Tuesday, April 19, 2005

Windfalls blowing through my mind

From the London Free Press: A day after councillor Ab Chahbar tried to reopen the question of whether the latest transfer of tax money from the provincial to the municipal level, cheerfully called a "windfall," could be spent on minimizing the latest 5.3% increase in property taxes, council passed by one vote the board of control's recommendation to spend the $13.1 million from the Ontario Municipal Partnership Fund on debt reduction. Funny how votes could be had by merely stumping for the return of money to the hands of those people to whom it rightfully belongs in the first place. How did we get to this state? Would Londoners be clamouring for a reduction in the property tax hike if council had budgeted responsibly in the first place?

Whether we like it or not, we have a municipal debt that at the end of 2004 stood $335.4 million — roughly $1000 for every man, woman and child, the servicing of which costs taxpayers millions of dollars a year just in interest. Where there is debt there is a contractual responsibility to pay off or at least acknowledge the debt and make interest payments. While I do not feel personally responsible for the debt load of Londoners, it is there like it or not, and the contractual responsibility must rest with the only people who can assume responsibility, the voters of London — who unfortunately blithely and repeatedly ignore their own indentures at election time.

I have no problems with the idea of individual debt — as a student, I have plenty. Debt is a contractual obligation self-assumed in the expectation of future economic gain or personal satisfaction. But the city does not have the moral authority to place my future economic security in lien without my consent. Municipal debt is a contractual obligation imposed on individuals in the name of future economic gains, but its inevitable purpose is underhanded income redistribution — in the form of social programs or, yes, even monumental official-ego-aggrandizing capital projects — and away from individual savings that go towards the capital formation and business investment that make it possible to meet our debt-financing obligations, making more tax increases necessary. Most objectionably, government debt, along with taxes, has the effect of developing constituencies of bureaucrats whose paychecks depend on debt and taxes as well as the taxpayers who are on the receiving end of income redistribution. You will never hear from city staff a peep about planning to retire all debt — it is assumed, and received as truth by the public that considers only its own benefits but not its costs, that public debt is simply a fact of nature.

So I think that council did the right thing by applying the whole amount of the "windfall" to the city's debt — but with the reservation that it has been unreported in any Free Press article on the subject whether the $13.1 million debt reduction is applied against the most recent budget's finances or this year's. The city currently has an annual $30 million debt cap in place, which means that $30 million in additional debt may be incurred each budget year above and beyond any debt retired during that year. For example, last year the city incurred $69 million in new debt after retiring $29.8 million — thereby incurring $30 million in new debt — hardly an accomplishment. If the $13.1 million is applied against this year's finances, the city can borrow an additional $13.1 million without negatively affecting their spending room under the debt cap. Could this be clarified in future Free Press articles?

I an unconvinced about the statistical significance of the Free Press's sampling of readers, but it was interesting to note that of the fifteen Londoners cited in this story, all favoured either a reduction in the property tax hike or payment of debt. No reader mentioned increased spending on capital projects or social programs — this should serve as a caution to council of the priorities of ordinary Londoners.

Councillor Paul Van Meerbergen commissioned Nordex to take a poll last fall in his ward 7, asking the question:

Some city council politicians brush off demands for tax savings by saying the electorate always wants to keep taxes low and at the same time the electorate wants more municipal services. How do you come down on this choice? Would you prefer to have lower property taxes and fewer services, or more services and higher taxes?
  • lower taxes & fewer services 52%
  • more services & higher taxes 23
  • can’t decide on choice 20
  • don’t know/don’t care 5
Put me down for lower debts and fewer services — I'll delay my gratification and wait for lower taxes in the future. But I understand the sentiments of those who want money in their pockets now — after all, it is theirs.

Needless to say, however, councillor Susan Eagle who unfathomably represents ward 7 as well has a particular constituency to which to pander, and it's not the taxpayers.
"I'd like to hear back from staff (as) to where they already see some significant impacts of cutbacks or where there are things we need to do now," she said. Eagle pointed to bus passes for the working poor and re-visiting social service cuts where investment would make a difference.
Whether Eagle enjoys or simply dismisses the spectacle of Londoners pleading for their own money is a matter of debate…

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