The 2020 Budget:

Posted on December 4, 2019 by Shane Keating

Even when we do the right thing, we’re wrong

Despite what you may have heard, Council did in fact approve an effective 0% change to the City’s operational budget.

Before I get into the details, here’s an interesting tweet from an individual who has been very active in the political scene for a long time:

@Calgaryrants has been a resident of Ward 12 since well before I was elected in 2010. While this appears to have been in response to the Federal election, the lyrics he shared from Kris Kristofferson also resonated with me. It seems I spend more and more time trying to explain my positions to people that don’t really care for reason – they saw the headline that works for their world view and don’t care to know the reason, the rationale, or the facts behind a decision that would run counter to their narrative. It’s unfortunate that today people are losing their passion and drive for politics or anything else and it seems to be fueled by people not caring to dig any deeper and to simply rely on rhetoric and opinion. I don’t know if that’s exactly what @calgaryrants thinks, but it’s my takeaway from this set of lyrics.

Stop the misinformation

I’ll get to the budget in a moment. Right now, I also need to touch on the current political environment in Calgary and Alberta. Misinformation is flying from every side, with people only trying to drive a narrative rather than facts. Animosity appears to be the political environment in Alberta and its coming at a cost. Just recently we heard that Calgary was out of the running as the head office of a 1,000 person tech firm because of fear of the overall divisive climate creeping across the province.

Additionally, after each vote in Council last week, Councillors were taking to social media to eagerly share their vote cards with just about as misleading as possible titles on each vote. I’m sure for some, this was in response to the extremely divisive and intentionally misleading vote cards that have historically been shared by one or two members of Council. But this past week went even further and only served to divide and misinform Calgarians. This behavior needs to stop, from everyone involved. We need to focus on the topic at hand in Council and not get bombarded with tweets and emails from constituents who have been outraged from these worse-than-clickbait style headlines. They were inaccurate and generally blatantly false. I’ll touch on a few of these at the end that I think I need to clarify.

Now if facts and my own reasoning have any matter or sway in your opinion, please continue reading. I’m hoping that I’m able to lay out the facts of this budget along with some of my reasoning on where I voted.

Despite the City holding the line on its operational budget, the Provincial government unfortunately cut our police budget by $13 million through an increased take in fine revenue, increased costs for forensic testing services, and increased its take of cannabis tax revenue. As a result, the flow-through from the Province accounts to approximately a 0.7% increase in the average residential property tax rate, to ensure that our police remain fully funded. The City set a 0% increase, but the Province increased taxes 0.7%.

As you are likely aware, the City collects a portion of property taxes on behalf of the Province called the education levy. This accounts for about 37% of your property tax bill. The Province tells the City how much to requisition. Because of the very delayed provincial budget, we didn’t have the total requisition the Province would be asking for and had to make an educated guess. Given the government had been elected with a promise to lower taxes, Administration and Council assumed the province’s take of property taxes would at the very least remain unchanged and we set the rate based on that reasonable assumption. Instead, the province increased the amount that it wanted to requisition through property taxes, which the City has no control over and needs to simply collect on behalf of the Province. Because the Province opted to increase how much it collects from you, the average homeowner will likely see an increase of about $4.45 per month on the provincial portion of their property taxes.

We all know the plight of businesses in Calgary have been under recently as a result of the downturn, the devaluation of downtown office towers, and the unfortunate commercial assessment methodology mandated by the province which resulted in a $250 million tax shift out of the core. While Council can’t make changes to the assessment methodology without a change from the province, we made the decision to structurally change the tax share between residential and business properties. We have made strides in recent years to make the tax split between residential and non-residential (business) accounts more equitable. There are approximately 14,000 non-residential accounts compared to more than 500,000 residential accounts. Despite this split, non-residential (business) accounts have historically contributed to the majority of the City’s operating budget.

As a result of our $60 million cut this summer, the split was closed to 49% contributed by residential accounts and 51% contributed by the non-residential accounts. The past several years, we have relied on a phased tax program to help out our businesses as a result of the tax shift out of downtown. We may still explore the continuation of that program, but a more long-term structural plan was needed and I supported this option to ensure our small businesses do not continue to shoulder an unfair split of the operational budget that delivers services to Calgarians. So I supported the proposal to shift the tax share to 52% paid by residential accounts and 48% paid by non-residential accounts. Around 14,000 accounts are still providing an incredible share of City services, but it continues the City’s trend of making the tax share more equitable. We want and need these small businesses to stay in business. They employ the majority of Calgarians, own homes, and pay property taxes there as well. While this shift will result in homeowners paying a little more, its an important step to ensure your favourite local restaurants, ice cream shops, retail outlets, and metal fabrication shops remain open, employing your friends, neighbours and family.

So what’s the impact of the budget?

Council’s first decision was that we set the effective tax rate increase for 2020 at 0% on the City’s portion. We were able to preserve our emergency services budgets and restore thousands of transit hours thanks to Councillors Gondek and Colley-Urquhart, in cooperation with City Administration, who found $24 million from two funds that will be used as one time funding over the next two years to cover the cuts particularly to transit and fire. This will remove $24 million from the base, and we directed Administration to find reductions of $24 million and $50 million over the next two years.

I believe this is a scenario that most Councillors should be happy with. Several supported a motion to cut $50 million from only 50% of the budget – cuts that Administration would have had no time to prepare for or find and that likely would have resulted in a significant loss of services, especially coming on the heels of our $60 million cut earlier this year. This way, we are able to get to an even larger cut (a total of $74 million) than what they had proposed, more thoughtfully and pragmatically.

Others had similar proposals to what Councillors Gondek and Colley-Urquhart brought forward and appeared to vote against this proposal just because it wasn’t their motion or were upset that they had identified this one time funding. Some wanted to be able to stand up and say “look at these cuts we made.” At the end of the day, cuts were made. Layoffs are going to happen, and I truly feel for the City staff who continue to do impeccable work that improves the lives of Calgarians every day. There has been a further $74 million cut directed, which will also likely impact staff. I’ll be honest – this is not an option I want, but these are steps we need to take. I want to assure all City staff that I am consistently blown away by and appreciative of the work you do, every day and that this is an unnerving time for City employees and their families. I voted for this option because we have given Administration time to make these cuts much more strategically and thoughtfully if they had simply been ordered on Friday to make it happen by January 1. This will help ensure that key services are not impacted and residents will get the service they expect and require.

At the end of the day, I’m going to venture a guess that most residents just want to know what does this mean to me? I want to be clear that the decision to shift some of the tax burden from businesses to homeowners is something that I received support for from both sides – obviously our small businesses were in support of this, but many homeowners also reached out to me and stated that they supported this move. At the end of the day, the average homeowner will see an increase of about $11.36 per month because of shift in tax share. But this will help create the structural change needed to help ensure our favourite local shops stay open. In addition, the average homeowner will pay about $1.14 as a result of the Province offloading police costs to the City and another $4.45 as I previously mentioned the Province has decided it needs to collect from you through property taxes. Obviously no member of Council wants to make life more expensive for homeowners, but as I’ve said before, the City is a service organization and we need to continue to provide services. The City does not have the ability to run massive budget deficits like the Province in hopes of greener pastures in the future, and we’re certainly not helped by the Province increasing how much money it takes from you.

While it has also been reported that some businesses will still see tax increases, despite Council’s actions, it needs to be remembered that those calculations are not accounting for the Phased Tax Program (PTP). The City has had a PTP in place to account for the shift due to the massive devaluation of our downtown office towers. The program provided rebates to businesses that were disproportionately impacted by the tax shift from the core. At the moment there is no such program in place for 2020 and beyond, but it was suggested that we look into one prior to tax bills going out. Not including the PTP rebate, the tax rate for non-residential property owners will be lower in 2020 compared to 2019, by about 11.3%.

We are committed to continuing to find efficiencies and we will find them. We held this year’s budget at an effective 0% increase, despite inflationary pressure of about 2% and a population increase of about 1.4% for a combined increase of 3.4% in financial pressure. We are seeking a further $74 million cut in our operating budget over the next two years.

Final thoughts

There seems to be this ongoing narrative that tax increases are purely an issue faced by Calgary City Council. Our Municipal Affairs Minister, Mr. Kaycee Madu, seems determined to shift attention away from his government and its massive deficit to the City of Calgary. It appears like this is happening so that when Calgarians get their tax bill, the increase will be solely blamed on the City, despite that a full third of the increase being the direct responsibility of the Province’s actions, while the increase the City has passed on is a structural change to help our business community and not an actual budget increase. The provincial portion however, is simply an increase. The City managed to hold its budget at an effective 0% increase, despite financial pressure from inflation and growth at 3.4%.

This is not a City of Calgary problem. We continue to strive to be as efficient as possible. Even with this shift, residential property tax rates continue to be among the lowest in the country. Calgary tax rates per $1,000 of assessed value were lower than every major city across Canada with the exception of Toronto and Vancouver. However, because of their significantly higher property values, the actual amount paid in Calgary remains significantly lower, especially in comparison to Toronto whose rate per $1,000 is just lower than Calgary’s. Our residential rate is considerably lower than Edmonton. Our commercial rates are on-par, and when the PTP is factored in, are lower by a fair margin.

Budget conversations are ongoing in other cities. Again, Council approved an effective 0% increase despite financial pressure indicating our budget should increase 3.4%. Earlier this year, Vancouver approved a tax shift from businesses to residential properties . Now, Vancouver is looking at an 8.2% increase in its budget (after a 4.5% increase last year). Regina is currently proposing to increase its tax rate by 3.25% . Saskatoon approved a 3.7% increase for 2020 . Winnipeg, while trying to reign in their spending, is doing so with a modest 2.3% increase . Ottawa’s proposed budget includes a 3% increase . Montreal also approved modest increases, with an average of 2.1% , though it’s highly dependent on where you live. For those wondering if I looked, Toronto won’t actually approve its 2020 budget until March.

The cost of providing services is constantly under pressure from inflation and population growth. The City of Calgary has consistently managed this well, despite the narrative from the media and some council members. It’s an issue every single city grapples with and is in no way unique to Calgary. This isn’t to suggest that we shouldn’t look for savings just because other cities increases are higher – we absolutely need to and should be striving to provide the best value for service anywhere in Canada.

Speaking of which, while our combined utility and tax rate isn’t the lowest in the country, its certainly not the highest. Again, we should continue to strive for improvements, but the rates and taxes paid by homeowners remain lower than our counterparts in Edmonton, as well as in cities like Vancouver and Toronto that we are competing with:

Finally, I want to respond to a couple of the vote cards that were sent out on social media during the budget deliberations with blatantly misleading titles:

First of all, the Green Line remains my top priority. However, I do not believe that we should be pitting capital projects against one another. The Event Centre is something we had already discussed, debated, and decided on. I consulted my constituents and found we had about a 50/50 split, and voted in favour of it because I believe it will be an important catalyst project for the Rivers District. As I wrote before , this is an important part of placemaking which is so important for a mid-sized city such as Calgary in terms of attractiveness to talent and vibrancy. This isn’t an either or issue – we have the capital budget to get both projects done. I believe it would set a bad precedent to renege on a deal we have in good faith that will also see an equal amount of private capital invested into our city, as well as create thousands of construction jobs when our city can really use a boost.

I also believe that this could potentially set the precedent that the City will simply step up to provide the capital shortfall if either other order of government reduces their funding contribution in the near term. This was a short sighted proposal and if the City were to kick in more money to the Green Line, it would at the very least need to be matched by the other two orders of government. This proposal just looked to increase the City’s portion of Green Line funding without seeking matching funding from the other orders of government. We also heard from CPS that a physical building is not going to help with managing crime, but boots on the ground will, which means more in the operating budget, not capital budget. Additionally, the mover’s proposal of directing a portion of these funds to a new police station isn’t even something that Council can direct and would be at the discretion of the Police Commission.

To be clear, I did not vote against the low-income transit pass. I know this is a service relied on by our city’s most vulnerable. For context, the sliding-scale low income transit pass was a pilot, which comes to an end this year. We were unsure we were even going to be able to offer it again next year, but the province did come through with a portion of the funding. That left the City with a decision – increase the amount it funds the program at by $6.4 million and keep the lowest rate at $5 a month, or maintain a stable investment level that could be relied on year after year and provide a low-income transit pass for as low as $15 a month. While I recognize that $10/month can be a significant amount of money to our most vulnerable, I voted to ensure we had stability in funding this program in the future, reducing our budget, and still providing the most generous low-income bus pass program of any major city across the country.

Jurisdiction	Low-income price, details
BC	$45 annual pass for low-income seniors only. $52/month discount for certain disability programs. Results in monthly pass in the Lower Mainland for $46 for 1 zone, $125 for 3 zone
Edmonton	$35 or $50/month depending on income
Regina	$71/month (20% discount)
Saskatoon	$66/month (from $83 regular)
Winnipeg	Program to start in 2020 at $71.75 /month (from $100 regular)
Toronto	$119.40 ($31.75 in savings)
Ottawa	$58.25 (about 50% savings)
Montreal	No program
Halifax	$41.25 metro or $63.75 regional (50% discount)

Again, to be clear, I was not supporting cutting supports for vulnerable Calgarians. This vote was to reduce the amount of funding Family and Community Services (FCSS) receives. First of all, the City contributes 25% of the program’s funding, which is over and above the 20% agreement signed with the province. Second, it was demonstrated that a large amount of the funding is going to the City’s own service delivery of the program and not the actual agency partners in the community.

This appeared to be an area where significant improvements could be made, delivering the same level of services at a reduced cost to the City. My vote was to enable efficiencies and finding ways to work with our agency partners to make the City’s dollars go further while seeking opportunities to increase the matching dollars from other private and philanthropic sources.

I apologize for the lengthy post, but I wanted to make sure that my thought process and decisions were out there for you to see. As always, I welcome any respectful discussion on this topic or any other here .