NEWS: City Budget 2010 Crunch Time

By Think City Staff

Do you know that Vancouver city council is drawing up the 2010 budget with the probability of significant cuts or increased charges and user fees next year?

Usually the budget is completed in the spring but this year, due to the Olympics, the final decision on the $900-million-plus annual operating budget will be taken in December not next April.

Vancouver, like most municipalities, faces tough decisions for 2010 due to the economic recession. There are cost pressures from previous commitments, increased costs and the loss of nearly $16 million in development fees.

In a recession it makes good sense to increase public spending to support the economy and provide services that are needed more in recession than in times of growth. Yet, unlike the provincial and federal governments, the city is not allowed to run a deficit.

For most people money is tight, so a significant tax increase or extra charges would be a big hit. In hard times there is often increased use of many city services. How can Vancouver support much-needed services without driving up taxes?

In late Sept, the city announced it faced a shortfall of $61.7 million without an increase in revenue. By mid-October, the city reduced the gap to $28.1 million by increasing user fees, permits and licenses by four per cent, conducting a thorough review of services and efficiencies, and extending the hiring freeze for a second year.

On Oct. 20, city council instructed staff to come back with a revised budget that increases property tax by 2.3 per cent and find another $20 million in savings through increased charges and service cuts. In addition, the city is planning to go ahead with a further two per cent shift of taxes from commercial to residential properties. If the overall tax increase stays at 2.3 per cent, this will result in a 4.3 per cent increase for residents while businesses (or their landlords) will receive a modest tax hike of 0.3 per cent.

At present the city hasn’t specified where the cuts will be, but they could include shorter opening hours for pools, libraries and community centres, higher charges for senior centres, reduced cleaning of streets and parks, less road maintenance, higher parking fees and library fines, fewer police or reduced support for community groups. Moreover, the service review and hiring freeze will hit city services, as both the supply and quality of service suffers when staff that retire or leave are not replaced. It also adds to unemployment as people are not hired to fill these vacant positions.

Instead of cutting services, the city could choose to look at alternatives to reduce the 2010 budget shortfall. For example, city council could suspend the tax shift for a year, which combined with a four per cent overall increase in property tax spread across all property classes would generate $22 million. This would share responsibility fairly between taxpayers and would mean an extra $5.50 per month in property tax on the average house assessed at $782,000.

The city could also waive the four per cent pay increase for senior managers saving nearly $3.0 million. Or it could extend the hours of parking meter operation – this could raise a few million dollars which would compensate for the $1.8 million in parking income the city will lose during the Olympics.

Together, these three measures would virtually close the $28.1 million budget gap without cuts or higher user fees. These are just some of the ways the city could find additional revenue.

The city's budget is both an outcome and a process, with a close connection between the two. In our society most organizations use a managerial, expert-based process that analyzes costs and benefits. There is often some recognition of a wider constituency of shareholders, members, or customers. In a political budget process, the impact on voters is considered.

Over the next few weeks, citizens have a very short window of opportunity to impact the 2010 budget. The city's public budget consultation process is now underway.

Think City will also be carrying out its fourth annual Citizen Budget initiative throughout November and early December.

The final budget will come before council on Dec. 15.

Please complete Think City's Citizen Budget survey or attend the Dec. 1 budget debate. For more information on Citizen Budget activities, click here.