Wednesday, January 10, 2007

Public input on London's 2007 draft budget

This is the text of a presentation delivered to London Board of Control, with some members of council attending, as part of the one-day public input meeting in the city's 2007 draft budget process on January 10.

The London Free Press reported in December that London’s Mayor and many members of council were very well pleased when city staff presented an $880 million draft budget for 2007 that proposes raising property taxes by 4.3 per cent and water and sewer charges by five and eleven per cent respectively… so pleased, in fact, were members of council that the Free Press reported that conversation immediately turned to whether council should be debating increases to next year’s budget instead of decreases. Her Worship the Mayor commended city staff for the budget, which was introduced by chief administrative officer Jeff Fielding in a letter suggesting that council focus on service growth in its deliberations. And indeed, we cannot help but note that every other presentation here today is a request for consideration of additional funding from the budget.

But contrary to the Mayor’s suggestion, there is nothing commendable about the draft budget. Much was said during the election about fiscal prudence on the part of the new council and promises to keep future tax increases at or below the rate of inflation. A budget that begins with a tax increase of 4.3 per cent is clearly not an example of fiscal prudence; it is a break of those promises, and hardly a cause for congratulations let alone for consideration of even more increases. Instead, the draft budget for 2007 is an example of the same kind of uncontrolled spending that has plagued city hall over the past six years.

We know that it will suit council, the London Free Press and many of the applicants here today to suggest that the final tax increase will be less than 4.3 per cent and perhaps less than three per cent once new assessment revenue and anticipated provincial grants are applied. This may sound better, but we cannot pretend that most of the growth in assessment revenue does not come out of the pockets of the same taxpayers who must also face hikes on top of the increased assessed value of their properties. Nor should we pretend that provincial or federal grants don’t also eventually come out of the same pockets. No matter how you shake it and roll it around, a 4.3 per cent increase in tax revenue is nothing more nor less than a 4.3 per cent increase in taxes, and a continuation of the spiral in spending that has cost Londoners dearly over the last six years.

Between 2000 and 2005, a period in which most members of council sitting before us today were passing budgets, residential property tax rates rose by 25 per cent, including hikes of 5.9, 6.6 and 3 per cent in the last three years respectively, while at the same time water and sewer charges increased by 50 per cent. But this does not tell the whole story – because of the growth in assessment values, many property owners have in fact seen actual tax increases of 50 per cent or more over that same period. Spending since 2000 has in fact grown by much more than 25 per cent, as astounding as that sounds – to take just one example, although the property tax rate hike last year was 2.95 per cent, spending actually increased by five per cent. And by increasing taxes again this year, council is in effect saying to taxpayers that the preposterous increases over the past few years were in fact warranted and unavoidable. This is hard to reconcile when one learns that of 24 cities examined in a study across Canada last year, London homeowners fared second worst when the cost of property taxes and utilities were added, and that according to another study of 67 cities last year, Londoners are also paying a higher than average percentage of their income on property taxes and water and sewer charges, a percentage that rose from 5.4 to 5.7 per cent just from 2004 to 2005! And that percentage will continue to rise with budgets such as this one. Simply put, city hall is commandeering each year a greater and greater portion of the city’s economy.

What’s more, with the astonishing growth in revenue from taxpayers over the past six years, one would think that city hall’s assets would at least be in sound shape. But over that same period, council has saddled Londoners with a debt of over $300 million, or over one thousand dollars for every man, woman and child in London, double the amount in Kingston and Hamilton, eight times the level in St. Thomas and higher even than in Toronto. The cost of paying that debt topped $38 million in 2004 alone, which made up 5.6 per cent of the city’s overall budget.

So council will deliberate over a budget that increases taxes by at least 4.3 per cent… or more, if our applicants today have their way. Where is the promise of fiscal prudence that we hear from our politicians? In fact, the promise has already been scaled back fresh out of the election. We don’t hear much anymore now that the election is over about holding tax increases to the rate of inflation – three per cent has instead become the magic number, a number that compares unfavourably to Statistics Canada’s Consumer Price Index rate of inflation that measured 2.3 per cent between October 2005 and October 2006. 4.3 per cent, however, is nearly twice the rate of inflation. City staff rationalizes the difficulty of adhering to the standard measurement of inflation because “the city’s basket of goods is different from the basket used in calculating the general inflation rate." This is utterly disingenuous – my basket of goods is different as well… the basket of goods of everyone in this chamber is different. Statistics Canada’s measurement is an average of the increase in the cost of goods that we all face if we continue to consume the same goods. In other words, what the city says makes no sense except that it is entirely self-serving. The problem that the city has is twofold: one part is that the city actually controls the prices of many of the goods in its basket, and has shown no real interest in containing increases in those prices. Setting budget targets for city departments at three per cent is an invitation for those departments to spend at least three per cent more; that is, above the rate of inflation. Even so, a number of the city’s departments have budgeted for increases even greater than three per cent, increases that Mr. Fielding wants council to consider granting. The second part of the problem is simply that the city keeps putting more goods in its basket. We hear a great deal about mandated services over which the city has no control, but this ignores the fact that even in city staff’s own estimation, almost half of the $880 million budget is discretionary spending over which it does have direct control. In the case of the councils London has had over the past few years, this has come to mean, of course, an almost complete lack of discretion. Each year at budget time, and in this year, council entertains requests for more and more lavish spending on arts, culture, museums, theatres, community centres, recreation, social housing and various other programs that, if they were as essential to Londoners as their proponents claim, would thrive entirely on the voluntary contributions or patronage of Londoners. Instead, council each year encourages the dependency of these programs on the continual infusion of tax dollars by handing out millions of taxpayers’ funds to them, even as they benefit only a minority of Londoners at the expense of everyone else. These kinds of payouts are not the city’s responsibility – they may buy politicians some favourable press coverage and the votes that can be brought to the table by vocal special interest lobby groups, but we would remind you that it is not your money that you are handing out.

We would also like to draw your attention to the city’s few strategies for what it calls fiscal prudence – they are neither sound nor prudent, and jeopardize the future fiscal health of this city. For one, relying on assessment growth to blunt the appearance of tax hikes is a foolish and precarious policy. Yes, London can still boast of an expansion in the assessment base, but this growth has not been an achievement of council’s policies – it has happened in spite of them, largely because of a monetary policy that has created low interest rates that have fuelled an artificial boom in property investment, development and speculation. But how is council prepared to deal with an economic situation where assessment values drop, such as is threatened by the impending burst of the housing bubble? Even to maintain spending growth at its current levels will require even much larger tax increases, which will in turn create a positive feedback loop that forces more people and businesses out of London and further decreasing assessments. For the other, to listen to our Mayor during the last election campaign, it would sound like lobbying for grants from provincial and federal governments is a key component of the city’s financial strategy. Instead, it is an admission that the city cannot live within its own means – and instead wants to defer the burden of tax collection onto other jurisdictions. These grants are really nothing more than welfare subsidies to cities, but more importantly they are not a dependable source of revenue. Inter-governmental lobbying is a risky strategy that depends nothing at all on sound financial management but rather entirely on political climates over which the city has little direct control. While it suits politicians at other levels of government to hand over these welfare subsidies to their little cousins, they may continue to do so, but similarly in an economic downturn the political benefits of doing so may just as quickly vanish.

So council is now proposing to spend at least $880 million, almost three thousand dollars per man, woman and child in London. Londoners are rightfully asking themselves what they are getting in return for these Cadillac prices. Cadillac services? More like a beat-up old Chevy. The costs of overtaxation and overspending in London are evident. The median family income in London has declined relative to other Ontario cities, while unemployment has risen from 5.5 per cent in September of 2004 to 6.5 per cent in September 2005 and to 7.0 per cent in September of 2006, at the same time that other Ontario cities have done much better. And no wonder – no major businesses have settled in London in the past six years, at the same time that new industries have located in nearby lower-taxed jurisdictions like Woodstock, Palmerston and Arthur. In June of last year London ranked 17th out of 25 Canadian cities in generating economic growth, one-third the growth of Kitchener and Hamilton and about one-half that of Windsor. Among graduate students at the University of Western Ontario, where I attend myself, London has become a byword for low paying, dead end jobs. In cases where people already have jobs in London, many residents are relocating outside the city into new developments in places like Delaware and Kilworth simply to avoid London’s high taxes, even if it means a commute. And what does London have to show for the spectacular increases in spending? Massive but money-losing prestige capital projects like the John Labatt Centre, the new Central Library, the Convention Centre and the Covent Garden Market have brought localized benefits to a few London businesses downtown but debt financing burdens to all Londoners – and in spite of these projects, the downtown has continued to deteriorate, to the point that many people feel either unsafe or have absolutely no interest in going there. And council has invested so many tax dollars and incurred so much debt over its prestige projects that it can no longer efficiently manage the basic infrastructure for which it is responsible. Roads and sewers continue as well to deteriorate, and council is poorly equipped to deal with the next major repair project.

As you consider the draft budget, we remind you that it is still possible to restore London’s competitive economic advantages and reduce the burden on taxpayers, but only as long as you are prepared and willing to cut spending. Even inflationary increases only postpone further decline. Spending increases may please the small but vocal constituencies that you have seen represented here today, but it should not need to be mentioned that they are not representatives of Londoners but of that demonstrative segment of the population that seeks to obtain something at the expense of everyone else. They may appear to appeal to your nobler sentiments, but the truly noble person recognizes when he or she has done an injustice and tries to make amends. If you imagine yourselves to be representatives of all Londoners, you will put your financial house in order to the benefit and prosperity of all Londoners. This mean finally saying “no” to spending and tax increases. This is what Londoners expect from their politicians.

Apart from the presentation as given above, the other presenters of the day were, in order:
  • Grand Theatre –(Capital Grant Request)
  • London Ski Club –(Capital Grant Request)
  • Friends of the London Public Library
  • Salvation Army Village Day Nursery –(Capital Grant Request)
  • London Regional Children's Museum
  • Motherreach Postpartum Support
  • Environmental Initiatives, Steven Turner, Chair of the Advisory Committee on the Environment
  • The London Coalition for Social Justice
  • Fanshawe Chorus London (Request for One-Time Grant)
  • Norma Chevalier, Social Housing
  • Palace Theatre –(Capital Grant Request)
  • Boys’ and Girls’ Club of London –(Capital Grant Request)
  • Eastwood Recreational Centre Indoor Pool

5 comments:

Anonymous said...

Excellent presentation, no doubt received with fixed, polite smiles. What a farce these budget "exercises" are. The deals are done. The rest is smoke and mirrors to pacify the rubes who pay the bills.

Thanbk God I no longer live in London. The stench of corruption and hypocrisy has become overwhelming.

Anonymous said...

The tax increases are more dramatic than you indicate. I am going to list my increases since my husband and I moved into our first home.
Year 1 1999 - $1718.
Year 2 2000 - $1879.
Year 3 2001 - $2099.
Year 4 2002 - $2159
Year 5 2003 - $2288
Year 6 2004 - $2650.
Year 7 2005 - $2878.
Year 8 2006 - $3096.
Who knows what increases this year will bring. Every year the value of our home is increased by MPAC.
Between the inflated value (no amount of arguing has gotten this reduced) and increaed taxes this is getting to the point where a lot of Londoners will be looking to relocate. Strathroy sounds nice.

Anonymous said...

I just love these welfare proffesionals.

All of them with their hands out, looking to snuffle up to the Taxpayes Teat.

Not to worry! Lots more where that came from.

Jake said...

I went to the consultation tonight at White Oaks Mall with Hume and Orser On one part of the survey they handed out, it asked what your top five priorities were for the 2007 budget. I wrote tax cuts, lower debt, better roads, cut spending on staff and management. It also asked that you rate the following five listed priorities in your own order:

Infrastructure
Culture
Economic Development
Environment
Parks/Recreation

Not one of the five priorities the city wants ranked in the survey mentioned either tax relief or curbing spending. Just where more pork barreling should go.

No wonder my Dad left this town for Elgin County.

Little Tobacco said...

Jake,
what is lost on almost all urban municipal governments is that the biggest boost to economic development is low taxes.

Of course, when one of the largest expenditures of a municipality is salaries, it is no wonder that the rates keep going up. A lot of self interest in feeding and expanding the machine.