Friday, December 14, 2007

This is your draft budget

London's draft budget for 2008, submitted to council yesterday, recommends a 4.4 per cent increase in the property tax levy and an 8.6 per cent increase in water and sewer charges. Council is advised by staff to consider using four-fifths of an estimated 1.5 per cent increase in assessment growth to reduce the property tax rate hike to 3.2 per cent, and twelve per cent of an estimated $7 million surplus in 2007 revenues to reduce the increase further to around three per cent. While this figure would compare favourably along with last year's property tax rate increase of 2.51 per cent after hikes of 3.9, 5.9 and 6.6 per cent in the three preceding years, it should be remembered that the proposed increase — even if not taking water and sewer rate hikes into account — is again above the rate of inflation as it has been over the past seven years.

To put the proposed budget increases in perspective, even a best-case three per cent scenario will result in an overall property tax rate increase of 38 per cent since 2000 — after 2007's hike, they have already increased 34 per cent — while water and sewer charges, which are almost never contested by council, will have increased 86 per cent since 2000, after increasing 72 per cent from that date after last year's budget. Moreover, these official increases have been mitigated over the years by surplus revenues, which represent taxation above and beyond budgeted rate increases, and by grants from other levels of government, which represent stealth taxation of Londoners who, of course, must pay for these taxes as well. Even without taking grants into account, the draft budget actually represents a 5.5 per cent increase in tax revenues to the City — effectively an average 5.5 per cent tax increase to Londoners who additionally pay for surplus revenues and assessment growth increases. Taking every tax obligation that the City puts on its citizens, it is probably safe to say that London's tax revenues have increased well over 50 per cent since 2000.

Why has this happened in London, and what misunderstandings of Londoners and misrepresentations by the City have contributed to this acceleration of unsustainable fiscal practises? We'll explore these questions, as well as some of the specifics contained in the draft budget, and attempt to provide an accurate figure of tax revenue increases in London over the next couple of days.