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March 2004
Newsletter
What Could be Done about Hamilton's Budget Problem
Mayor DiIanni conducted his own "public consultation" on the $65 million budget shortfall. It included meetings where he spoke, as well as a budget questionnaire designed by his office to elicit the kinds of answers he wants to hear. The glossy 12-page questionnaire asked people to choose between tax increases and cuts to services. But there was no place in the questionnaire where you could suggest either:
- stopping the Red Hill Creek Expressway
- stopping the further reduction of business taxes
A Simple Budget Solution |
| Starting deficit |
|
$65 million |
| Cancel Expressway |
— |
$33 million |
| Cancel business tax cuts |
— |
$ 9 million |
| Federal GST rebate |
— |
$ 7 million |
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| Remaining deficit |
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$16 million |
Resulting tax increase of 3.6%
and no cuts in services or user fee hikes
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These two items are the "budget priorities" of Mayor DiIanni and are "untouchables". What would happen if the City Council decided to "touch" these two items?
Over the past three years, the Council has reduced taxes on commercial property by 15% and on industrial property by 30%.
The reduction now totals $30.6 million a year. That is, the City Council starts its budget deliberations this year with $30.6 million LESS in revenues than it did in 2001. The budget proposes a further $9 million reduction in business taxes in 2004.
The 2004 proposed budget for the expressway is $33 million. The province will provide $15 million of this, but has stated publicly that it is willing to re-allocate this money to other City priorities IF City Council asks them to do so.
So if the Council simply decided to stop the expressway and NOT further reduce business taxes, the budget deficit would drop by $42 million - from $65 million to $23 million.
The federal government has decided to relieve cities from paying the GST. This will save Hamilton about $7 million a year. That gets the budget shortfall down to $16 million or less than a 3.6% tax increase with no cuts in services.
DiIanni is loudly complaining that the provincial government is being unfair to Hamilton by not providing more money. DiIanni specifically says Hamilton should be getting an extra $20 million a year to cover social services. What he conveniently forgets is that the province has committed $120 million over the next four years to the Red Hill Creek Expressway project. That's $30 million a year that the province is giving to Hamilton, but not providing to any other municipality in Ontario.
What other steps could Hamilton take to get its financial house in order?
During the budget process City staff have repeatedly stated that new house-building costs the City. This is because the development charges in Hamilton are absurdly low at barely $7000 per home. The average in the surrounding communities is over $16,000. Since there are about 2000 new homes built every year in Hamilton, the City is losing $18 million a year because it has such low development fees.
Unlike most other cities, Hamilton exempts all industrial and many commercial developments from development charges. Ending these exemptions, even at the current low development charges would add $5 million a year to City revenues.
A very large slice of the City budget is taken off the top to pay off debt. This year's debt charges are $54.4 million. That's equal to the combined costs for waste management, the HSR and DARTS.
Paying off the Linc and valley expressways accounts for $6 million of that figure and will rise to $10.5 million by 2008. Cutting the borrowing by cancellation of the valley expressway will make future budgets much easier.
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