A very large #STCbudget post – what’s going on, and where we’re at in #StCath

Admittedly, it has been a while since I posted on the budget. The process has been long, and very difficult this year. It is also not done yet, but will hopefully be on its way to Council very soon.

The reality in this community is simple – residents don’t have extra money lying around the house to throw at a large property tax increase. With the increasing price of just about everything (thank goodness for a break at the pumps this year), the City has to keep its rate of increase as low as possible to lessen the burden on residents. This is difficult this year for two reasons:

  • The Meridian Centre and the Performing Arts Centre will both come online this year, which is a 1.75% increase to the tax rate by itself;
  • There is a very large, approximately $2.5 million dollar hole in our revenues, brought about by poor decision making by previous Councils.

These two items make a difficult year worse.

The simple reality is that St. Catharines City Council has done several things poorly over the last few decades. Rather than build up reserves, Council has depleted them to try and make tax increases smaller, so there is no cushion when unexpected issues arise (like the province decreasing it’s grant to the City by double the expected amount). There is no multi-year budgeting, so when snow control budgets go well over (like they did last year and are likely to do again this year) there is no way to deal with the bubble. Council has sat on a number of surplus or underused properties, with no plan on how to get rid of those properties so they can add to the tax base. There has been a general lack of transparency and accountability back to taxpayers. All of this came to a head when staff presented a budget, with projected revenues, that amounted to a tax increase approaching 10%.

Let me be clear. I will not present or endorse a budget that asks citizens of St. Catharines to pay an additional 10% in taxes.

At this stage, I still don’t know what the final budget will look like that the budget committee endorses. I do, however, have a few key commitments that I am making as budget chair:

I will not be satisfied until every possible option has been exhausted to get increases to our budget in line with inflationary growth;

I will be championing a new budget process that addresses the problems identified above. These issues won’t be able to alter the 2015 budget, but will help to ensure that St. Catharines’ finances get back on track.

The budget process in St. Catharines can no longer be a once a year endeavour. The city budget is too large at over $105 million in operating expenses per year, and Council needs to recognize this and meet regularly to tackle the issues that plague us. With that in mind, I offer the following issues that I intend to pursue as part of our budget reform:

1) Improve accountability and transparency.

At present, we deal with budgets once a year; not nearly often enough when you’re dealing with a $100+ million corporation. We need to see budgetary updates at least twice a year, with Actuals included, to allow Council to know how our budgetary priorities are progressing, and what issues have crept up that require new attention. We will know on July 1st a lot more about what the year in tree removal and winter control will/have looked like than we did in January when we looked at the budget the first time; let’s use that information to make better decisions.

In addition, we need to make the budget transparent. More than one resident has complained that the budget is almost impossible to read properly – the ability to understand how we spend money shouldn’t be reserved for accountants and financial analysts in the city. We need to find best practices in other communities that properly lay out spending plans, and allow residents to compare how this year compares to previous years, while also laying out a path for future years.

If we want taxpayers to participate in the process and be more financial literate, we have a responsibility to provide them with appropriate information and tools.

2) We need to address the absence of sufficient reserve funds – both globally and within key programs that fluctuate over multi-year periods.

Something I have pointed out for several years is our lack of reserves and reserve funds. If our city were to undergo a significant infrastructure event, we are unprepared to deal with the financial hit that event would cause. The damage that this winter has done to our roads and water lines is a perfect example; the money that is needed to fix these problems will come from general revenues, which will mean reductions in service in other areas. If we had been contributing over the last decade to a working reserve, those increased costs could have been mitigated. This is similar to the Ash Borer infestation which is currently killing our ash trees – again, we’ve had to go to taxpayers to make up the gap.

The City reserve should grow over time, and Council may be tempted to use those funds for special projects or to support capital programs. In some cases, these decisions may be appropriate, but reserves should not be depleted to the point where they fail to serve their intended purpose. We need a specific bylaw that mandates reserves must be built up to and then kept at an appropriate level, based on best practices in other corporations (both municipal and private), to provide appropriate insurance for taxpayers.

Additionally, there are certain programs that we know are very difficult to budget for in any given year, but generally equalize over a longer period of time – like snow removal services. When we set the budget for this program, we have no way of knowing what the following winter will deliver other than by making an educated guess based on history. To combat the wide fluctuation in spending for programs like these, a separate reserve fund should be built to absorb these financial pressures in peak years. In a mild winter, we should bank the money that wasn’t spent and apply it when it is needed during an abnormally harsh winter. Setting budgets for these programs based on a five-year rolling average would help to flatten the impact of spikes from year to year and provide greater financial stability for both the City and the taxpayer.

3) We need to address the sale of surplus property.

Finally, we need to finally address the number of buildings and properties that the City currently owns. While Council has talked about selling these properties, we have made virtually no progress. This has led to long term drains on our budget as we pay to maintain building that are under-utilized. We need to now take a very close at the properties (or in some case, services) and ask:

  • Does it provide us with any residual value?
  • Do taxpayers benefit from the property (service)?
  • Can the private sector make better use of the property (or improve the service)?
  • Can we realize any financial gains from sale (or privatizing / ceasing the service)?

We need to answer these questions and make financially responsible decisions. It makes no sense to continue to increase property taxes year after year simply because we are servicing property that provides no value or delivering services that taxpayers do not need or want. When we sell a property or realize a one-time financial gain from these decisions, the funds should not be put into general operating revenue, but should be earmarked for the reserve fund that I alluded to earlier.

It is clear to me that there are many challenges ahead in dealing with our City finances. Unfortunately, many solutions will not be in place for the 2015 year. I am disappointed that we are at this point, but I am committed to working day and night with my colleagues on Council and city staff to ensure taxpayers are represented fairly and not punished with double-digit tax increases.

I am also committed to dealing with the root cause of our financial failures. We do not have the luxury of letting this drag on until the next election. We have to meet these challenges head on and fundamentally change the way we do business in St. Catharines – starting today.

As a final thought, I will give credit where credit is due and give a kudos to Doug Herod – he has captured the overall picture of this year’s budget quite well here and here.