There are tough decisions for Council coming in the next few months. Council will have to decide on the indicative tax rate for 2018 and how to properly invest over $600M in capital dollars (dollars are not borrowed). I would like to revisit some points from my VC blog in June, 2016 titled “Just the Facts on our Taxes (Let’s get rid of the Rhetoric)”. This post and all my past blogs are available on my City of Calgary website.
The previous 2010 Council (of whom 11 are still in the current 2013 Council) passed tax increases of an average of 9.8% and to a high of 13%. The three year average tax increase approved by the current Council is 2.98%. Although this is the lowest tax increase in over 11 years, I believe we can go lower.
In March, 2016, I sent a memo to the Mayor and Council outlining how we could get to a zero increase in 2017 without service reductions. Additional ideas came forward and I was very pleased with the support from Council, which resulted in a zero tax increase over 2016 being passed unanimously. A significant amount of work by Administration has been done to reduce operating costs and finding savings. City Manager Jeff Fielding and his team should be commended for the ongoing reductions, which truly make our job as Council much easier when it comes to deciding the tax rate.
The Zero Base Reviews have been very effective in terms of creating efficiencies and permanently cutting over $80M from the operating budgets. Now, we are focusing the project to look at the overall corporate cost of running the departments.
As a council we still need to pursue and discuss what businesses the City should be and should not be in. I hope this will occur with the next Council. There have been a number of discussions regarding 2018 and the existing wage agreements. The breakdown of the current four year contact that will be ending this year is as follows: 2014-1.8%, 2015-3.2%, 2016-3.5%, 2017-4.0%, with the average being 3.1%. Note that out of the 3.5% tax increase in 2016, 3.04% was for contract labour increases. It’s also important to iterate that City Council does not have the legislative authority to cancel contracts.
Unions have accused me of “campaigning” for publicly discussing what direction I believe wages negotiations should go in. My response has been consistent over the last few years - it’s simple math and a fact of the current economic environment. Wages are a significant portion of tax increases and there must be a shared responsibility in our current situation.
As we have all seen over the past two years, there have been increased taxes and new taxes, which has resulted in additional revenues for other levels of government, and yet we still have higher debt? As a municipality, we cannot run a deficit - our revenue has decreased significantly and we have added no new taxes. In fact we’ve delivered a zero increase budget, with the help of many people.
What does that mean? Reduced revenue means you should reduce spending (i.e. operating budget). Let’s look ahead to 2018 - less revenue is expected, inflation pressures (operating) will still exist, the additional burden of the Carbon tax (which is a double tax) will continue, and I anticipate yet-to-be-determined wage negotiation challenges. The obvious elephant in the room is: REDUCED OPERATION COSTS. We can debate how to get there, but it will have to be addressed in the coming months. These ideas will be addressed in a future blog.
To illustrate the spirit of good budgeting practices for any business or government, I have created a logo that reflects this principle. If you Mind the Gap between your Revenue and Operating (expenses), it will create solid value-added decisions. In terms of the City of Calgary, it will result in the best value for the services delivered. This is my goal!
VC Finance Blog
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.