Wednesday, December 20, 2006

Budget surpluses are bad news for taxpayers

The London Free Press reports that this year's budget "surplus" is estimated at $8.1 million — at least the third straight year of multi-million dollar surpluses, totaling over $30 million over that time. Although surplus revenue is taxation above and beyond the city required to meet its budgeted obligations over the year, Londoners can expect to see little of that money returned to them. Council Monday voted narrowly to back a staff recommendation to spend most of the money on debt reduction and new spending initiatives — General Manager of Finance and Corporate Services Vic Cote's plan recommends applying only $600,000 of the revenue to reduce the property tax increase for the 2007 budget, projected now at between 3.5 and 4.5 per cent, "enough to lower the hike by a small fraction of a per cent." This promises to be a replay of last year's $8.7 million surplus, of which only $650,000 was used for a reduction of the property tax hike.

But if revenue is not budgeted, the city cannot even begin to pretend that it is a legitimate municipal asset. Nevertheless, council continues to make year after year the same assumption that it is. The "good news" of budget surpluses has not been good news for the taxpayers of London, but instead for its politicians who have accustomed themselves to seeing the additional revenue as a license to spend. There will be additional pressure this year on the surplus as chief administrative officer Jeff Fielding is advising council, in the wake of the city's draft budget, to "focus on service growth" and consider funding requests from programs that exceeded the city's 3.0 per cent growth targets. Why does this continue to happen in London?

Given the range of taxes and fees which the city charges Londoners for being Londoners, nobody could expect that administration could predict with certainty all of its revenues for an upcoming fiscal year, but at least three straight years of large multi-million dollar surpluses suggests that the city has adopted a strategy of systematic under-reporting for its own benefits. As William Robson noted in the Financial Post this past spring, the strategy at the federal level has provided politicians with enormous political benefits, not the least of which the "good news" suggests to taxpayers that the government is managing finances well, as though revenue from taxes and monopolistic services were a direct function of economic well-being. As well, politicians realize two other important benefits: first, fans of fiscal prudence are placated by the fact that much of the surpluses are earmarked for paying down debt without the government having to go to the trouble of making debt repayment a significant line item in the budget — meaning that surplus budgeting is a method of stealth taxation for deficit financing; and, second and perhaps more importantly, the government finds itself with plenty of extra money to throw around to coddle protected special interests — for example, both the Children's Museum and the London Community Players shared in part of last year's surplus. In fact, council was entertaining requests for its projected surplus in April of this year, only two months after its last budget. Whether administration has adopted a policy of systematic and deliberate under-reporting of revenues as a cynical political ploy is only suggested by its recurrence and council's expropriation of the revenue for its own purposes, but one thing is certain: taxpayers will see little of that surplus returned to them until the political benefits of doing so overcome all the others.

Public participation meetings for the budget process are scheduled for 2-4pm and 6-8pm on January 10 in council chambers, and 11-2pm on January 13 at Masonville, Cherryhill, Argyle and White Oaks malls — the schedule can be found on pages 35 and 36 of the city's 2007 Draft Budget, Timetable and Operating Highlights document (pdf). Much more on municipal "surpluses" here, here, here, here, here, here, here, here, here and here.


carmilevy said...

Amen. It's bad news only as long as the government believes it has a license to spend taxpayers' money.

If only we lived in a world where surpluses were considered negative, where the folks we elect and hire saw our money as a sacred trust. And that any excess monies received from us - an indication of overtaxation if ever there was one - were duly returned to their rightful owners.

My apologies, but I think I'm better equipped to determine where my hard-earned dollars go than some disconnected politico or municipal staffer who doesn't even care that we're already being squeezed an order of magnitude more than taxpayers in comparable Canadian cities.

The term "thieves" comes to mind when I take the time to mull over the institutionally-sanctioned shell games that are played every year around this time.

Mixed up, indeed.

Greg Thompson said...

Carmi, Carmi, Carmi. It's no wonder you get yourself so worked up: sloppy thinking, imperfect analogies, mathematical fallacies. Even I, certainly less unsympathetic than you to the challenges involved in running a city and providing the services that most people expect, would consider the payment of my municipal taxes to be an act of "thievery" if I thought that my tax burden was larger "by an order of magnitude" than that paid by taxpayers in other comparable cities.

Here's some more bad news for you: municipal governments do indeed have a license to spend taxpayer's money.Just as you have a choice if you don't like this. In fact you have several choices. Jenn illustrated one for you on another thread: move outside the city limits to a lower-tax jurisdiction so that you can get something for nothing, similar to the way welfare abusers do (getting something for nothing, I mean).

And, in point of fact, I doubt very much whether you are "better equipped ... than some disconnected politico or municipal staffer who doesn't even care" to make those decisions on how to fund the required services of our city. I suspect your decision would exactly mirror that of Jenn, who I (unfairly? Perhaps) characterized as "the poster-child for the libertarian ethic. Mealy-mouthed. Grasping. Self-absorbed. What's in it for me? For ME?"

By the way, in this alternate world you wish for where surpluses are considered "negative", do deficits becomes "positive"?

Lisa Turner said...

Bonnie, you may want to proofread your own comments before posting to ensure that they are free from "sloppy thinking, imperfect analogies, mathematical fallacies."

How large does the surplus have to be before taxpayers have a right to demand some of it back? Would that be when the surplus is larger by "an order of magnitude" than the surplus collected in other "comparable" municipalities?

You remain an apologist for the biggest welfare abusers of them all - the elected and non-elected administrators of the public collection plate. "Municipal governments do indeed have a license to spend taxpayer's money" but that doesn't make it right. It's not their money they're "budgeting", and once the city coffers are dry and the bulk of the population has relocated outside city walls, the bandits will be looking to graze and raze greener pastures. If individual people can't be trusted to spend their own earnings, why trust them to elect "responsible" governors to administer the trough collections?

If it is wrong to demand direct access to my neighbours fridge, it is equally wrong to gain indirect access to his grocery budget by taxing the hell out of him against his will. Even though I may exit the city limits, swearing never, ever to return, as an Ontario and Canadian taxpayer, I'd still be paying for the money pit we call London. Anne-Marie and crew keep handing out the money, while they beg the rest of the taxpayers in the country to help pay for their extravagances.

There's no avoiding the vultures, so long as people like yourself take up the refrain of "It's not theft because..."

Prosecutor: What did you take from Mr. Jones?
Defendant: Some money.
Prosecutor: And did Mr. Jones agree to give you that money?
Defendant: No.
Prosecutor: And to ensure that Mr. Jones gave you the money, you threated him with force?
Defendant: Yes.
Prosecutor: And how long has this been going on?
Defendant: For as long as I've been aware that Mr. Jones had an income.
Prosecutor: Mr. Smith, at the beginning of these proceedings you plead not guilty.
Defendant: Yes, that's right.
Prosecutor: But you've just admitted to multiple acts of theft against Mr. Jones.
Defendant: No, I have not.
Prosecutor: Please explain to the courtroom how what you have admitted to is not theft.
Defendant: If Mr. Jones had left the country at any point, I'd not have taken any of his money subsequent to his departure. And I never did anything to stop him from leaving the country.

MapMaster said...

People do move outside the city walls, but the city just keeps moving the walls out further.

Greg Thompson said...

Hi Lisa. Thanks for proofing my post. I'd comment further on your comments to my comments on Carmi's comments but, based on your comments on my comments on Carmi's cooments, my comments on Carmi's comments were obviously different from the comments you thought my comments on Carmi's comments were.

Have a great Christmas!

carmilevy said...

Bonnie, Bonnie, Bonnie - assuming that IS your real name, of course - had you taken the time to READ my comments or anything I've written previously about taxation (go ahead, Google me...I'll wait), you would have noted that I have no opposition to taxation.

I do not want something for nothing. I fully appreciate the value of civic services and the price we must pay for a given standard of living in a modern urban society.

My concern revolves around why London's tax rate must be significantly higher than that of other cities. We are, in fact, among the most highly taxed cities in the country. Why is this so? Do the residents of Kitchener, which arguably has a much more vibrant business community than ours, somehow merit better value for their taxpayer investment than Londoners do?

Your logic, like the anonymous facade behind which you leave comments, is fractured. If everyone felt like you, cities would have license to continue to jack tax rates and have no accountability for delivering on that investment.

You obviously have a strong grasp of the fundamental concepts of finance.

Greg Thompson said...

Carmi, I, like any other breathing person, am concerned about the level of taxation in Melonville. Your question about Kitchener is a valid one. As was Lisa's when she asked, "How large does the surplus have to be before taxpayers have a right to demand some of it back?" But I hardly think the discourse is improved when words like "thievery" are bandied about indiscriminately. It's only my opinion, of course, but the problems in this particular city revolve around core competencies, the tendencies of some elected officials to be worried more about the health of particular private interests than delivering good value to the taxpayers, and a clear and consistent refusal to plan for success.

I would say to Lisa, though, that I am hardly an apologist for "the elected and non-elected administrators of the public collection plate". My views on the dismal state of the res publica are rather well known in the circles in which I travel, which, perhaps unsurprisingly, are different than those in which you travel.

Anonymous said...

Bonnie, I don’t think you took the time to go back to that other thread so read my response to you. I think you protest too much about our taxes being reasonable. Is it possible you are one of the City workers that require my taxes to pay your salary????

In case you missed it – My comment to you from the other thread -
“I just left my comment to do some spouting off after I heard that our taxes were being raised again after we are already one of the highest taxed municipalities in Canada. However you seem to have taken deep offence at me leaving London. I grew up in London, I love this city. The leaches that have taken over city hall are the ones who are pushing me out. I already live in the one area of the city where we have no bus service; I never go downtown and work at the very fringes of the south end of the city, so very rare for me to be using the pothole filled streets anyway. I'll be happy to do my shopping in St. Thomas and stay off the roads of London for good. I only complain when I see things like free lunches at City Hall or huge chunks of cash going to places that don't even come close to supporting themselves like the pioneer village. I'm happy to pay an increased fee to show my kids things like the pioneer village or go to the library, but I'm sick of paying all this cash out to charities and others that use it for salaried positions. My whole point is that the City doesn't know how to say "no, I'm sorry but there is no money in the budget for that". I have to balance my family's budget making sure we have enough money to pay the bills, the mortgage, the cars, and still have enough for food and a small savings account, if this means I have to drive an older car, put off those renovations until next year, or have my kids wear hand me down clothes, so be it. This is the type of fiscal responsibility I want to see. As my vote made absolutely no difference and we voted to keep in the same spend happy crew at city hall, I'm talking with my feet and leaving.”

I’ve made it very clear that I don’t really use many London roads and I’m not asking you maintain only the ones I use. I want the City to take responsibility for basic services – roads (new, maintenance, snow removal, cleaning), parks and green space (the city already has several green spaces that they do not maintain), bus service, garbage pick up, and a few other “necessary” services. The other stuff will either have to survive in today’s market place, or solicit donations. The things that people actually use, or truly believe in will be able to raise enough money; the unnecessary things will just fall to the side and disappear, as they should. I stopped making my private donations to the library after they abandoned my favourite location and spent millions of dollars moving to a mall. I am very careful about making donations to charities that will use that money to hire an expensive C.E.O. or administrative staff. I make donations to things I care about and to charities that are fiscally responsible. The City doesn’t seem to care who is fiscally responsible (including themselves) as long they go away after budget time and don’t come back with their hands out until next year.

Greg Thompson said...


NO, I am not a City worker; YES, I did go back to look at your comment on another thread; NO, I don't ever remember saying that our taxes are "reasonable", let alone protesting they are; and, BTW, I'm confused that you are moving to get into a more expensive house while clothing your children in hand-me-downs. The house can't be more important than the kids, can it?

Anonymous said...

"What's in it for me? For ME?"

That's a good question, and one that people should ask just as often as:

"What's in it for you? For YOU?"

After all, why would you care if someone is self-absorbed, if it didn't affect you at all?


Greg Thompson said...

I wouldn't.

Greg Thompson said...