Wednesday, January 23, 2008

Budget 2008: more pain, no gain

City Council as a whole does not typically rock Board of Control's boat, and Londoners will likely face an increase of just slightly more than four per cent in residential property taxes and utility charges this year as the Board recommended to Council yesterday in its review of spending in the 2008 budget. If, as administration has advised to Council, four-fifths of the City's 1.5 per cent increase in assessment growth and twelve per cent of the City's $7 million surplus revenues from last year are applied to the tax levy portion of the budget, the overall hike in tax and utility rates will be reduced to about 2.7 per cent — or the lowest rate of increase in at least five years. This may seem a respite after tax rates skyrocketed between 2004 and 2006, but it certainly does not represent a return to Londoners after those exorbitant hikes but an excuse for them. Nor is it much consolation to those property owners whose assessments have risen in concert with rate increases. Whatever the final advertised rate of increase, the Board's recommendation is for a 4 per cent increase in tax-supported spending — which is, put simply, a four per cent increase in taxes. And as Deputy Mayor Tom Gosnell noted, "not many people are getting four-per-cent wage increases."

Despite the initial forecast of a 5.5 per cent tax hike for 2008, Controllers cannot be commended much for the reduction since it merely implemented most of administration's original spending recommendations (PDF), although the Board did finally and mercifully reject for the time being a proposed $2.7 million call centre and its annual $1.7 million in operating costs, and withdrew $2.14 million from a fund to subsidize hospitals and the downtown. Otherwise, the Board's review produced no program service cuts, and even found room for $3.4 million worth of new non-budgeted items through additional revenues that included a $3.9 million saving provided by the Ontario government's decision to relieve municipal funding of two social programs.

Assessment growth and windfalls from other levels of government may spare the City from the appearance of significant spending growth through tax rate hikes, but neither source of revenue can be counted upon to provide relief if economic factors outside the City's control — such as a recession — begin to exert negative pressures on property values or on provincial and federal governments. Despite the relatively innocuous rate increase, this year's budget has been a lost opportunity to reign in spending and begin to insulate London's economy from impending constraints, and in fact has only entrenched and expanded the City's program obligations. Following administration's recommendations almost without question, the Board continued as it has for the past several years to approve requests for municipal boards and departments that failed to meet budget targets, including granting the Library Board's request for a 5.5 per cent increase — its target had been 3.2 per cent — after it has already received an average annual increase of 4.8 per cent since 2003. Fire services, courts administration, and the London Middlesex Housing Corporation will all also receive requests over target. Targets, it would appear, are nothing really more than gestures by Council, and from experience are safely ignored by departmental administrators.

It is too late for this year, but Council would be advised next year to begin demanding of administration that board and department budgets be comprehensively reviewed, and not simply the over-target portions of those budgets, and that those budgets are not passed simply for the sake of expedience. Further, those boards and departments must be obliged to consider alternative revenue streams — we have already made suggestions in the case of the Library. Further consideration — and courage before isolated but powerful political pressures — should also be given to outsourcing services to reduce taxpayers' costs where legally permissible. Finally, selling London Hydro at an appropriate price — lately estimated at $246 million — and applying the proceeds to the City's $350 million debt would substantially reduce debt-servicing obligations to taxpayers, forecast at $59.8 million for 2008, or almost 6.5 per cent of the City's overall 2008 budget.

Although the prospects that Council will substantially revise Board of Control's recommendations, we will be providing some suggestions in the coming weeks before Council reviews the budget on February 5 to eliminate some of its more egregious and unnecessary spending items.


carmilevy said...

And yet we keep electing the same morons back into municipal office. In so many ways, we are simply getting what we deserve...because we keep asking the same people to kick us in the financial rear end.

Butch McLarty said...

Carmi, the problem is there's a lack of quality candidates to take on the uncumbents.

Often, you've got a choice between an incumbent and four out-patients from the Highbury Hilton.