Thunder Bay City Council
has voted to pass the 2018 municipal budget and will formally ratify it at a
vote this evening. The Mayor and Council
have of course been patting themselves on the back about how it is a “responsible
budget” and how it keeps the tax levy increase in spending within the average
of the last two terms of council. The tax
levy increase is now coming in a 2.4 percent now – just above the rate of
inflation - which is down from the 3.03 percent increase that was originally on
the way after several weeks of deliberation and debate. This was managed by essentially taking out
about $1 million from the city reserve fund to lower the levy against the
advice of City administration it turns out who also noted that the reserves –
used to cover unexpected costs or deficits throughout the year - have been
declining since 2012
What this all really
means is that this is an election year.
The average municipal tax revenue increase over the period 2011 to 2018
has averaged 3.3 percent and ranged from a high of 5.7 percent in 2015 to a low
of 2.2 percent in each of 2014 and 2016.
The increase of 2.2 percent in 2014 was also during an election year and
was followed by a 5.7 percent increase in 2015.
Keeping the increase low this year can be interpreted as a deliberate political strategy to not raise
the ire of ratepayers in the lead up to the October election and one can expect
a hefty increase to make up lost ground when the 2019 budget comes in.
In the end, a tax levy
increasing at just above the rate of inflation is not much of an accomplishment
given that it was done by dipping into the reserve fund. While much was said during council debate
about the hard decisions that have been made the fact remains that spending is
going to go up by the amount originally agreed upon – just over 3 percent – but
it is going to be subsidized by borrowing from the reserve fund.
But then, cost control
is hard work and in the end some of the efforts at cost control have
backfired. One need only look back at
the attempt by Thunder Bay to reduce garbage collection costs in 2017 which
were supposed to eliminate a truck and labour costs via attrition while at the
same time reducing bag pick-up to two bags from three with additional bags
requiring a tag. And what was the end
result? After a period of chaos, the truck
was reinstated but the three-bag limit was not and things have remained very quiet since.
So, one has to conclude that costs have remained the same while less
garbage is being collected and revenue is probably up for the City from the bag
tags. It was certainly a win for the City of Thunder Bay but not for rate
payers who altogether have to pay more but are getting less.
We can expect more of
the same next year after the dust clears from the election. The current cast of councilors will largely
be returned to office and the cycle will start anew. We will be paying more and
getting less, and the debut will be a hefty tax levy increase to replenish the
reserve fund as well as boost spending to make up for the previous year’s
slowdown. There will be the usual
grumbling and complaints, but they will be dismissed because after all Thunder
Bay voters are the ones doing this to themselves by falling for the same thing election after election. Why would city politicians take them seriously
when they complain?
Additional Note: February 6th - Well, the budget did pass last evening. Please note that the 2.4 percent levy increase coming in is "net" or after factoring in "new growth". The gross levy increase is actually 3.13 percent. Originally, the net increase was going to be close to 3 percent and the gross increase nearly 3.6 percent. So, total spending is still going up 3 percent and the net is 2.4 because of the use of projected surplus funds from 2017 budget away from the reserve fund and towards the tax bill. However, apparently there was an effort to move even more of the projected 2017 budget surplus away from the reserve but it did not succeed. Of course the 3.13 percent does not mean that everyone's tax bill will be going up 3.13 percent or 2.4 percent if you are an "existing" ratepayer. That is the total increase in tax financed expenditure. Much of the burden of the increase will go to residential ratepayers. See my post last month here for a more detailed discussion.
