Council Update: Budget 2018 Direction

It was a double Council week. In addition to our regular bi-weekly Tuesday meeting, Council met to set the starting point for the 2018 budget. You can read the staff report and presentations here. The gist of it is there are some pressures due to unexpected costs (mainly labour for police and fire), but that overall HRM is in pretty good shape.

The noteworthy part of the budget direction that grabbed the headlines is that Council approved a 1.9% increase in the tax bill as a starting point in the creation of the 2018 budget. A 1.9% increase would mean about $35 for the average homeowner to $1,874. It would be below the average growth in wages in HRM and on par with the consumer price index. The 1.9% increase will raise just under $10 million, which covers the $8.5 million cost of the recent police arbitration award. The police arbitration provided officers with a 2.75% increase each year, a substantial increase compared to the 1.0% that HRM submitted to the arbitrator. The extra 1.75% has punched a large hole in the budget plan. Since firefighter wages are tied to police wages, the arbitration award has also impacted the cost of settling the firefighters’ contract. The firefighters increase totals $1.4 million. So the 1.9% increase is basically all spent on increased wages on police and firefighters that HRM has no control over.

Of course, just like a household, HRM’s other costs and revenues aren’t static and there have been changes since 2018 was sketched out last year. Here’s a round up of some of the other budget pressures:

  • HRM’s firefighting costs are also increasing because HRM has directed that there be four firefighters per truck. Having four firefighters per truck is important because four is the number of firefighters that are needed to enter a burning building. If there are less than four, than the crew has to wait for a second truck to arrive. HRM is staffing up, but it takes a while to train more firefighters and training also has to keep pace with those who retire or move to other departments. The requirement to have four has meant higher overtime totaling about $3,000,000.
  • $2,900,000 in ticket and building permit revenue won’t be collected because the needed legislative changes haven’t been made.
  • Transit revenue is down by about $1,000,000.
  • Licensing costs for software are up more than expected, by about $1,000,000.
  • An increase in the senior snow shovelling program ($200,000) and grants for community museums ($220,000).
  • On the positive side, deed transfer taxes is expected to be about $2,200,000 more than budgeted as the real estate market remains brisk.

So even without the 1.9% to cover increasing police and firefighter labour costs, HRM’s costs are up and some planned revenues haven’t come through or will be less than expected. This will likely mean that some projects will need to be adjusted in scope or put off a year to balance. There are also emerging challenges on the assessment side. Commercial tax revenues are the bread and butter of municipal budgets, but high vacancy rates in the office market (both suburban and Downtown) means that growth in commercial assessments has really flattened out. Residential assessments are still growing, but not by as much as they did in the past. The assessment changes means revenues will be $4,500,000 less than originally expected. This will likely impact future budgets as well because the office glut isn’t likely to go away overnight, especially since the amount of space per employee is steadily declining as business and government adopt more flexible work arrangements.

So what does it all mean? My recount of what’s changed for 2018 versus the original plan may sound gloomy, but the reality is HRM is in very good shape. The municipal tax burden in HRM is in the bottom 1/3 of large Canadian municipalities, HRM’s debt load is more than manageable and has been steadily declining, and a large portion of the capital budget is paid for from savings and taxes upfront (pay as you go). There are more items on the capital wish list than there is money for, but the bulk of that capital hole is on big ticket items that would be nice to have, but aren’t a necessity in the short-term. Council will be taking a close look at the capital budget to identify priorities, but HRM is really in great shape.

I expect we’ll end up with more adjustments on the operational side as we start to dig into each department’s budget in the New Year. I will need to add the expanded Alderney Ferry service ($500,000) into 2018 and I would like to see more money put into sidewalks, crosswalk improvements, and traffic calming. I know as well that HRM is falling behind on the urban forestry plan because it was never fully funded and, at the same time, the cost of new trees is increasing because demand is up from other municipalities buying. Funding the capital budget to make sure the Integrated Mobility Plan’s big vision for cycling, complete streets and bus rapid transit is also a priority for me. We’ll see what budget season brings, but some adjustments on the capital side, how much debt HRM pays down or a possible increase of more than 1.9% (low 2.0s) are what I see as possibilities if Council decides to add more to the operating budget. Based on last year’s results, I suspect some adjustments are likely. Will post more in the New Year as the budget process unfolds.

2 Comments

  1. I cleaned,shovelled and brushed,my sidewalk down to bare concrete and the sun took are of the rest. On the opposite side of the street a sidewalk plow went by and not much changed. It is not safe and no salt has been applied.
    In contrast the asphalted pathways on the Common are clear and have been salted (except the asphalt pathway from the western gate of the cemetery to the exit next to the shed on Park Avenue. Normally about 15 cyclists go through the Common but winter has reduced the number to a handful. For many years I walked from Halifax to Dahlia Street in all weather conditions, including trudging through the snow on the Common.
    More people use sidewalks than the few cyclists & pedestrians in the Common. Surely safe sidewalks are a greater priority for HRM. A budget is all about priorities and some expenditures are nice but not essential.
    Thank you for your service and have a great holiday,

  2. Sam: many thanks for the very comprehensive and easy-to-understand update. It is reassuring to know that, overall, HRM finances are considered to be sound. While many thoughtful socialist-leaning members of the community have well-developed talking points to the contrary, the enduring TOP priority of our city leadership (and especially mayor, councilors and managers) MUST be to ensure a sound municipal financial footing now and for the future. Three specific comments:
    1. Pertaining to the 1.9% salary arbitration award to police and firefighters, you assert that “HRM has no control”. Should this be correct, it is most disturbing. If the city agrees to arbitration, surely city leaders would not be so naive as to assume the original 1% proposal would be accepted? And knowing that, why would a contingency have not been factored into the original budget plan? Over-estimating income and under-estimating expense are the hallmarks of the path to penury. While it would be crass and unproductive to call into question the base salaries of police and fire fighters, particularly given that they don’t seem to be out of line with other municipalities of similar size, I note the preponderance of expensive overtime and add-on benefits. As well, if readily available statistical data is to be believed, call-out rates for both services in terms of their traditional mandates remain approximately steady and possibly even in slight decline. Accordingly, if it has not already been done or is not yet being contemplated, isn’t it time for the city to undertake a comprehensive independent audit of these services, with the objective of determining how some reasonable measure of affordable service provision and cost-control can be assured for the future?
    2. Moving beyond our police and fire services, which are in any case absolutely essential to public safety and well-being, Colin May in his comment above raises good points pertaining to other areas of the budgetary prioritization process. In particular, investments in cycling infrastructure. There is much heat and light surrounding issues of urban mobility, transit infrastructure, etc. (a dialogue I note you have been a regular contributor to). Of course, targeted improvements to these services are always desirable. That said, the vocal constituency that most actively argues for major new investments in these areas — frequently on the basis of alleged environmental and general quality of life benefits — tends to dramatically overstate advantages and positive impacts while consistently underestimating costs. By the very nature of our city terrain and climate, not to mention the unenthusiastic attitude of our citizenry toward regular exercise, bicycles are never going to be more than a novelty component of a long-term urban mobility solution. At the opposite end of the public transit/urban mobility spectrum, high-end initiatives — such as much-touted light rail development — have in other jurisdictions proven to be eye-wateringly expensive and have left cities on their financial knees, having to beg higher levels of government for bail-outs. Thankfully, such potential boondoggles seem only to be at the most tentative discussion stage in the HRM. Prudent and responsible city leadership must ensure they will NEVER be authorized unless and until there is every possible assurance they can be constructed, and then maintained and recapitalized in the long-term, on an affordable ‘pay-as-we-go’ basis without the requirment for onerous tax increases. This, unsurprisingly. leads to my third point…
    3. Tax burden/tax increases. It is indeed good to know that the HRM municipal tax burden, comparatively speaking, ranks in the bottom third of Canadian municipalities. But why be satisfied with this? Again, our socialist bother and sister citizens will take umbrage, but why not set ourselves the challenge of establishing the goal of having HRM, within 10 years, in the bottom 25%, or even bottom 15%, in the nation? You note in your update the (presumably serious) issue of flat-lining commercial tax revenue; let’s instead give business located in other parts of the country an overwhelming incentive to move to HRM. Finally, and I wish to be very clear on this, living as we do in one of the most highly-taxed jurisdictions in the nation, municipal tax increases should only be considered as an option of LAST resort, after all other avenues have been pursued to keep costs in check and the budget balanced. The first options should always be sensible management of expectations vis-a-vis provision of services and ruthless prioritization of expenditures, including a commitment by our elected representatives to never accept (admittedly taken slightly out of context, but in your own words) that “HRM has no control”.

    Very best regards,

    Michael Craven

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  1. E-Newsletter December 2017 – Sam Austin

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