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October
13, 2003
MASSIVE CITY BUDGET DEFICIT
Tuesday’s
meeting of Hamilton City Council promises to be painful.
Two of the city departments are reporting a combined operating
deficit this year of $19.4 million. In response they are
presenting proposals for major fee increases and service
cutbacks. These include an immediate HSR fare hike, fewer
transit rides for the disabled, less litter and garbage
pickup in cemeteries and downtown, and further deterioration
in maintenance of city buildings.
It
is illegal for a city’s operating budget to run a deficit.
Hamilton has covered such deficits in the past with its
Tax Stabilization reserve. At the beginning of 2001, there
was $23 million in this reserve, but by the end of 2003
it will have been completely drained and will be itself
actually showing a deficit. Staff has warned the Council
that “any shortfall in 2003 will have to be taxed in
2004 in addition to the $45+ million in budget pressures
already identified”. Covering all this would require
a tax increase greater than 20%.
The
Public Works department predicts a $16.2 million deficit
this year. It is proposing to make the following cuts, most
of them affecting the poor, the disabled, seniors and the
deceased:
- Imposing
another immediate HSR fare hike of 15 cents per ride (on
top of 10 cent hike in April)
- increasing
the seniors annual bus pass by $45
- cancelling
DARTS improvements made in February, thus cutting 19,500
rides for disabled users
- eliminating
the taxi scrip program for disabled persons, cutting another
45,000 rides a year
- stopping
all painting, window cleaning and carpet cleaning for
the rest of the year
- eliminating
50% of grass cutting and litter cleanup for the rest of
the year
- cutting
computer training in the fleet services department
- ending
spring litter and debris removal from cemeteries, as well
as leaf removal in fall
- reducing
cemetery grass cutting and garbage can emptying to once
every two weeks
- eliminating
public support for Veterans Day functions, and reduce
monument inspection and repair
- reduce
street sweeping from 16 times a year to four (after buying
2 extra sweepers last year)
- doing
maintenance on the Linc only when there’s a complaint
- reducing
downtown litter cleanup and street flushing by 25%
The
Public Health and Community Services Department is reporting
a $3.2 million deficit. This department is proposing:
- elimination
of 22 jobs at Wentworth Lodge
- unpaid
days off and a Christmas shut down program
- not
replacing departing staff for at least three months
The
2003 budget was only adopted six months ago. How has this
massive deficit appeared so quickly? At least part of the
explanation is that the budget predictions were extremely
optimistic to allow the Council to avoid imposing a big
tax hike that would have angered the voters in an election
year. They gambled that the financial mess could be covered
up until after November 10.
A
second factor is the stampede of senior city staff leaving
Hamilton for other jobs. Three dozen senior staff have quit
so far this year including the heads of communications,
legal, long range planning, heritage planning and the water
and wastewater departments. This reflects the extremely
low staff morale at the City, and the loss of key people
creates further chaos in the bureaucracy.
The
deficit also indicates that the budget cuts already imposed
have likely been too extreme in many departments, and have
been driven by a political wish for smaller tax increases
rather than the actual requirements of operating the City.
The
deficits in the operating budget are only a small part of
the severe financial crisis facing the City.
In
March, the Dominion Bond Rating Services imposed a “negative
outlook” on Hamilton’s credit rating citing “a
deterioration in the City's next tax-supported debt outlook
resulting from an increase in the medium-term capital spending
plan." The report specifically noted costs of the Red
Hill Valley Expressway and the new waste management strategy
as the key driving factors in increasing debt levels and
warned that: "Any further increase to the tax-supported
debt outlook would likely warrant further rating action".
The
City is already paying over $50 million a year to service
the existing debts. This uses up the first $400 from each
homeowners’ taxes, and is more than the total spent
on libraries, the HSR and DARTS combined. Current plans
are to triple the external debt from $210 million at the
beginning of 2003 to $643 million by 2007.
In
June, staff warned that despite the borrowing, the City
still faces a shortfall of nearly half a billion dollars
in its ten year capital budget. And this budget does NOT
include any money to renovate or re-build City Hall, or
any of the $80 million for the Commonwealth Games, or any
money for development near the airport or in existing City
business parks. The Red Hill Creek Expressway is the only
major "economic development" expenditure in the
10-year capital budget. The expressway project will use
almost 13% of the total capital spending over the next 10
years, more than 10 times the amount allocated to downtown
Hamilton, and more than four times the total allocated to
parks.
The
same June report said "The City’s state of roads,
bridges, buildings, parks, arenas, water/sewer mains and
fleet is rapidly aging as Hamilton faces an annual infrastructure
gap estimated at $50 million per year". It also noted:
"The City does not have any existing reserves for capital
building replacements, like roads and facilities" and"Reserves
declined by $110 million since 2000."
In
mid-August, the auditors reported the City took in $1 billion
last year, but spent $1.1 billion. Reserves went down $82
million, while unpaid taxes and other liabilities increased
by $58 million, for a total drop of $140 million in taxpayers'
equity. The auditors wrote: "The above items are indicators
that the city does not have the appropriate oversight, discipline,
rigour and planning in existence with respect to financial
matters.” In response to the audit report, the City
Treasurer declared: "Our financial position is deteriorating.
There is no question about that part of it." The report
was so critical that Councillor Murray Ferguson publicly
admitted: "I don't think we're qualified to be an audit
committee. Most of us don't understand financial statements."
In
late August, the City Manager revealed that tens of millions
of tax dollars are being spent without proper scrutiny by
Council. "It surprises me the magnitude of the purchases
that run through the system without council ... seeing them
come forward or understanding what the purchase was for,"
he said. "What I find vexatious is that this is quite
different than most other jurisdictions."
Citizens
have an opportunity on November 10 to make some much needed
improvements to Hamilton City Council.
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