Sunday, March 27, 2011

Three Big Reasons Why I Can't Support the Flat Tax Rate Proposal

As we come closer to the actual vote on the budget at tomorrow's council meeting, I thought that I would mention why I can't support the proposal that we received from city administration - and my reasons fall into three areas.

First, the proposal is unfair. Our previous tax system was based on the assessed value of a property. The reasoning behind that long-practised system is that people who own more expensive homes likely can afford to pay more taxes than people who own less expensive homes. It also indirectly recognizes that more expensive homes tend to be located in areas of the community which have a greater level of services - more parks and green space, for example, newer infrastructure, paved streets.

The new system will put in a flat tax of $100 on every residential property, then add on a percentage tax increase. One of the reporters for a local web-based news site has done some number-crunching that shows that applying this system will mean that a small home with an assessed market value of less than $100,000 will face a increase of about 10%, the owner of a mid-range property ($100,000 - $200,000) will face an increase of about 5.1%, and the owner of a high range property with a value of over $200,000 will face an increase of less than 3%.

There are some members of council who will say that the high-end property owner is still paying more tax, on a straight dollar to dollar comparison, than the lower or middle range property owner. I know that. The idea is that, similar to income tax, those who can afford to pay more should pay more. Presumably they have more disposable income, and, along with their more expensive home, can afford to pay more taxes. A 10% increase for a widowed senior living on a fixed income is going to cause far greater problems for her than a 3% increase to a double income family that has far more disposable income. And of course, the option for moving to a smaller house in a less prestigious part of town is always open to those who feel that the current system is unfair, but you don't see too many people doing it.

It's interesting that the proposed tax rate for commercial property owners is graduated, because it was seen as unfair to have the same flat rate for a small business owner as for a large business. Even so, the same projections show that a small business owner will have a tax increase of about 17%, the medium business an increase of about 6%, and the large business an increase of about 3%.

My second objection is that the proposal shows serious inconsistencies. The difference in approach between commercial and residential properties is one inconsistency. Another is the arbitrary difference between apartments and detached homes. A detached home will have a flat rate of $100. Apartment buildings will be assessed at $35 per apartment, even though an apartment will likely be home to the same number of people as a small house.

My final objection is the distinct lack of rationale for the setting of any of these rates. The only apparent objective was to raise $1 million through the flat tax alone, to be used in setting up a capital reserve fund (although this council has a bad habit of raiding its reserves for such initiatives as Neat and Clean). While setting up a reserve is certainly a sensible thing to do, and one that previous councils did through the debt reduction levy, which has now been directed solely toward the soccer centre until 2017, I wonder where the $1 million number came from. It doesn't appear to relate to the various numbers thrown out for future needs or for making up maintenance shortfalls from previous short-sighted budget decisions.

I wonder how we got to solving all our problems with a flat tax and a general increase of over 3%, when initial numbers suggested that a 16% increase would be required to meet all of our neglected maintenance needs. I would like to see proposals that clearly identify what money is needed, what money can be saved (and no, proceeding with status quo on discretionary expenditures is not acceptable to me), and then, options for finding the needed money, whether it be through increasing user fees, increasing the mill rate, reducing levels of service, or some combination.

What I find really disturbing throughout this whole discussion is the implication from some that those in lower-priced homes aren't "paying their fair share." In fact, in the anonymous comments sections of any of the articles on this topic, you're sure to find several comments along the lines of "people who live in those lower income areas are the ones calling the police and fire departments all the time, so they should pay more." What's most disturbing to me about this undercurrent is that somehow, people who live in the poorer areas of town deserve a lower level of service. The city would be better served if people realized that we need to get rid of this "us and them" thinking, and bring all levels of the city to a point where your address shouldn't matter.

I'm sure that both the police and fire get calls from all over the city. The only truly "fair" way of dealing with this would be to charge callers directly. And we could take this further - those with more children should have to pay more for education, and those who want to walk in Kinsmen Park should have to pay at the park entrance.

We don't, of course, because underlying the whole concept of municipal taxes is the idea that the city as a whole benefits from having a police force, whether we call them or not. Same with the fire department. We recognize that an educated population benefits society as a whole, and we are willing to pay for it. We recognize the value of green space, of parks, of community halls, of recreational and arts facilities. All of those amenities are supported by your tax dollars, as are streets, sidewalks, water mains, and other basic infrastructure.

I wish that council would spend its time trying to figure out how to bring up the basic level of amenities, across the city, to an equitable level, rather than worrying about complaints from people who point fingers at others, claiming that they aren't "paying their fair share", and not being thankful for the level of service that they enjoy.

"Some people are born on third base and go through life thinking that they hit a triple." - Barry Switzer

Sunday, March 20, 2011

An Excellent Example of How Not to Prepare a Budget

If there's anything to be learned from how this council works, it's that we are an ongoing example of how not to do things. We're consistently inconsistent, we ignore the rules, we pick image over substance at every opportunity, and speed over thoroughness. We claim to be open and accountable, but make decisions based on backroom discussions, and refuse to provide the most basic information about what it costs to run the city.

And what should be most concerning to the taxpayers: it appears that most members of council are quite all right with this, and see no reason to change the way we do things.

The recent budget process was, once again, an excellent example of how to bungle our way to a result that is confusing and inconsistent.

We first received the budget documents in late December. In late January, instead of passing the budget in a one-day cram session as has been our practice in the past, most of council voted to send it back to administration, asking for more details, for a list of discretionary expenditures that could be reduced and a plan for staff reductions. In the intervening six weeks, a few staff members' jobs were abolished, but we saw no plan or reasoning behind those abolishments. We have not received any more budget details, including details about the police budget, which is one-third of the city's budget. We have received nothing on what the city's discretionary expenditures are, or how they could be reduced. We did receive a rather disappointing report on implementing a flat tax a few days before the final budget meeting. That's it.

What we haven't seen is a breakdown of the budget that shows where the money is being spent, or any initiatives to reduce costs - limiting our paid advertising, or cutting down on floral decorations in Memorial Square, or cutting out custom-made Christmas cards, as a few examples that I've mentioned before. It seems that we're not willing to look at our spending patterns, and see where we could cut back. There have also been no suggestions as to other ways of covering our costs, such as increasing user fees at facilities. We'd rather just keep on doing what we've been doing, and bill the taxpayer for any shortfalls.

As a way of hopefully kick-starting some people into actually thinking of ways to save money, I had given notice of motion to freeze salaries for out-of-scope staff. Not only would this save money, since traditionally these staff get the same increase that is negotiated with unionized staff, but it would also send a message that, as a council, we are trying to reduce costs across the board. This made for some lively discussion at Monday's council meeting, as well as the usual ill-informed comments from some other council members. On Monday, I had suggested that I would be willing to amend my motion to limit an increase to cost-of-living, whereupon another councillor wondered where such information would come from, as though I was suggesting pulling a number out of the air. I'm rather surprised to find out that he doesn't know that these numbers are published regularly - Saturday's Star-Phoenix indicated that in February, the annual consumer price index had increased by 2.2% - there's a number that hasn't been pulled out of the air, and that I would be quite comfortable in setting as a cap. At any rate, after some discussion, which included suggestions from several members of council that this topic should be left to our budget meetings set for Friday and Saturday, I withdrew the motion. The result? When I raised it on Friday, other members of council claimed that they had made no commitment to discuss this, so it didn't happen.

What has been brought in, without much open discussion, is a flat or base tax. This has been brought forward at least once in every council term that I've been part of. It's based on the idea that everyone should pay at least a basic amount in taxes that isn't related to the assessed value of their home. I have consistently opposed a flat tax, because every report on it that I've seen shows the same thing - it means a greater proportional tax increase for low and middle income residents, and it isn't based on the full spectrum of benefits that come from the city. The usual simplification focuses on police and fire services, but ignores things like paved streets, green spaces, sidewalks, or access to recreational facilities.

At a council meeting in January, I believe, it was brought forward that a flat tax be part of the budget discussion. I objected at the time, partly because this was focused on residential properties, with no mention made of how such an assessment would be applied on commercial properties, and partly because it hadn't been discussed in council previously, and appeared to be made in this way so that the flat tax would be brought in the back door, as a way of achieving the agenda of some members of council. However, most other members of council voted in favour of this.

We got a report from the city manager last week, with just a few days to review before the budget meeting, which outlined a few projects that could be removed for budget savings, but with its main focus being options for a flat tax. Unfortunately, it appears that the various options have been pulled out of nowhere - there is no reason for the various numbers proposed, such as a connection to level of service provided. The main target appears to be to result in an income level of $1 million. Some councillors have suggested that this money be set aside in reserves, but it isn't clear for what, or what a target should be. We do have a mechanism for establishing reserves - the capital reserves levy. Unfortunately, that levy has been earmarked for a single purpose, the soccer centre, until 2017 (the original date was 2013, but overruns and additional embellishments took care of that).

As in previous years, the actual budget meeting took less than a day - I was home before 5 p.m. on Friday. Much of the time was spent debating the difficulty of setting a flat tax for commercial users. Apparently other members of council were able to recognize the inequity of having the same tax for a large store in a big box development and a small business downtown - that wouldn't be fair, someone said. But they have no difficulty in doing exactly that to a senior citizen who lives in an 800 square foot war-time home in Midtown, as compared to a two-income family in a 3,500 square foot house in Crescent Heights - that inequity is okay.

Although the budget was passed by the budget committee, it hasn't been passed by council yet. That will happen at the next council meeting. There is still time to voice your opinion to any member of council. Since we have a history of approving the budget as fast as possible, through special meetings, I would recommend making your opinion known quickly and directly.

It's too bad, really. I'm sure that most people, before being elected to council, intend to do their best to speak up for their constituents and the rest of Prince Albert. I guess, that for some, when the going gets tough, it's not worth the effort.

"All that is necessary for the triumph of evil is that good men do nothing." - Edmund Burke

Sunday, March 6, 2011

Preparing (again) for the Budget

We're back to a more regular meeting schedule now that February is over, with an executive meeting tomorrow, and council next Monday, four weeks since the last council meeting. After that will be our budget meetings - set for Friday and Saturday, March 18th and 19th.

In late January, when we delayed our budget deliberations because we had insufficient information, I had hoped that in the intervening time we would get more information from city administration, specifically in the areas of discretionary spending (where could we cut back on what we currently spend), staffing (what positions could be eliminated), and financial information about city facilities. Well, a few jobs have been cut, but we haven't received an overall review of all positions and potential reductions. And we've received nothing on potential savings in current spending, or financial reports from some city facilities.

At the last council meeting, I proposed that we take at least one step to save money - freeze the salaries of out-of-scope staff for the next year. I'm looking forward to our discussions on this at our next council meeting.

I proposed this for a few reasons. The main reason is that we are in serious financial difficulties as a city - the city manager has told council, and some members of the public, that the city is broke. When you're broke, you look to reduce costs wherever you can. Salaries are a large part of our costs, and any step that we can take to limit these costs is worth at least some discussion. Right now, raises for out-of-scope staff usually follow whatever raise that the unions negotiate, and the city is heading into these negotiations this year. Council does not participate in these negotiations, but we do approve the out-of-scope salaries, and I think that it would be prudent to decide ahead of time that we can't afford raises for everyone this year.

Another reason is that I've been disappointed with the initiative shown by administration in cutting costs. Their initial reports indicated that, to make up for past neglect in things like road maintenance (caused in part by a zero per cent increase a couple of years back), we should be raising taxes more than 16 per cent. This would be huge, and before we should even consider such a thing, we should be cutting anything and everything that we can, that wouldn't affect the basic operations of the city. I've mentioned before that expenses like pots of flowers on Memorial Square, meals for members of council, custom-made Christmas cards, gifts for the mayor to give visitors to his office are all things that could be cut from the budget without affecting how well the city runs. We could also look at reducing costs by having facilities like the soccer centre open fewer hours, or by handing over city-run facilities to the organizations that benefit directly from them. But we have yet to see a budget that cuts any of these nice-to-haves or suggests other changes (and the budget that we got this year had so little detail that we couldn't see how much such things cost). So I thought that I would make a suggestion that would make them sit up, take notice, and perhaps provide us with some cost-savings alternatives.

I'm sure that I didn't make any friends among city hall staff with my suggestion. That doesn't bother me - that's not why I was elected. And I'm also not surprised that the usual gang of on-line critics has taken a few irrelevant shots at me on various web-sites. I realize that many of them like to use the anonymity that these sites provide to vent their anger at me for a variety of my past decisions. I wish that the discussion would focus, not on me and my many failings, but on my suggestion, and what the pros and cons of the suggestion are - just leave the personal insults out of it. It's a bit like road rage - people say things on anonymous forums that they would never say to your face. I've learned that it goes with the territory, but those who unleash their anger at any elected official in this way should pause for a moment and wonder if perhaps that's one reason why it can be difficult to find people willing to run for council, where your ideas and opinions aren't anonymous. Just a thought.

In any case, in my ten years and a bit on council, this is the most difficult financial situation that the city has been in. Our budget discussions need to focus on how best we can solve our spending issues, without burdening both current and future tax-payers. To do this we have to look at everything that we spend money on and figure out if we can still afford to do so. We need to look at other options for increasing revenue, rather than just taxing residents (sharing water rate increases with commercial users, charging for parking for events at the Art Hauser Centre are just a couple of ideas). We need ideas from everyone, not just from a few. And we have to be prepared to make whatever changes we can, while keeping the city functioning.

"Desperate times call for desperate measures." - Anonymous