Budget 2020: Where We've Come and My Priorities

Tomorrow, Council heads into deliberations concerning Budget 2020. This is the third budget our current City Council will be setting. And it will be a very difficult one.

A priority of this Council has been to see operations of the City improved. We have a new (and very good) City manager, and much of the corporate structure of the City has been overhauled. As part of this process, significant work was done to spend money more efficiently and better target it toward community priorities (click here for more information).

This made budget 2019 relatively easy for Council. Thanks to the very hard work of our staff, there were significant opportunities for savings that could be implemented. That allowed Council to lower taxes while also increasing how much was spent on roads, RCMP, and other key services.

We don’t have the same luxury this year.

As with any large organisation, there is still room for efficiency in the City. We’ll continue figuring out how to use City resources better. But, we don’t have anywhere near the same potential savings as was possible last year. As always, inflation adds annual costs to the City. And in 2020, provincial and federal changes are creating holes worth millions of dollars in the City budget.

I do not see how Council could set a 2020 tax decrease, or even hold taxes where they are, without reducing some services delivered by the City. At the same time, controlling the tax burden is a big concern. Through budget deliberations, the predominant conversation will be, “in light of significant increased costs to the City, how can we balance maintaining quality services with charging reasonable taxes?”

Recently, I’ve written about public feedback we’ve received. Yesterday, I wrote about how federal and provincial decisions will cost the City millions of dollars in 2020. Today, I want to discuss my priorities as we head into City budget deliberations. But before I do that, I think it is worthwhile looking at how taxes have changed this term.

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LOOKING AT TAX CHANGES THIS TERM

This Council term began at the end of 2017. As we look at tax changes this term, it makes sense to use that as our base year.

During last year’s budget deliberations, Council was presented with this graph. It compares 2017 per capita spending between Alberta municipalities. Numbers were taken from official financial reports. To arrive at these numbers, spending associated with airports, utilities, and other large budget lines not common to all municipalities were removed.

Compared to other municipalities, Grande Prairie’s spending has been reasonable. However, compared to others, Grande Prairie takes a high proportion of its revenue from residential property taxes. Which is a huge concern in our community.

City Council and administration have worked hard to reduce the residential tax burden. We’ve done that through significant spending control. But we’ve also done that through changes to how other revenues and debt are handled (click here for more info).

So what has happened to our taxes so far and what will happen to them from here?

In 2018, Council approved a tax increase of 2%. In 2019, it approved a decrease of 4.1%.

(Important to note: these percentages indicate how the total amount of municipal taxes owed by an average residential property changed. They are not impacted by changes to average assessment values. Click here for more info.)

Earlier in the year, Council set a goal that any 2020 tax increases should be within 1% of inflation. However, when it set that goal, there were some on Council who were opposed to any sort of increase. This goal was also set before we knew that provincial and federal changes would create a hole in our budget roughly equal to a 3.5% property tax increase. I have no idea where Council will land on the 2020 budget. As you will see below, I’m not even sure where I will land.

However, I do think it is useful to look at how taxes will have changed over our term if the 2020 budget has an inflationary only (1.3%) increase.

In this graph, the blue bars represent the percentage of municipal tax change seen on an average residential bill. The orange bars represent inflation. The grey bar represents how much municipal taxes would need to be raised (3.5% is a conservative estimate) if changes being made by federal and provincial governments were directly passed onto municipal taxpayers.

Here’s another useful graph. It shows how, if Council approves an inflationary only (1.3%) increase in 2020, taxes will have cumulatively changed over the course of this term. The blue bar shows how they will have actually changed. The orange bar shows how they would’ve changed if they had kept pace with inflation. And the grey bar shows how they would’ve changed if they kept pace with inflation and if the 2020 provincial and federal changes were directly passed onto taxpayers.

(A note about inflation: I based these rates on the Alberta Consumer Price Index. For 2018 and 2019, I used the Consumer Price Index change rate for January. We don’t yet have any information for January 2020, so instead I used the rate for this month [November 2019].)

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MY HOPE: TAX CHANGE

Approaching budget 2019 was relatively easy. I knew we could find large amounts of savings without sacrificing key services in the community. So, it was easy for me to go into budget deliberations advocating for a tax decrease. As it turns out, we managed to lower residential taxes while increasing some key services.

This year isn’t so easy. We can always get better, but there isn’t as much room this year for the City to become more efficient. As always, inflation will increase City costs in 2020. Additionally, we need to figure out how to absorb millions of dollars worth of changes coming down from other levels of government. I don’t see a path towards lowering taxes in 2020 without significantly cutting services, which isn’t something a majority of Budget Survey respondents were supportive of.

But keeping the tax burden under control is still important to me.

To deliver the services residents expect, a small tax increase is likely necessary. But it needs to be very modest.

I would love to see any tax increase stay at or below 1.3%. This would match inflation and generate about $1.5 million.

There are some increases that I think are necessary (see below). If necessary to attain these, I think I could also be comfortable with a tax increase of up to 2.5%: that is inflation plus 1/3 of the impact created by provincial and federal changes and would generate $2.9 million. I’m unlikely to be comfortable with anything beyond that. HOWEVER:

I’m intentionally not going into deliberations with a particular number in mind.

Council will be arriving at a final budget based on many decisions covering all aspects of operating the City. This year, I’m going to be paying more attention to each individual decision than to an overall goal.

In past years, I’ve approached all votes within budget deliberations asking myself “is this an acceptable way to get to my final budget goal?” This year, I intend to keep an eye on our overall budget. But I’m going to be putting a lot more thought into each vote and whether or not what we are debating is 1) important for our community, and 2) delivering good value.

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MY HOPE: CITY SERVICES

Of course, budgets are about a lot more than what they City charges taxpayers. They are also about what services the City delivers (or doesn’t deliver).

In light of us needing to find millions of dollars due to federal and provincial decisions, consideration needs to be given to reducing some services. I’m very open to that conversation- we need to be ensuring that we are targeting our spending where it will best serve the community.

However, a majority of Budget Survey Respondents said that they supported maintaining or increasing services over lowering taxes. We also don’t yet know what impact provincial rollbacks will have on residents of Grande Prairie. Any potential savings realized by service reductions need to be very carefully weighed against the impact they have in the community. I’ll be approaching this conversation with a great deal of caution.

There are also some budget areas that I’ll be advocating for increases to. These include:

• Basic Infrastructure: we haven’t been investing enough municipal capital dollars into maintenance of basic infrastructure. I want to see the proportion of municipal taxes dedicated towards infrastructure maintenance increased.

• City Policing: the federal government is imposing a very large increase to our police contract costs in 2020. However, this increase is only for existing service, which isn’t quite adequate to meet local needs. I hope to see resources set aside to hire more RCMP officers to work within the City.

• Affordable Housing: Council will soon be approving an Affordable Housing Plan. I want to ensure we have resources set aside to begin implementing it.

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There’s my general take on our upcoming budget deliberations. We’ve got some interesting, important and challenging decisions ahead. As we head into creating Budget 2020, I’d love to hear any questions or thoughts you might have.

Thanks for reading!

-Dylan