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January
8, 2004
THE BUDGET – WHICH ARM ARE YOU WILLING TO SACRIFICE?
The
budget crisis outlined yesterday by Mayor DiIanni is smoke
and mirrors. We are told that the City is facing a $65 million
deficit which is equivalent to a 13.2% tax increase. Both
DiIanni and the media are falsely presenting the crisis
as (1) a debate about what services and programs we “can’t
afford”; and (2) a failure of the federal and provincial
governments to provide Hamilton with enough money. By framing
the debate in this way, no blame can be attached to DiIanni
or the local elites. Instead the problem is the “unrealistic”
attitude of others – of local residents who unrealistically
want “cadillac” services; and of other levels
of government who unreasonable refuse to share their wealth
of (our) tax dollars.
DiIanni
spoke on the budget for more than an hour yesterday and
failed to even mention his real budget priority. It’s
on page 6 of the budget summary document under the title
“2004 Budget Priorities”, and it’s pretty
clear. Priority 1: “Continue to foster and encourage
economic growth and improved competitiveness through the
Business Tax Reduction plan and strategic infrastructure
investments”. You can find the whole $65 million “deficit”
right there in those tax cuts and just one of the “strategic
investments”.
The
Business Tax Reduction plan was the brainchild of Bob Wade
and the Chamber of Commerce. Over the last three years,
it has lowered business taxes by about $32 million. That
means that this year, and every year into the future, the
City starts its budget process with $32 million less in
revenue. These cuts have been matched by the provincial
government, so that total taxes paid by Hamilton businesses
are $64.8 million less in 2004 than they were in 2001. And
DiIanni’s plan is to provide more cuts this year.
“Strategic
infrastructure investments” is code for the Red Hill
Creek Expressway and other projects allegedly being built
to encourage economic development. The bill for the expressway
in $2004 is $33 million.
So
simply add together the business tax cuts ($32 million)
and the expressway costs ($33 million) and you get $65 million.
This doesn’t even include the last three years of residential
tax hikes, service cuts and user fees increases such as
higher HSR fares. Those revenues and “savings”
have been used to cover the cost of amalgamation, some inflation,
and other types of subsidies to business. On page 9 of the
budget summary document, we read that the “cumulative
budget reductions since 1999/2000” are $88 million
(plus $10 million more in “savings” already identified
for the 2004 budget).
All
of this has brought us to the $65 million “deficit”
now facing the City Council. In fact, the staff says the
deficit is actually $83 million, but they have been able
to find $18 million “through a critical review of ongoing
operations and program requirements, restructuring, fiscal
adjustments, phase-ins, use of reserves and other budgetary
measures”. One of these ‘adjustments’ is
another 5 cent fare increase for the HSR.
That
leaves the $65 million “problem” tossed into the
taxpayers’ lap yesterday by Mayor DiIanni.
The
“tossing” is a bit more literal than in previous
budgets. Prior to this year, the draft budget would normally
include massive proposed cuts to get the tax increase down
to a level judged acceptable by council. The staff would
propose the cuts, then the public would scream about them,
the council would say they are ‘unacceptable’,
a long debate would ensue, some fiddling occur, and some
magical dollars appear late in the process. The outcome
would be ‘victory’ for the public in beating back
some of the worst cuts, an ‘acceptable’ tax increase,
and a final budget that inevitably produced operating deficits
and a bigger budget crisis the next year.
This
year the process has been altered. The draft budget includes
only a “few” cuts, leaving a deficit of $65 million
and a tax increase of 13.2% that everyone agrees is “unacceptable”.
The next step is “public consultation” which DiIanni
made very clear yesterday is actually public “education”.
The process will “explain” to the uneducated public
the terrible financial problems facing the city, and this
now educated public will be asked to advise DiIanni and
councillors on what should be cut.
The
consultation offer is essentially: “tell us whether
we should cut off your left arm or your right arm (and maybe
we want part of your leg too); we really value your opinion”.
One can easily imagine the hoped for result. People who
don’t use transit will say ‘sacrifice the HSR’;
people who are young will say ‘sacrifice the old’;
people who are well off will say ‘sacrifice the poor’;
etc. etc. And if that doesn’t work, then everyone can
blame Ottawa and Queen’s Park. In that way, public
anger can be shifted away from the council and everyone
led to accept more tax hikes, service cuts and fee increases.
For
this scheme to work, the public must not notice:
- that
Hamilton has been going steadily downhill for quarter
century;
- that
there are fewer jobs today in Hamilton than there were
in 1990;
- that
28% of our workforce is now employed outside Hamilton,
mainly in the greater Toronto area;
- that
local developers have continued to make money hand over
fist on more and more sprawl;
- that
25% of our water and sewer pipes are under 25 years old
and have been built to service the sprawl;
- that
25% of our water and sewer pipes are over 75 years old
and have been allowed to rot while the money was spent
to service sprawl;
- that
the main effect of amalgamation was to eliminate councils
in Flamborough and Dundas which were starting to question
the so-called benefits of more sprawl;
- that
downtown and other commercial areas fell apart long before
provincial “downloading” in 1997;
- that
employment vanished, and jobs shifted to Toronto long
before “downloading”;
- that
taxes on commercial and industrial properties have been
slashed by $32 million in 3 years;
- that
despite these cuts, commercial and industrial growth in
Hamilton is one of the lowest in Ontario;
- that
more business tax cuts are planned for this year, while
“we” scramble to find $65 million in cuts;
- that
spending on the expressway to more sprawl this year alone
will eat up half the deficit
The
budget priority (which is defined as the City’s strategic
plan) has been the same for the last three years. It was
adopted by Wade’s council in November 2001 without
any public consultation. It is a priority that has filled
the pockets of a small handful as the expense of the vast
majority of Hamilton’s residents. It makes a mockery
of the Vision 2020 that is supposed to have been Council’s
guiding light since 1994.
The
justification for this priority is to “increase commercial
and industrial assessment”, because this has become
a smaller and smaller part of the total property assessment
in Hamilton. In the 1970s it provided 60% of the taxes,
while now it provides only 40%, so residential taxpayers
have to shoulder a larger portion of the total taxes. Therefore
increasing commercial and industrial assessment will allegedly
mean more revenues for the City and less reliance on taxing
of residential properties. Amazingly, we have never even
been presented with a detailed explanation of how this magic
is supposed to be accomplished.
Take
the business tax reduction (BTR) plan. Since 2000, taxes
on commercial businesses have fallen 15%, while taxes on
industrial properties have dropped by 30%. Allegedly this
is being done to “retain and increase business assessment”.
What has been the result? The draft budget shows us (on
page 6) that in 2003, business and commercial assessment
in Hamilton increased by 1.2%. That’s one of the lowest
in the province and is even less than the rate of inflation.
Obviously the BTR isn’t working. In addition, that
1.2% growth is paying taxes that are 15-30% less than they
would have paid if the BTR hadn’t been implemented.
So instead of the BTR reducing the reliance on residential
property taxpayers, it is very obviously greatly increasing
that reliance.
So
what’s Mr. DiIanni’s solution? Lower business
taxes some more, which will mean even higher residential
taxes. It’s no wonder he doesn’t want to talk
about this part of his budget.
The
same effect arises from the other half of the “#1 Priority”.
We are told that building the expressway will stimulate
economic development, and that the ‘short-term pain’
of sinking $220 million into this project, will be rewarded
by a ‘long-term’ gain in more commercial and industrial
assessment that will shoulder more of the tax burden now
being borne by the residential taxpayers. Once again there
is no detailed explanation of how this magic is going to
work.
However,
we do have a bit of experience with such schemes in Hamilton.
In the 1960s we paid for an expensive elevated Burlington
Street expressway to “stimulate economic development”.
That was back when there were 50,000 jobs on the bayfront.
Today there are less than 20,000. So much for “stimulation”.
In
the 1990s, we sank $192 million into the Lincoln Alexander
expressway for some more of that “economic stimulation”.
The Meadowlands went up and the rest of Hamilton’s
commercial areas went down. The total number of jobs in
Hamilton today is less than it was in 1990. In the past
few months we’ve seen the closure of Levi’s, Camco
and (probably) Slater Steel – taking well over 1200
jobs out of Hamilton. All of them are well serviced by those
wonderful stimulants called expressways.
This
isn’t an isolated pattern in Hamilton. It’s repeated
over and over again. The wizardry has had the same results
at the HSR where the “plan” has been to raise
fares and cut service to reduce costs, leading to one-third
fewer riders and resulting higher costs.
Of
course, some people have done quite well as a result of
subsidies to business. Not surprisingly, they are also the
ones who finance the election campaigns of DiIanni and the
majority of City Councillors, run the Chamber of Commerce,
make money from sprawl, and pretty frequently choose to
make their homes somewhere other than Hamilton.
The
obvious debate needed in Hamilton is how to take control
of the City out of the hands of a tiny self-serving elite
and start reviving older neighbourhoods, expanding (not
paving) parkland, improving quality of life, reducing poverty
and start attracting the kinds of jobs that 28% of us currently
have to leave Hamilton to find.
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