City of Calgary Operating Budget- Vice Chair Perspective
“It’s about positive change to the approach Council employs to the budgeting process."
I have had the opportunity to be involved in great detail over the last 25 years in the budgeting process in the private sector within large corporations. Thus, I found it very interesting as I explored the City of Calgary’s budgeting and accounting practices over the last two years. I still to this day do not understand why any council would go through this large budget line by line? It makes for grand theatre for Council, however this process really does not yield the magnitude of results Calgarians deserve. Many of the lines are generic in nature and tie into multiple other programs. So even when you cut an item, you are truly not aware of the real effect of the cut. The City Manager and his team are the experts. Council should recommend what the property tax should be and Administration should present the results and potential outlying scenarios.
The new direction this year, driven by City Manager Jeff Fielding to review the 2016 budget earlier and divide the budget process (operating/capital), is the responsible and pragmatic approach. This process allows changes and enables Council to respond to unusual circumstances in our economy. We are dealing with operating budgeting first - to provide stability and certainty to citizens and the organization. It creates focus for Council and Administration towards service delivery and innovation. The capital budgeting is secondary because it takes longer to fully review and reprioritize. Additionally we need to know the results of the up-coming provincial budget.
Why does Administration recommend a reduction from 4.7% to 3.5%? In the last 10 years, Administration has never recommended a reduction in property tax. This is a significant paradigm shift for the City Administration. It’s very positive to see the commitment of the senior management and leadership to Mr. Fielding. In the current budget there is a shortfall of $41M in City revenue. However with efficiency, using the budget saving account (a motion introduced by Councillor Demong last year), Administration was confident they can deliver the same level of service at 3.5% level. The current wage increase in the collect agreement for the City of Calgary for 2016 is 3.5%. The current agreement goes to the end of 2017. My personal view is that the next set of labour negotiations will need to reflect the previous contract results compared to the economy.
It is important to note, if we did not have such a large short-fall in revenue, we could have reduced property tax to ZERO without affecting any services!
We have some numbers; it is up to Council to decide. I checked back the last 10 years to see what the previous Council’s approved for property taxes: 2005-2007-6.12% average, 2008-2010 - 4.86% average, 2011-2013 - 9.5% average, 2014-2015 - 4.65% average. The highest tax increase in the last 10 years – 2013-13%, 2011-10.4%. The lowest tax increases were in 2007 - 4.0% and 2005 - 4.4%.
Would I like 2016 property taxes lower than 3.5%? Of course! Is it smart to cut services now, knowing revenues may continue to drop in the future or adjust services when necessary? We should not make these decisions lightly. If Council decides to support the 3.5% recommendation, our three year average will be 4.26%.
If Council approves the 3.5% recommendation, we will deliver the lowest property tax increase and the lowest average in the last 10 years, even with the tremendous population growth Calgary has experienced.
As Vice Chair of Priorities and Finance, I encourage Council to look at the numbers closely and responsibly. As Vice Chair, I support Administration’s recommendation of 3.5%. It makes for great entertainment in Council and in the press to stand up and demand less. However, you need to ensure you have the detailed data to support your request.
The next and more complex decisions will be coming forward later with the Capital Budget. There is even a stronger link between capital budget and the local economy. For example, counter-cyclical investment supports job creation because of economic multiplier, and allows the City to take advantage of lower prices. We need to look at ways to speed up building of already-approved capital. This will require a more comprehensive strategy and analysis.
Best of Business,
VC Priorities and Finance
Councillor Ward 1
This content represents the personal views and opinions of the Councillor and should not be taken as a statement of policy of The City of Calgary. The inclusion of any external content does not imply endorsement by The City of Calgary.