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January
19, 2004
THE REAL CITY DEFICIT IS OVER $300 MILLION
The
$83 million budget shortfall is only a small part of the
financial crisis of the City of Hamilton. Several other
numbers should be added to it, including this year’s
jump in debt, the fall in reserves and the annual shortfall
in infrastructure maintenance. This year the City’s
tax debt will rise by $150 million. At the same time, reserves
will fall by $33 million. And staff report that the City
is spending $67 million LESS than is required “to maintain
the City infrastructure in a good state of repair”.
If we add all these numbers together, the actual shortfall
THIS YEAR is $333 million. That’s equal to a 74% tax
increase. And this doesn’t take account of the fact
that reserves have fallen by $128 million since 2000 and
underfunding of infrastructure maintenance and replacement
has been going on for decades.
The
extreme depth of Hamilton’s financial crisis raises
the possibility that the expressway spending will be seriously
reconsidered as City Council grapples with the 2004 budget.
The
annual infrastructure deficit is detailed on page 47 of
the draft 2004 budget (http://www.hamilton.ca/Finance
/2004-budget/pdf/2004-Operating-and-Capital
-Budget-Report.pdf). It shows that $50 million a year
is needed for road replacement, but only $26 million is
allocated this year. For City buildings and facilities,
the need is $12 million a year, while the spending is less
than $2 million. That’s the same amount being spent
on downtown renewal, although the identifed need is $16
million. We need $20 million a year for vehicle replacement
including police, HSR, DARTS and City service trucks. But
this year, the budget only allocates $11.3 million –
leaving an $8.7 million shortfall. No doubt that generates
other costs that show eat up parts of the operating budget.
The
decline in the City’s reserves has been extremely rapid,
dropping 37% over the last three years. Most of this money
was used to pay for more capital projects and to cover off
operating tax budget deficits in 2002 and 2003. As a result,
some reserve funds have already been emptied out. For example,
pension reserves have dropped 75% in the last two years
and will be gone by the end of 2004. The reserves to pay
benefits to retired city employees are already exhausted.
These payments must now come directly out of annual taxes.
The pension plan has an estimated liability of $18.8 million
with no offsetting reserve to fund it.
Last
year’s operating deficits cleaned out the last of the
Tax Stabilization Reserves resulting in the use of some
program-specific reserves to cover the remaining deficit.
This year, some of the $18 million in budget ‘savings’
being proposed by staff call for paying some salaries out
of reserves. Staff candidly warn that “the method of
utilizing reserves to fund ongoing capital initiatives is
not sustainable.” The draft 2004 budget offers the
following advice: “Prudent fiscal management of reserves
is imperative. Reserves provide flexibility against uncertainties,
which inevitably arise in today’s changing municipal
environment, reducing the risk to taxpayers in the future.”
Unfortunately, the City hasn’t been following this
advice.
The
tax supported portion of City debt is scheduled to rise
from $222 million last year to $372 million this year. It
is set to rise another $25 million next year and a further
$23 million in 2006 to hit $420 million. Debt from the construction
of the Red Hill Expressway and the Linc will make up nearly
one-quarter of this total.
These
figures do not include the debts being incurred for the
City’s water and sewer system which are paid from water
rates rather than taxes. They are rising $90 million this
year and another $128 million by 2006.
Expressway
Economic Implications to be Discussed
The
Standing Committee on Planning and Economic Development
will finally discuss the economic development implications
of the Red Hill Creek Expressway at its January 20 meeting.
A report on the issue had been “tabled” on August
12, 2003, the day after the City launched court action to
end protests that had blocked construction near Greenhill
Avenue. It was ‘remembered’ when the Standing
Committee reviewed outstanding business items at its January
6 meeting. Construction of the $220 million expressway project
is now underway. The main justification used by its supporters
has been its alleged contribution to the City’s economic
development. The committee meeting starts at 9:30 am in
council chambers.
Expressway
Implementation Committee Re-established
A
City Council committee to oversee construction of the Red
Hill Creek Expressway has been re-established after several
months of inactivity. The committee, formerly chaired by
Larry DiIanni, stopped holding monthly meetings in August
after the City’s legal department ordered councillors
and staff to stop making any comments on the expressway
project. On January 6, the Standing Committee on Public
Works, Infrastructure and the Environment voted to re-activate
the committee and add Councillors Phil Bruckler, Maria Pearson
and Brian McHattie to its membership. Continuing members
are Dave Braden, Chad Collins, Sam Merulla, Dave Mitchell,
and Tom Jackson.
A
Busy Wednesday
Mark
January 21 on your calendar. From 3 to 6 pm, friends of
public transit in Hamilton will be distributing flyers against
budget cuts. Anyone who can help should meet at the Fountain
in Gore Park. For more information contact transit@environmenthamilton.org
At
7 pm there’s a Primer on Smart Growth being presented
at Hamilton Central Library. The guest speaker is Linda
Pim of the Federation of Ontario Naturalists and co-author
of “A Smart Future for Ontario”. More information
is available from contactus@environmenthamilton.org or by
visiting the website of the Ontario Smart Growth Coalition
at www.greenontario.org/smartgrowth/
For
more events visit www.actlocally.info
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