubling is that the longer-term issues which loosely cluster around the concept of budget structure were never discussed in this year's deliberations. The best case scenario for the 2009 tax rate is six per cent and 2010 is marginally better at 5.1 per cent, before one even considers program enhancements. And the most incisive PowerPoint deck presented at city hall this year by treasurer Marian Simulik and revenue manager Ken Hughes didn't even factor into the budget discussions.

During the two-day corporate services committee meeting, which started on Nov. 19, Ms. Simulik and Mr. Hughes presented something known as the tax policy update, a high-level 34-page deck which chronicles property tax policy changes for residents and business owners. For example, our last assessment on the residential side was done in 2005 for the 2006 taxation year and the next one will be done next year for the 2009 assessment year.

However, this new assessment must be revenue neutral for city tax purposes and our ability to deliver services will be further hindered through a four-year assessment smoothing, as promised by the provincial government. The deck also notes that the cumulative provincial business education tax reduction will amount to $33 million by 2014, which will result in a further $8 million of pressure on the city budget.

Couple this failure to account for such near- and mid-term tax policy pressures with a non-existent long-term economic development strategy to attract more businesses to Ottawa to alleviate the 60-40 ratio of residential to non-residential tax split. It all adds up to big-time budget conundrums in 2009 and beyond.

Unfortunately, acknowledgment of this grim reality was missing from the official city news release on the 2008 budget last week, but somebody's gotta say it!

= = = = =

Walter Robinson is the former chief of staff to the Mayor Larry O'Brien and past federal director of the Canadian Taxpayers Federation. He is presently looking for his next former occupation.