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Memorandum

733 Coral Springs Blvd NE Calgary, Alberta T3J 3T4 Canada +1 (403) 830-8232 naheed@post.harvard.edu

TO: Council Colleagues

CC: Administrative Leadership Team

FROM: Naheed K. Nenshi

DATE: 24 November 2013

Budget 2014 deliberations

This week, we will be discussing the 2014 budget, starting with Administrations proposal.This brief note highlights the process we will be following, as well as my thoughts on the keydecisions before us. I have also been contacted by a couple of you on amendments youwould like to propose, and I have incorporated them here.

PROCESS

We will start at 9:30 AM on Monday with a presentation from Administration and questionson the presentation. We will then have public submissions, which will be like a publichearing: five minutes each followed by questions from Council. I have not heard a lot ofbuzz around these submissions, and I dont think there will be very many this year.

We will then have some housekeeping motions, including one to change the time of recess

so that we go from 9:30 am to 6 pm every day, which is my recommendation.

We will then move to table 4.1 and 4.2 to the right positions in the agenda and I will askCoun. Farrell as Vice-Chair of PFC to move the recommendations in 5.1.

We will then go through each of the departments in the order in the binder, starting withCommunity Services and Protective Services. Each GM will present their adjustments andyoull have the chance to ask questions of them or of the Directors. You may also proposeamendments to any of the departments at this time.

Once we have completed all departments, I will ask for amendments that impact acrossdepartments, including any relating to the $52 million tax room.

Once we have dealt with all amendments, we will return to a vote on 5.1, which is essentiallya vote on the budget as a whole. Should this not pass, bad things happen. I will recommendthat we simply keep going until there is a budget that a majority can agree upon. And I willgo first to those who voted against to look for proposals that they could support.

Once we have a budget, we pass a number of other motions to put it into place.

The tax rate is not finalized, however, until Tax Rate Finalization day, which happens in thespring. So if, for example, new labour contracts are finalized, there may be changes to the

8/13/2019 Nenshi's 2014 Budget Memo to council

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rate at that time. Thats typically also when we discuss the tax room, if any, as the provincialbudget is done by that time.

BACKGROUND

We are being asked to approve both the Capital and the Operatingbudget. The Capitalbudget, with the exception of pay-as-you-go capital, is funded from grants and reserves.Adjustments to the capital budget have no impact on the property tax rate.

On the Operating budget, you will see that there are both one-time and baseadjustments. One-time adjustments are typically funded from reserves. Changes to thesealso have no impact on the property tax rate. Only changes to base funding change the property taxrate.

ADJUSTMENTS

Ive gone through all of the proposed adjustments, and I am not opposed to any of them upfront, though I have a number of questions that I will be asking about a number of them.

The adjustments are by and large rather small numbers, and very few of them impact thebase budget (and therefore the property tax rate).

I understand that one Councillorhas some questions on item 4.2, and will have anamendment asking for a report back to Council in January. I think this is fine.

However, despite the fact that I think the adjustments are fine, I feel that 6.1% is much too

high. I think an absolute maximum should be growth plus MPI, which is 5.7%. This is adifference of about $5 million.

So, I suggest the following motion:

BE IT RESOLVED THAT Council direct administration to bring the tax rate increasedown to 5.7%, cuts to be subject to the approval of the City Manager.

Now, I would also be interested in bringing the rate down further, if this is Councils will.

I understand that a Councillorwillbe bringing a motion to freeze management exempt-levelsalaries for 2014. I favour this, but will also point out that, to be logically consistent, weshould freeze Council salaries as well.

I dont know what the impact of this would be on the property tax rate, but I expect itwould actually be quite small - certainly far less than one point.

I would also favour broad-based cut at the end of the process. If you are interested in such acut, I would suggest a motion such as:

BE IT RESOLVED THAT Council direct administration to bring the tax rate increasedown to 4.9%, cuts to be subject to the approval of the City Manager.

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I would NOT use this technique to go down much below this amount, which is about $14million below the 6.1%. If your desire is to see a lower rate, then I think Council has to beaccountable for the resulting cuts. If you want to go lower than about one point, then Iwould suggest a motion that either outlines the specific cuts you would like to see, or askAdministration to come back with those cuts for Council approval.

THE FAMOUS $52 MILLION

For 2014

Administrations recommendation is to use the 2014 $52 million for as-yet-unspecified floodmitigation work. I believe that this is notthe best use for these funds in 2014. When wehave a better sense of what mitigation efforts are needed, we will appeal to the province andthe federal government for these funds. If we need to cover a shortfall (and we will), I

believe that would be a good use for FSR funds.

However, I believe that funds are still needed for flood recovery work in this year. You willsee that there is a recommendation for a 4% increase in drainage fees. This may not seemlike much, but it is on top of very large increases we have already assessed in water andwastewater to get a handle on the utilitys debt.

The present value of this fee increase, as near as I can tell, is about $70 million. I believe it isdishonest to tell citizens on the one hand, were giving you back the $52 million and, onthe other, Were raising your fees by $70 million. The fact is that there are costs to theflood that will not be covered by other sources and we need to determine how best to coverthem. I would not like to use the FSR exclusively for this purpose, as I am certain that some

of these funds will be needed for supplementary mitigation work.

So, I propose that we REJECT the drainage fee increase and give the 2014 tax room to theutility for flood recovery work. Should they require more than $52 million, they can makeapplication to Council for a one-time transfer from the FSR.

For future years

I know there are many different and strongly-held opinions on this matter. I will remindCouncil, however, that returning the $52 million to taxpayers means a one-time decline inthe tax increase for 2015 only, but would remove a permanent source of revenue and

funding for the City. Some have suggested that we give back the $52 million for 2014 only.This is not possible. If it is removed from the base, it is removed forever.

A couple of Councillors will be moving to create a ten-year plan for transit, specifically theGreen Line. Given the financial constraints on the provincial government post-flood, Isuspect we will not see a new commitment to transit (including the promised butunannounced GreenTrip funds) until 2016 or 2017 at the earliest. I believe that the peoplein SE and NC Calgary deserve better transit sooner than that, and I favour this use of thefunds.