There was not a lot of good news last month as Hamilton City Council got a look at the prospects for the upcoming 2020 budget. Finance Chief Mike Zegarac presented three scenarios to council—none of them easily achievable:
Cuts of $18.3M to achieve a 4.6% tax impact
Cuts of $27.0M to achieve a 3.6% tax impact
Cuts of $35.7M to achieve a 2.6% tax impact
Just to get the tax increase down to 4.6% the city would have to cut back on contributions to reserves, which could have a long-term negative impact, especially if we experience a recession, which is more or less inevitable at some point. It would also involve raising user fees across the board, and an unspecified number of service cuts. To get the tax increase down to 3.6% there would be further service cuts, in some cases in core service areas, and more user fee increases. The report didn’t specify how to get to a 2.6% increase other than to say a further $8 to $9 million would have to be found somewhere.
About $12 Million of the increase comes from labour contracts that have been previously agreed to. Then there were some nasty surprises such as an unexpected hike in insurance premiums, WSIB shortfall, and increases in software licence fees totalling $5 Million. Zegarac explained that the WSIB hike was due in part to a jump in the number of Post Traumatic Stress Disorder cases being reported by first responders.
On the transit side DARTS increases will be around $2.6 Million due to increases in the number of people needing the service, in part caused by the province expanding eligibility criteria for the service.
Affecting the revenue side have been a number of successful appeals by industrial and commercial operators on their property taxes. Stelco alone was able to trim its property tax bill by $3 Million, as a result of shutting down its steelmaking operation. Zegarac told councillors that now that Stelco is back on its feet the city is appealing its tax assessment.
The temptation for council’s past has been to find savings by deferring capital expenditures on basic infrastructure like roads and sewers, but that historical practice has resulted in an infrastructure deficit of nearly $3 Billion—a number that is growing by approximately $200 Million per year.
One cost item that was identified, albeit gingerly, was the cost of staff having to conduct all manner of studies and reports ordered, often on a whim, by councillors. Zegarac reported that there is a significant backlog of such requests, and while he declined to term them “crazy” requests, as one councillor suggested, he admitted the information requests sometimes involve overtime expenses. He suggested that in future it may be necessary to hire outside resources to deal with the requests.
Councillors were assured that unlike previous years where staff would start the budget process with a really ugly tax increase, but somehow whittle it down to an acccptable level in the end; that would not be the case this time out. In fact the treasurer warned that 2021 would be even tougher as certain provincial cutbacks that were deferred, would take effect in the coming year. Still, there was little disagreement expressed when Coun. Chad Collins said he was not interested in proposals that imposed new taxes on residents.
One item not raised at the meeting was the total number of employees on the city payroll now sitting at almost 7,300. At amalgamation the combined staff of the amalgamated communities was 5800. That’s a 26 percent increase in municipal employees over a span of time when the population of Hamilton has increased by about 10 percent. The current budget allowed for the creation of 73 new positions.