Assessment increase only good news during dire...
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Jan 09, 2013  |  Vote 0    0

Assessment increase only good news during dire budget meeting

Our London

On a night filled with ominous budget forecasts — and little in the way of new information — London councillors did receive some good financial news.

During the Strategic Priorities and Policy Committee meeting on Wednesday (Jan. 9), city staff provided councillors with what was called a budget overview, laying out what might be involved in achieving council’s stated goal of a zero percent budget freeze for 2013. In the shadow of dire warnings of serious cuts to not only city services, but also organizations such as the London Public Library, London & Middlesex Housing Corporation and London Police Service, city treasurer Martin Hayward delivered actual positive news.

The city’s assessment growth, Hayward said, increased more than twice the 0.5 percent staff had predicted.

“I am pleased to tell you it is looking like it is coming in at around 1.43 (percent), which is good news,” Hayward said. “What that does is leave us with a surplus of around $5 million in assessment growth this year. Even as late as September we didn’t think it would come in much higher than that”

City policy for dealing with assessment growth states 50 percent of funds are to be put towards debt reduction. The other 50 percent can be directed either to an economic development fund or for use in reducing the tax levy.

The recommendation by staff is to use that $2.5 million on economic development. Council is looking to invest $6 million per year for each of the next 10 years into an economic development fund. Hayward said the $2.5 million would be a start, but that there were other options available to help fund the city’s five initial economic prosperity projects.

Another way to support that fund, Hayward explained, would be by calling in London Hydro’s $70 million note, payable at six percent, and having it renegotiated on the open market. While the tax levy would need to be increased by 0.9 percent, or $4.2 million to replace lost interest from London Hydro, Hayward said the $70 million could be invested with the interest being directed to the economic development reserve.

In addition, the city could request London Hydro increase its annual dividend to the city to reflect savings made through renegotiation of the note — possibly by as much as $1 million.

“Lower interest cost means their profit would go up, income tax would go up, but would still leave more for distribution to the shareholder, which you are,” Hayward said. “We would have to investigate it more to make sure it is doable, but we think it is.”

Hayward also said staff was looking at the potential sale of city-owned assets that provide non-core services. Hayward, who said the $70 million London Hydro note is the city’s “major asset,” also cautioned councillors that any asset sale is more of a long-term solution and could potentially cost the city in the short-term.

The unexpected assessment growth, and options around utilizing the London Hydro note (which was created when the utility was transformed into a corporation) were almost certainly the most positive points of the nearly four-hour meeting.

The majority of the budget overview was spent hearing from several boards and commissions, which unlike civic departments, have been unable to bring forward individual budgets at zero percent.

The largest of those, would be the London Fire Service, which submitted a budget at 7.7 percent, which would represent a $4.1 million increase to the budget. Another controversial submissions was made by the London Police Service, which a 3.6 percent increase in spending, causing an additional $3.2 million increase to the tax levy.

In one of the more dire predictions of the evening, Police Chief Brad Duncan said attaining zero percent budget would result in the loss of 53 positions and a drastic reduction in services, particularly various pro-active programs.

The London Transit Commission (LTC) had similarly dire warnings should they be asked to further reduce their submitted budget of 4.9 percent, which would be a $1.2 million impact on the tax level. Like Duncan, LTC boss Larry Ducharme warned of layoffs, the reduction of service hours and even the elimination of several bus routes.

Those warnings, along with those made by officials from the public library and housing corporation, brought a clear message from Mayor Joe Fontana who lauded city staff for making the cuts the boards and commissions seem unable, or unwilling, to make.

In particular, Fontana said city staff have done “the hard work of looking at doing things differently” to achieve zero without “essentially” impacting services. While acknowledging service reductions are on their way, Fontana said boards and commissions have to be willing to do the same.

“We keep hearing from our boards and commissions that ‘we can’t get to zero, we just want you to give us more money,’” Fontana said. “I know we will have the opportunity to have those people come back, after today, to ask why they can’t do what our own city services have done over the past several years.”

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