Nenshi warns tax hikes could total 23% over next three years
Council's next great debate about service and property tax levels began Tuesday with a bang -a warning that status quo would mean a tax hike that could total 23.6 per cent over the next three years.
Mayor Naheed Nenshi said he wants to find a sweet spot between a potential increase of eight per cent in 2012 and seven per cent in both 2013 and 2014, and a tax freeze, which he called the other extreme.
Council endorsed Tuesday a two-pronged strategy to get to that middle ground by June for the next three-year budget cycle -use ongoing public consultations to determine what services Calgarians want, and push city hall officials to trim finances.
While he admitted the prospect of eight and seven per cent annual property tax hikes will likely scare Calgarians and council alike, Nenshi also asked city managers to paint the bleak picture of the consequences of a tax freeze.
Next year alone, a tax freeze would force $90 million in spending cuts, chief financial officer Eric Sawyer told council.
"I really want council to have a discussion around the implications of both extremes," Nenshi told reporters during a break in council's strategic planning meeting.
The large potential tax hikes floated Tuesday mirrored the numbers surrounding the 2009-11 budget cycle. Those tax hike figures ranged from 6.8 to 9.6 per cent a year, but were trimmed significantly by cost-cutting, tapping reserves and through other means.
Floating higher numbers is a typical civic strategy, said Scott Hennig of the Canadian Taxpayers Federation.
"This is part of the scare tactic to make five per cent look reasonable," Hennig said. The city should get tough with its current labour contract negotiations to stave off a high tax pinch, he said.
The eight and seven per cent tax increases would eliminate any budget shortfall, Sawyer said.
However, the city has coped with shortfalls of up $50 million or higher in recent years without making service cuts that outraged the public.
The city is trying to be firmer in the way council sets "indicative" tax rates in June, rather than have city managers determine what services Calgarians need and then letting council take the lead in reducing the tax rate to something more palatable during November's budget debates.
Ald. Brian Pincott urged council to show "real leadership" this time -enact higher-than-normal tax increases this time to ensure that the services and quality of life Calgarians say they want actually get enacted.
Too often, council has brought in lower tax hikes that undercut its long-term goals for the city, Pincott said.
"To determine the path of our city based on what 15 politicians think is a safe number to ensure re-election? That is not a way to build a city," he said.
Taking advantage of the province's lower-than-expected take from provincial property taxes, council decided recently to hike the civic tax level by 10.4 per cent to create a $42-million annual fund that will help build and repair recreation centres, libraries and other community facilities.
Ald. Andre Chabot said to control its tax rate, council should redirect that money to offset what it was told is a growing operations shortfall.
"I say live within our means, keep the mill rate as low as possible and deal with the operating costs and then worry about what you can afford, as opposed to what you want to build," Chabot said.
Nenshi argued that those overdue infrastructure projects are as vital as ongoing city services.
Council merely set broad principles on Tuesday, but added one to those administrators proposed: "Raise the care and attention that the administration pays to restraining expenditures and continually seeking efficiencies."
Nenshi said city hall needs a "major shift" in how expenditures work, likening it to provincial health-care budget woes.
"Health-care costs grow and grow and grow, and every now and then you kind of have to prune it. And then they start growing and growing and growing again," he said.
"I do think It's time for probably a pruning at city hall."
Sawyer warned aldermen that current revenue and expense patterns will create a $100-million revenue shortfall in three years, and $200 million by 2020.
"The potential for that to be higher is very much real," he said.
Sawyer also confirmed that after council approves the next three-year budget plan this fall, the city will spend the 2012-14 period gradually reviewing all spending programs and making adjustments where possible.
That sort of "zero-based budgeting" was a longtime demand from former alderman Ric McIver, who finished second to Nenshi in last fall's mayoral race.
Calgary could hike Property Tax by 23%
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