Budget Committee, Jan. 20, 2021
Meeting recap (the important stuff):
The Budget Committee met today and approved the Strategic Initiatives Funding Plan.
The plan is essentially a savings plan for large future projects in the HRM. When people want to buy a house or buy a car, they generally need to save up a bit of a down payment in order to make that major purchase for their household. This is the municipal version of that process, but instead of saving for a home, they’re saving for things like HalifACT 2050.
During the meeting Councillors Becky Kent and Trish Purdy were worried about increasing taxes on people who’ve been hit pretty hard by COVID. While this is a serious concern, it’s worth taking a moment to describe how taxes functionally work.
For most people (or taxpayers if you want to reduce people to their financial contribution to the government) a 1.9 per cent tax increase would be less than $40 dollars a year. If your property has an assessed value of $250,000 (not what you could sell it for but what the city says it’s worth, which is usually less) then your tax increase would be $38. If the city raises taxes by one cent, it generates $5.1 million. This money is then spent by the city to give us services, like libraries, street paving, hockey rinks, garbage collection, etc.
If the city doesn’t collect taxes, then everyone needs to shell out individually for the things we want to see in the city or in our neighbourhoods, which usually costs a lot more. In my subdivision, for example, the streets weren’t paved. In order to get the streets paved, governments provided some funding but each property owner had to kick in $24.54 per foot of street that touched their property. Which led to people in the subdivision paying taxes and getting bills in the range of $5000 for the paving.
So when politicians talk about cutting taxes what this means in practice is that tax bills go down slightly (the price of a cup of coffee range) but the cost to access services increases exponentially. Cutting taxes usually helps those with money, and hurts those with less. If someone is struggling financially a tax cut will usually hurt them if they have to start paying full price for services previously paid for or subsidized by their taxes.
Councillors Mason, Austin, Smith, Blackburn and others reiterated that Halifax is growing and some of the long-term plans the city is considering need to start moving if they want any hope of succeeding. Austin pointed out that when it comes to climate change and HalifACT 2050 if we don’t start to act now we’re doomed. Jaques Dubé added that if the city doesn’t start to meet its climate goals this year achieving them by 2050 would remain a dream.
The city’s Chief Financial Officer Jane Fraser also pointed out the city has spent a lot of money in recent years on capital projects. Although this is good, it eats into the money available to maintain what the city has already, which is putting significant strain on the budget. This funding plan would allow council to properly invest in the city.
In the budget process, until the money is voted on specifically it’s all subject to change as per the whims of council. For more information about the debate, keep reading.
Who said what (paraphrased):
Russell: Budget Committee is back! Today we’re talking strategic priorities. Roll call? Good. Public speakers first.
Elizabeth Cummings, public speaker: On Jan. 13, CBC published an article saying that the tax was going to go up by 1.9 per cent. The CBC also said that Shawn Cleary wanted to shift the burden to residential properties instead of commercial ones, and Savage supported it. I find it concerning that a permanent tax increase could go to reserves instead of capital projects. Some small business owners had to close their small businesses, but are still landowners. The only people who’d benefit from this are the big stores. Taxes in Nova Scotia are already among the highest. It’s a volatile time, more than 50,000 people have lost their jobs, and Nova Scotia brought back 80 per cent of those jobs. It’s a record time for home sales, can the deed transfer tax be used instead of raising taxes?
Russell: Thank you for this, we’ve heard a lot of these concerns. Mancini has joined us after technical difficulties.
Mancini: It wasn’t technical difficulties, I had a hair appointment (he’s bald if you don’t know).
Russell: On to the strategic priorities presentation.
Dubé: At this time we’re not seeking specific funding, we’re looking for guidance. Strategic initiatives are big, city-changing projects, they usually require special funding. Not all planning strategies are strategic initiatives.
Fraser: We need a Strategic Initiative Funding Plan because normal capital funding plans don’t go far enough to fund new projects and maintain existing city infrastructure. This is an introduction of a concept instead of having hard numbers (it’s like saving up for a vacation, knowing you want a vacation, without knowing where you want to go on vacation). We want to use a majority of the reserve to pay for debt. We want annual reporting. We don’t want to increase debt levels without a plan, we only want to use debt for capital assets. Capital assets last more than a year, are owned by the city, won’t be sold at a later date, and improve the city. — *Some technical difficulties are interspersed in her presentation* — Debt should be used to pay for projects that current taxpayers are using, so the people are paying for the services they’re using. The stuff that doesn’t qualify for debt, the strategic reserve would be used to fund them. We’re looking for guidance on what type of projects council would want to be funded by this reserve.
Fraser: We need to talk about the base capital budget. It’s normally $130-160 million, 70-80 per cent of that is to be spent on maintenance. It’s not keeping pace with inflation, or the pace of maintenance required. This is how we’re spending our money.
Fraser: HRM is growing, over 50,000 people since 2010. We keep building new things to maintain, but not increasing the budget to build new things and maintain the stuff we’ve built. Here’s how your taxes are spent.
Fraser: We need to manage how we maintain our assets (the slide above is assets, mostly). We need to make sure the budget is enough to cover what we need. Our pavement condition is deteriorating year over year since 2016 because we’re not investing in street maintenance.
Dubé: It’ll take some time to build up the money and resources to do this. We won’t be able to do what you want without more money to do it.
Cuttell: (Reads the motion for agenda item 5 as written) We all know this is an extraordinary year. Some businesses are failing, and some are doing well, but we’re growing overall. How will business units coming up with capital plans work if we’re looking at organizing by capital plan?
Dubé: When we look at the growth, job growth is going up, even if some sectors are being hit hard, overall, more people are working. Can you elaborate on your second question?
Cuttell: The list of strategic initiatives are interlinked and interdependent, I just want to know how that’s being organized.
Dubé: There’s a lot of communication and collaboration required, we’d rejig things to increase communication and collaboration. Also, Jane Fraser is kind of magical at this. We need a fund like this, so we have a separate stream to invest in the city.
Fraser: Are you talking about service-based budgeting? What this plan allows us to do is plan further out to meet council’s priorities so we’re not continuously trying to catch up.
Mason: The day has finally come! We’ve been good at establishing green goals, quality of life goals and a bunch of stuff people are really excited about, and now we have to pay for them. So we either have to pay for new services by increasing taxes, by borrowing or just not doing them. We can’t do Bus Rapid Transit by finding efficiencies in our current transit. We’re not doing much here except setting the table for the future. My only question really is how did you get the number of $150 million? What are the numbers behind that number?
Fraser: There’s no magic behind that number (disappointing) it’s just an illustration to give an order of magnitude. The real work is coming up with the number. The debt that we’d take out would only be what we needed.
Mason: The debt payment part will be attached to what we build? We need to internalize that these things cost money.
Dubé: Just to state the obvious, the important thing to do now, is to start. The number isn’t pulled out of the sky, it’s an estimate based on the current capital budget. But it is an estimate. We need direction today though, so we can address your priorities.
Blackburn: Halifax is sometimes described as the greatest little big city in Canada, and we’re getting to the threshold of big city. But we’re not keeping up with the demand, and debt is an absolute last priority, but none of us have bought a house or a car without going into debt. But it’s calculated debt. I think the guy taking over the White House said ‘don’t tell me your priorities, show me your budget’ and we need to put our money where our mouth is.
Hendsbee: When I hear strategic initiatives, it’s long term planning. How long is long term? 10 years is two and a half terms. What timeline are certain projects to start? What are those projects? Some of them we’d like to see quickly. I’d like to see timelines in the report. When do things come off this list and go into the operational budget?
Dubé: This is a forever strategy, we’re going to hit 500,000 people by 2025, probably. We’re seeing growth with no signs of letting up, and we need a financial plan to deal with it. The timelines will be in the budget in February. I don’t know if the project you sent us a note about will be in the budget.
Fraser: This strategic plan allows staff to allocate funding for future projects easier.
Deagle-Gammon: The 1.9 per cent tax increase, is funding this fund part of that 1.9 number? Are our current infrastructure needs put at risk if we’re putting money aside for this?
Fraser: It’s built into the 1.9 per cent. As for your second question, our infrastructure is currently at risk, this is to try and alleviate it.
Dubé: What she said.
Outhit: I strongly support this. We should set expectations, but some of these projects won’t happen with federal and provincial funding, and sometimes we don’t get a lot of notice when the money comes. We can’t be one-trick ponies, community groups can be all-in on one thing, but we can’t. We need to set expectations about timelines. We have the time to do this properly. On TPW (Transportation and Public Works), every year we need to increase paving, but paving doesn’t get better. And sometimes we give staff money to pave and they don’t spend it! What are we going to do to make sure the money gets spent? What happened with the paving? If the money didn’t dip, why did the paving numbers? Will the money on paving also be spent on street safety, traffic calming, etc.?
Dubé: We’re trying to come up with a plan we can pay for, and deliver on. On the feds and province, bike lanes and the Windsor exchange are moving faster than expected because of federal money.
Fraser: Some of the challenges of the capital budget, the budget for paving has actually gone down, and paving costs are going up. And the streets that are getting done now are getting a number of features, ‘complete streets,’ so the money also doesn’t go as far.
Savage: We’ve tried to increase our paving budget in the past, but were told we couldn’t. The population growth of the city is growing like a hockey stick, and so much of it is immigration, from other parts of the world and other parts of Canada, and we’ve had more births than deaths last year. Which is good as long as the growth is sustainable and just. This growth isn’t going to stop, it’s going to accelerate with our COVID response. At least 12 companies set up here during COVID, they could have gone anywhere in the world and they came here because of our commitment to our quality of life. This cost, I don’t think it’s an option, I think we have to eat the cost. Housing, food security, social inclusion, these are costs we’re going to be asked to bear. Even if it’s not our mandate, it’s our responsibility.
Morse: I support this and find it inspiring. What can we expect to see from council in the next month or two? Will there be an analysis of the economic spinoffs of some of these projects, for the Windsor junction; job-creating, impact on the port’s competitiveness, etc.?
Lovelace: It’s important for us to think about rural connection, some of us don’t feel a part of the city since we don’t always have the same access to services. What’s our legislative authority for deferred maintenance? We’ve let some things slide over the years. There’s a cost to growth. We don’t know where the money the province takes from us goes, can we get a breakdown of how that money is spent? I’d also like to know timelines and we also need to think about things beyond physical infrastructure. What are the timelines and how do we integrate them with each other? We need to make sure people see our plan and we communicate it clearly so everyone buys in.
John Traves, staff: There’s no specific requirement for maintenance in the charter. Legally, the municipality needs to provide services as decided by council, need a capital and operating budget, and you need to set the tax rate based on what you think you need.
Fraser: The provincial slice goes to things like education, housing, and jails. It’s driven by formula, so we can ask for a breakdown from HRCE. But it’s mostly formula driven.
Kent: Thanks to the member of the public who phoned in, I was uncomfortable with a 1.9 increase across the board, but this is a journey, and I’m looking for ways to not raise taxes by 1.9. We have 110 plans and I like most of them, and we need to fund them to achieve them. Many people in our districts and city, they’re sometimes not able to look a week ahead with what they can afford. We need to do that for them, we’re leaders in this area. Job numbers are great, but just because people have a job, doesn’t mean they can pay their bills. I think some things, like street paving, need to be a stand-alone priority. I’ll be looking for ways to not increase taxes if we can.
Dubé: The short answer is yes, we’ll have options for you. And this is your budget, we’ll do what you direct.
Purdy: The funding for the strategic initiatives, is it from tax raises, debt or both? 30 per cent of the budget last year went to large projects, which impacted infrastructure renewal. Is it possible to pause the strategic funding for this year until we see how this shakes out? We don’t know if tourism is going to come back this year. Small businesses are failing. A tax increase in a year of unprecedented hardship is more than a lot of people can handle (for most residential property owners in the HRM the tax increase will be less than $40 dollars at 1.9 per cent).
Dubé: This is the council’s budget, so we can do whatever you want. But if you want these projects to happen, you need to start them. HalifACT, for example, the first 10 years are the most critical. Between 2021 and 2030 if we don’t get things done 2050 becomes an unrealistic target. But not everything is this important. But we also need to be cautious if we defer these projects, our capital spending generates a lot of employment in the HRM. If we pause things that means people go without work.
Fraser: The money is in a big pool, but it comes down to risk, but you vote and we do what you vote.
Traves: A note of caution, those obligations that we are legally already bound to, like Windsor Street exchange, would be hard to get out of.
Smith: Mason’s right, the time has come where we need to pay for our initiatives, our words aren’t cheap. If we don’t want to raise taxes, we need to do serious cutting. Not just major projects, but basic service delivery. What was the final number on taxes received? Did we meet the target we wanted during the recast budget?
Fraser: We’re at 98 per cent, we’re doing better than anticipated.
Smith: The fed and provincial money, are there any fears of that money disappearing? What’s the number for how much we’d need to spend on deferred maintenance? I know that’s a hard number. Why doesn’t the province need to disclose to us the money they spend? The charter? Did the city mess up years ago when they signed the agreement?
Dubé: I’m not worried about the federal or provincial money disappearing, they’re contractually obligated to give it. The legislation requires us to make mandatory contributions to education, corrections and housing. We’ve come a long way with HRCE to get accountability there, but they don’t have to tell us about the rest though. Their accountability for the rest of it is through the Legislature. They do annual reports though.
Fraser: We need the asset management plan to give you a number on deferred maintenance.
Outhit: It’s frustrating to me that we keep trying to spend money on our streets, and we can’t really. What has changed that would allow us to get the work done if we put it in the budget? Is road safety a strategic initiative? Should it be? Or will it be addressed elsewhere?
Brad Anguish: I won’t speculate on why you were told it (paving budget increase) couldn’t be done. Going back to 2014-15, it was recommended we increase pavement spend, just blacktop, by $10 million a year. That didn’t and hasn’t happened. That’s roughly a $70 million deficit on blacktop spending. Last budget was for complete streets, more than just blacktop, the whole street, which exacerbated the blacktop deficit. So you can see the decline, and we’re expecting a decline again this year. The concrete (curbs) is riding a similar line. The lack of spending is starting to catch up with us. We’re planning for you to increase the budget so we’re ramping up to make sure we’re ready. 30 streets will get traffic calming this year, but we’re looking to get a different piece of policy to better target traffic calming.
Outhit: Do we need a strategic reserve for complete streets and street safety?
Anguish: I’ll defer that to Fraser.
Russell: The pavement condition index is an estimate, when will we get the actual number?
Anguish: February, maybe? That’s our goal.
Austin: Things have landed differently, it’s been a great time for bike shops, I understand. Some people, like us, have been able to keep on like normal, mostly. But the hospitality sector got hit really hard. In the early days of COVID, we tried to figure out if there was anything we could to help and the province said ‘we got this,’ and came up with the hotel tax credit. It’s easy to fixate on 1.9 per cent, but we’re going to be looking under the hood, and it’s really hard to make cuts. There’s not a lot of fat on our budget and most of our money is spent on things that impact people in their day to day lives. It’s not cost-neutral to delay projects, climate change looms large, and if we don’t get moving on that we’re in for a world of hurt. Our wind storms are way up, what’s the property damage from Dorian? We lost six people during Juan. If we can’t show leadership here then we’re doomed, and that’s just climate change. What’s the long term cost of bad bus service? You can always give yourself an argument about why you can’t do something right now, ‘I’ll do it next year’ but next year never comes. Sometimes politics feels like surviving until Friday afternoon, but we have to be thinking about the type of city we want to be in 20 years.
Russell: I agree with most of what you said. I’m a strong proponent that municipalities shouldn’t be in debt, but this will allow us to get closer to that goal. I would rather see us invest money and earn compound interest. We were talking about things being a rainy day in May or June of last year, but I don’t think our rainy day has come yet. I think now is a reasonable time to start this savings account for our strategic initiatives. Can or should safe streets be a strategic initiative?
Fraser: We need to be careful with what we deem a strategic initiative. Complete streets, I think, should be in the regular budget. Debt shouldn’t be used in the renewal of our assets.
Cuttell: Just to speak to what Smith and Cleary said, the Strategic Initiatives Funding Plan is a good plan. The question I’m hearing is do we set priorities for this funding plan. Are they only for things that are already in the plan? Or do we have flexibility to add new things, like if we get money like we did for the Rapid Housing Initiative? It would be good to see a list of projects that are already ongoing. We talk about ‘the time has come’ but I also want to say that times have changed. No matter what it’s hard choices. Sometimes there are external circumstances that force us to change.
Dubé: You’ll be getting a really big book with a lot of detail, more than you want probably some of you. The rapid housing fund, we’re being used as a flow-through organization, it’s not a capital funding thing. We can give you details about the contracts we’ve signed.
Cuttell: The rapid housing might not have been the best example.
Kent: The origin of this comes from — ‘Develop, “Strategic Initiative” Reserves, as part of the
2021/22 budget process, for projects that are tied to an approved Council strategy and are
significant enough to lead to a discernable increase in the tax rate or special funding that is outside the normal budget process. This should include any required changes to debt and reserve policies and should be eligible to be funded through dedicated tax levies’ (she’s reading from the ‘Origin’ section of this document). What’s on the table today is within the envelope of the 1.9? If 1.9 is approved, that’s all the money?
Dubé: Think of this as a tax increase avoidance plan. We’re putting money aside, a little bit of money aside every year so we don’t need to raise taxes for every major project.
Fraser: A one cent increase in the tax rate, raises $5.1 million. So a $50 million project would require a 10 cent increase in taxes.
Hendsbee: Should the tax be localized or general across the board for the strategic investment? The IMP (Integrated Mobility Plan) doesn’t cover my whole district for example, but a broadband plan for the HRM would.
Fraser: It’s a general rate.
Russell: It’s almost lunch, should we break or power through?
General chatter: POWER THROUGH!
Deagle-Gammon: I appreciate the transparency of this process, it’s much better than the provincial government lockup (I 100 per cent agree, although the catering is better at lockup).
Outhit: Didn’t you know that according to Facebook and Twitter this is done behind closed doors!? *laughing* Transportation capital asset renewal, is that paving?
Fraser: That’s not paving. It’s borrowing to do things we should do with capital.
Outhit: So what is it exactly, sorry?
Dubé: It’s repairing a street. Sometimes it’s a full rebuild sometimes it’s a patch job, but it’s that kind of work.
Russell: Time for the vote!
M/S/C – Vote – Unanimous – Aye (it’s unclear if Cleary voted via thumbs-up, or had been dropped due to technical difficulties)
Councillor Paul Russell, Chair (District 15)
Councillor Kathy Deagle-Gammon (District 1)
Councillor David Hendsbee (District 2)
Councillor Becky Kent (District 3)
Councillor Trish Purdy (District 4)
Councillor Sam Austin (District 5)
Councillor Tony Mancini (District 6)
Councillor Waye Mason (District 7)
Councillor Lindell Smith (District 8)
Councillor Shawn Cleary (District 9)
Councillor Kathryn Morse (District 10)
Councillor Patty Cuttell (District 11)
Councillor Iona Stoddard (District 12)
Councillor Pam Lovelace (District 13)
Councillor Lisa Blackburn (District 14)
Councillor Tim Outhit (District 16)
N/A – COVID
Previous meeting minutes and current agenda:
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