Ottawa budget pressure has some councillors questioning 2 per cent tax promise

Some Ottawa city councillors are beginning to ask whether the mayor's two-per-cent tax promise can be kept in the face of daunting annual budget shortfalls predicted for the next three years.

• City of Ottawa saddled with $41M deficit for 2015
• City staffoutline plan for 2016-18 budget pressures

The questions come as the city's finance and economic development committee is set to meetTuesday morning to discuss their budget strategy for the next three years.

According to a staff report, the city is facing a $36.3-milliondeficit in 2016, followed by projected gaps of $23.4million in 2017 and $24.2million in 2018.

In order to balance the books,which municipalities in Ontario are required to do each year,finance staff recommend dipping into reserves specifically, a $23-million fund set aside to replace city vehicles.

The report recommends shifting $11.5million from the reserve fund in 2016and another $6.7million in 2017.

It's anticipated that by 2018, savings from other efficiencies such as reducing overtime, cutting down on advertising and increasing class sizes for employee training will meanone-time transfers willno longer be required.

"It is anticipated that utilizing the fleet reserve in this manner is feasible and does not represent a significant risk to the city's investment in these assets," the report says.

Budget pressures increasing

Some city councillorsquestion the wisdom of such one-time funding as a means of dealing with ever-mounting budget pressures.

"The question I would have is whether we should be borrowing from our reserves in order to achieve a tax target that is inappropriate," said Kitchissippi Coun.Jeff Leiper.

"I imagine that a lot of councillors will be looking through this year's budgetto see whether or not two per cent gives us the kind of wiggle room we need in order to provide the kind of services that our residents are demanding."

City staff calculated the three-year budget targets with an annual tax increase of 1.75 per cent in mind. That translates into a two-per-cent residential levy to cover the cost of city services, as well as the cost of police, public health, the Ottawa Public Library and the auditor general's office.

The report calls for a 2.5-per-cent transit tax levy, which translates to an annual increase of 2.85 per cent on residential tax bills.

OC Transpo is facing $15.5million in budget pressures in 2016, thanks to rising maintenance costs, increased insurance claims and dwindling farebox revenue due to flat ridership numbers.

As anticipated, the sewer and water surcharge will rise by six per cent in 2016as the city struggles to deal with shrinking revenue due to lower consumption.

Projected decline in development revenue

At the same time, tax revenue from new development isdropping, city staff say.Normally anticipated at two per cent per year, the city's number crunchers are only banking on a 1.3-per-cent gain in 2016, or $15.4million. Similar growth targets are forecast in 2017 and 2018.

That has Somerset Coun. Catherine McKenney wondering whether it's the right time to set such a strict tax cap.

"You know, I'm not a fan of setting a tax rate and budgeting backwards," she said.

"And if two per cent doesn't cut it, then we haveto look at what is needed to meet growth, to make sure the services are being delivered the services residents in the City of Ottawa rely on."

Neither McKenney nor Leiper are members of the finance committee, but both will be around the council table during subsequent stages of the budget deliberations.

Among the so-called "base pressures" essentially, lingering cost overruns from 2015 the city faces next year:budget-busting spending on winter maintenance; big insurance payouts for firefighters; costly arbitrated settlements;and "unachieved revenue targets" for the city's sponsorship program.

In order to deal with those pressures, the report recommends administrative restructuring, reviewing the summer student program and setting "efficiency targets" for various departments, including winter operations, paramedic services and the parks department.

The report also contemplates increasing user fees and charges in line with the cost of delivering services.

The city's draft 2016 budget will be tabledNov. 12. Council is scheduled to vote on the final documentDec. 9.