A shortage of new people moving to Ottawa is pinching the city’s budget, forcing City Hall to scrimp even harder to keep from raising taxes.
New neighbourhoods need new libraries and fire stations, new sidewalks and streets need to be plowed, new houses need new watermains. But there’s always a gap between the new taxes people pay and the services they use. What the city calls “assessment growth” – the arrival of new residents moving into new homes and paying new taxes – is an annual boost to the city’s operating budget, providing a little pot of free money the finance department can use to defray the costs of services for those of us who got here first.
It’s there in the budget documents every year. The amount goes up and down, but between 2012 and 2015 the gap averaged $12 million. In 2016, however, the city’s finance department predicts it’ll be $8.9 million, thanks to assessment growth of $18.4 million (more money coming in) and increased service demands of $9.5 million (more money going out). That’s a record low in recent years — and the woman stickhandling the budget this year, deputy treasurer Isabelle Jasmin, warned city councillors to expect that this is the new normal. Slower growth, fewer newcomers, less new money.
In the most generous interpretation, patching the budget with assessment-growth money is OK because having more people helps us make better use of some things we’re already built. If more people go to libraries and recreation centres we’ve already built, that only costs the city more once it has to start adding service hours and hiring people to handle the crush. The influx of new tax dollars shouldn’t always be matched by an equal outflow of money aimed precisely at the neighbourhoods paying those taxes.
But in practice, doing this has always come with problems.
Coun. Marianne Wilkinson, who represents Kanata North, has complained for years that new neighbourhoods in her ward have been denied transit service they deserve. Mainly, OC Transpo has stretched its existing service to cover more territory rather than putting more buses on new routes. If you live in Kanata Lakes or Morgan’s Grant (or any of Ottawa’s newer suburbs outside the Greenbelt), and you wonder why the bus isn’t better, the cannibalizing of assessment-growth money is one reason.
Same for new crossing guards, park maintenance, you name it. Not adding something new is always easier than cutting something or raising prices on something you already do. The incentive is to skimp.
Former councillor Peter Clark, an old curmudgeon with decades in politics who’d forgotten more about civic budgets than most of his fellow councillors knew, used to say it was a kind of cheating. Mayor Jim Watson likes to think of himself as tight with the public purse — more to the point, he’d like for you to think of him that way — but that assessment-growth money has always made his promises of small tax hikes easier to achieve than they looked. Clark would go along with it, but he was wise to the trick.
The trick is going to be ever more difficult to pull off, if the forecast Jasmin presented is right.
Downtown condos are the perfect kind of assessment growth, as far as the city’s concerned, housing new people whose demands for new services are negligible. They produce the biggest gap between city revenues and costs. The Canada Mortgage and Housing Corp.’s latest figures show that Ottawa has a historic number of unsold condos and construction of new ones has fallen sharply. Builders have started 775 units this year. That’s not just down from boom years in 2012 and 2013, when they started 2,200 a year, but down from a longer-term average of about 1,500 a year.
How will the city adapt to this new normal? It can squeeze services in new neighbourhoods harder, for one. That didn’t happen this year — there’s less money coming in, less going out and less left over, but new spending as a percentage of new revenue from new neighbourhoods is about average. The temptation will be strong once the bureaucracy runs out of internal spending to cut.
Eventually though, as the pot of free money gets smaller, the inevitable answer is higher taxes or tougher service cuts. There’s no way around the math.
dreevely@ottawacitizen.com
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