De-spin Cycle: Where's the Vision in an historic 8% tax increase?

Post by Daniel Fontaine in

7 comments

De-Spin Cycle
Our CityCaucus.com cleaning staff put Raymond Louie's rosy OpEd through the de-spin cyle

On Wednesday, Councillor Raymond Louie, Chair of the City's Budget Committee published an OpEd in the Vancouver Sun titled Tough choices had to be made on the city's budget. He's right, tough choices had to be made, however, taxpayers are still waiting for them.

Now that the Vision dominated Council has voted in favour of the largest single tax increase in the history of Vancouver, we thought it was time to put Louie's bit of verbiage through the CityCaucus.com de-spin cycle. Here is a complete copy of Louie's piece with our analysis.

This year's Vancouver city budget faces unprecedented challenges. The global recession is affecting how we manage the finances at city hall. Our new council has kept its focus on the priorities we were elected on -- homelessness, public safety, and the economy -- while making some difficult decisions to put the city back on stable financial footing.

FACT: Mr. Louie says that Council made some difficult decision to keep the budget in line. If you recall, it was Vision that ran on a platform last November that tax increases would be kept to the rate of inflation which is currently pegged at about 1.5%. Are the budget trimming decisions Louie refers to include spending $88,000 tax dollars for an off-site lavish inaugural ceremony? How about Council's decision to spend $570,000 on former City Manager Judy Rogers severance package? How about Louie's decision to increase the office budgets of elected officials by almost 5% this year?

When we took office in December, the city was facing a potential 13-per-cent property tax increase due to spending decisions of the previous council.

FACT: The previous Council left Louie with a $15 million budget surplus last year. As far as the fictional 13% potential tax increase, that figure was the amount the public service annually puts out as part of their "wish list" to the politicians. In every single budget civic politicians are then expected to trim that down to a level voters can live with. In the case of Louie and Vision, they made an election commitment to raising taxes no higher than the rate of inflation...but they ended up voting for an 8% tax increase.

By February, the economic downslide was hitting our development sector, to the point that revenue from building permits dropped by almost $13 million compared to February of 2008.

FACT: The economy had started to tank well before February. As Budget Chair, Louie either ignored the headlines or was asleep at the switch. For example, one only has to look at the meeting agenda of the last six months of the Development Permit Board, who not only are reviewing far fewer projects, more than half of their meetings have been cancelled because there are no projects in the queue.

Let's not forget the public revelation that the previous council had signed the city to a completion guarantee for the Olympic village to a Wall Street hedge fund, with sky-high monthly interest payments that were threatening the city's financial capacity.

FACT: Vision continues to reference the Olympic Village in the context of the city budget. As they say in the business, this is a red herring. On page 17 of a budget report, signed off by City Manager Penny Ballem, officials state:

The Olympic Village project does not impact the 2009 Operating Budget or property taxes.

Therefore either Ms. Ballem and her staff have it wrong, or Mr. Louie is trying to hoodwink voters into somehow believing this year's budget was negatively impacted by the Olympic Village project. I'm more apt to believe Ms. Ballem's version of events on this one.

These past few months have been tough. Tight credit markets are inhibiting new development and investment. Rising unemployment means increasing demand for affordable, publicly funded city services at our libraries and community centres.

It is within this context that council is taking action to address our economic challenges head-on, and make decisions in the best interests of Vancouver's long-term economic success.

We trimmed $42 million from the city's operating budget by focusing on non-essential spending without hurting service delivery. Targeted adjustments include reductions in travel and communications budgets, as well as programs that Mayor Gregor Robertson campaigned on ending, like Project Civil City.

FACT: There was no major restructuring of city services, nor any major program cuts to speak of. The City Manager allegedly told the unions she will not be laying off any employees as part of the 2009 budget process. While their much touted hiring freeze has loopholes big enough to drive a truck through.

To say that $42 million was "trimmed" from the budget is pure fiction as most of this amount were programs and services the public service put on their wish list as part of the normal budget process.

As far as Project Civil City (PCC) goes, the current council didn't really eliminate it, they merely rebranded it. In any event, to reference the PCC office in the Op Ed as part of a major budget cutting exercise is nothing short of laughable. The total cost of the program was $300K out of the City's $1 billion dollar operating budget. One other minor fact Louie failed to mention was that before PCC was rebranded it was a catalyst for the development of 3200 new units of social housing in partnership with the Province from 2005-2008. It is one of the main reasons Mayor Robertson has been at so many social housing ribbon cutting and ground breaking ceremonies lately.

Council gave city manager Penny Ballem the authority to implement a hiring freeze -- which she did almost immediately -- providing one-time savings.

FACT: There are many so exemptions to the current hiring freeze...so you could say it's more like a hiring frost.

Council renegotiated the financing deal for the troubled Olympic village; that decision alone reduced Vancouver taxpayers' risk by an estimated $90 million by lowering interest payments that would have had a major impact on future city budgets.

FACT: Firstly, let's not forget that Councillor Louie and many of his Vision colleagues voted in favour of the very Olympic Village project he now openly criticizes to score political points. Secondly, the Olympic Village has no impact on this year's budget. See notes above.

We recently announced the first phase of our economic strategy by outlining an aggressive plan to spur investment in Vancouver through the construction of new rental housing. Council is proposing an innovative two-year plan that would see a variety of incentives -- reduced parking requirements, increased density, waived property taxes and development cost levies, expedited permit processing -- offered to developers who build new rental housing immediately.

This plan will stimulate our local economy, provide jobs for our construction sector, and address our lack of affordable housing -- in other words, an economic and housing stimulus plan that makes sense for Vancouver.

FACT: It was Mayor Robertson that put a chill on investment last Fall when he said he wanted to implement a new city tax on all vacant condominiums in the City. Now that the economy has tanked, we no longer hear about his new condo tax.

Secondly, this Mayor and Council have yet to show any leadership regarding the development of a regional economic development strategy for Metro Vancouver. That is compared to Mayor Watts in Surrey who has indicated she wants to help lead this effort

We are continuing council's policy of shifting property taxes to provide fairness for businesses in Vancouver. Reducing the property tax burden on our small neighbourhood businesses keeps them competitive, and makes Vancouver a more desirable place to invest, start a business and hire employees.

FACT: It was Louie and his Vision colleagues that all consistently voted against the concept of a tax shift while they were in opposition. In fact, Louie was the most vocal opponent claiming that there was no evidence that a tax shift actually made any difference in the local economy.

On a side note, Louie also complained that by supporting a tax shift, the previous NPA Council was giving tax breaks to big banks, corporations and multi-nationals. We note he didn't include that bit of information in his opinion piece.

This is part of council's plan to help Vancouver through these tough economic times. Considering how hard our local businesses have been hit by the recession, now is the most important time for council to continue the business tax shift. With a brutal gang war taking place in Metro Vancouver, council is funding 96 new police officers at a cost of $16.8 million over two years. With the enormous burden the Vancouver police department has taken on by providing regional leadership on the gang war through Project Rebellion, these police officers are urgently needed.

FACT: It was the previous Council that actually approved funding for the 96 new police officers long before the current gang mayhem on Metro Vancouver streets. We note it will take at least two years before these police officers are fully recruited, trained and in their vehicles. This is hardly the quick response to the gang warfare Louie is trying to portray it as.

Our new council is being prudent. Through the re-alignment of budgetary priorities, new programs promised in last year's election by Mayor Robertson -- a detailed external audit of city spending, enhanced child care support, a mental health advocate, green neighbourhood grants -- make up just 0.08 per cent of this year's 5.83 per cent city tax increase. These are difficult times for our city's finances. Council has had to make tough choices, and there will be many more in the future.

FACT: Despite an 8% tax increase, Louie and his Vision colleagues increased property taxes to pay for provincially mandated programs such a new mental health advocate. He claims the city had to make "tough choices"...but fails to outline what those "tough choices" actually were? 

Ironically, Louie's decision to hire an external auditor to cut costs, actually cost $300,000. This is the exact same amount they claim to be cutting by closing the Project Civil City office.

However, the decisions this council has made in its first four months have put the city on much firmer financial ground, and as a result, we are well-positioned to get through the economic challenges facing the world.

FACT: This Council is going to face significant budget challenges in both their 2010 and 2011 budgets unless a wholesale restructuring of city services is implemented. No decisions made in this budget have set the framework for reduced costs in the future, with the possible exception of hiring an external auditor. However, unlike an independent auditor general, they will be directed by Council and likely not have a free hand to make the necessary recommendations to keep future tax increases low.

A budget is the ultimate blueprint to help voters better understand the priorities of any government. This budget has helped to solidify that the current city government in Vancouver is not only without a plan for the local economy, it simply doesn't have a plan. What do you think?

7 Comments

I think you're still a bit tipsy from the Judy Rogers wing-dig.

1) Gregor Robertson never promised to keep an overall tax increase at inflation, in fact, he received some flak during the election for predicting that there might be a double-digit increase in taxes to pay for the previous council's expenditures. Ladner pounced all over this and told anyone who would listen that while "Gregor Robertson is talking about a 10-per-cent tax increase, blaming it on the past council" he would institute an impossible tax-freeze. Here is a press release to this effect:

http://www2.canada.com/theprovince/news/editorial/story.html?id=eba9238d-978e-4c13-92b0-ed94748b6317

2) Council might have inherited a $15 million surplus but it also inherited a necessary tax increase of 9%, a number determined by the Chief Financial Officer Estelle Lo late last year. This was due to the large increase in police, 311 etc. etc.

3) You cannot possibly think development permits this year are going to bring in as much revenue as last year.

4)The Olympic Village project does'nt directly affect the budget but the decrease in our credit rating brought about by owning too much of the project's risk due to previous councils' mismangament does affect the budget significantly as it affects our interest rate.

Michael,

Where do I begin.

I went back into the archives of the Vancouver Courier to find this wonderful quote from Allan Garr (by no means is he considered anti-Vision)...and here's what he wrote about keeping taxes to the rate of inflation:

"When pressed, both [Ladner and Robertson] say they intend to hold future taxation to the rate of inflation". That seems pretty clear to me...but just in case you weren't convinced, Councillor Kerry Jang said the following in a Sun article pre-election:

"We would be looking at re-allocation from existing funds and then any tax increases would not exceed the rate of inflation."

On point number 2, you state council "inherited a necessary tax increase of 9%". Huh? Isn't it the politicians that decide what the final tax rate will be? Isn't that what they're elected to do?

Then you go on to blame the tax increase on new police officers. FYI - Vision not only supporting the hiring of 96 cops, they wanted more...so you can take that argument off the table. Next you blame 311 for tax increases in 2009...FYI the 311 program is being paid for through internal efficiencies aka cost savings, not new taxes.

On point 3, I would be interested if you could tell me how much higher borrowing charges have impacted the 2009 budget? How much of the 8% tax increase was due to those higher interest rates?

Clearly you are reading off the Vision talking points on this one...and you may need to go back to 'Vancouver Kid' to get a few more.

Vancouver's beauty will only take her so far, at the end, she will have to show that she has the smarts to encourage people and business to maintain a relationship with her.

I think this council is more about maintaining current union wage and benefit packages and less about what services are being offered. As a resident, I really don't care if my community services are union or not, there should be a criteria of skills met, quota of services provided and if not, then the city should be able to hire someone else. And I don't buy the slave wages argument either, if the city has a transparent assessment provision, then mismanagement and/or corruption is revealed rather than hidden.

Costs go up, and I am only willing to pay more for my city services if I can readily measure its value.


I have written to express my appreciation for your combined efforts previously. I am doing so again because of the importance of the article entitled “ De-spin Cycle: Where’s the Vision…….. There is no other media which gives this type of excellent coverage of civic matters. The issues you reference are the issues by which civic administrations should be judged: transparency, integrity and prudence. I am, by nature, opposed to governmental excess but even those who embrace it are well served by your disclosure of the duplicity being practiced by the unholy alliance of a spend-thrift council being encouraged by an administration stripped of its independence.

As I have said before, keep up the good work.

Very thorough rebuke of Louie's opinion piece. I enjoy your commentary.

Daniel,

Neither the second-hand statement from Garr nor the hypothetical statement of Jang demonstrate anything. At the unveiling of the platform, Mr. Robertson said on the subject of a tax increase “It may be as high as 10 per cent" Here's an article with the quote:

http://thetyee.ca/Blogs/TheHook/Municipal-Politics/2008/10/27/VisionPlatform/

By "necessary tax increase" I was unclear and meant the level of tax increase that would be necessary just to pay for previous spending. The City's CFO pegged this at 9 percent last fall.

I know Vision voted for the new police, it simply has to be admitted that a large portion of this tax increase comes from that major new bi-partisan spending, whether it was a good decision or not, that's all.

I don't buy the 311 "internal efficiencies" argument for a moment. The running costs are $5 million per year, $5 million of wages, equipment etc. Now where is the $5 million decrease in the workforce and the equipment they require caused by 311? Who does the City now not pay $5 million to because of 311? If they are paying the same amount of people the same amount of money as before, and buying the same amount of stuff as before, then the $5 million is new spending. Now everyone has a bit less work to do thats all, I wish someone would answer my phone at work too.

General debt charges come out of the operating budget, which affects property tax directly. Any new borrowing will be at a higher operational cost and I assume there will be an ongoing rollover of debt.

Can someone please explain to me the recurring dread that CUPE and their Vision pawns have of the 311 system? If it isn't Vision who are blaming 311 for their woes it's Frances Bula who criticizes it, leaving the impression she's getting her wires pulled by the party in power.

311 no doubt will have some start up costs, but once people realize how they can get their City Hall working for them, there will be no turning back. Why the union opposes having their workers be more efficient and accountable to taxpayers is beyond me.

This may end up being one of the great Judy Rogers' legacies for Vancouver.

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