Hamilton officials, politicians and taxpayers are patting themselves on the back for the belief that the 2014 budget could hold a record low average tax increase.
Taxpayers are looking at no worse than an average 2.8 per cent increase in 2014, which, in an election year, should be reduced closer to zero once politicians start nibbling around the budget’s edges.
Almost every day you can’t help but hear from the mayor or councillors about economic revitalization that is occurring in the city’s downtown with cranes in the sky and fresh concrete on the ground.
But a closer look reveals Hamilton’s optimistic financial situation is built on a house of cards. While the city isn’t in a Detroit-style financial situation just yet, there is reason enough for concern from both city financial staff, and Hamilton’s credit rating agency.
The city’s forecasted debt is expected to soar in 2014 to $809 million from this year’s $294 million. By 2016 it is expected to top off at just over $1 billion, and then slowly — extremely slowly — retreat from $985 million in 2017 to $855 million in 2020.
The city has also depleted its reserve funds that are supposed to be used in emergencies, or when the province starts turning off the funding spigot.
And despite all the talk of a $1 billion in building permits being issued a couple of years ago, the city’s assessment growth remains steady at a measly one per cent. And remember that health campus that is taking shape in downtown Hamilton won’t mean any revenue to the city. Institutions, such as McMaster, don’t pay property taxes.
Having low assessment growth means low revenue growth, forcing councillors to place more of the tax burden onto residential homeowners.
And since the province has eliminated Hamilton’s special funding for social services in 2011, taxpayers have had to cough up more money to fund provincially mandated programs.
Added to the city’s financial misery is Hamilton has a $2 billion infrastructure backlog. Even though councillors have agreed to raise an extra half-million dollars towards fixing sidewalks, roads and sewers, it’s barely making a dent in the city’s crumbling infrastructure.
In past budgets, councillors relied on city staff to work their accounting magic to delay, or shuffle around funding so the politicians could pull out the proverbial low tax increase rabbit out of the hat with minimal impact to taxpayers, programs and services.
But starting with the 2014 budget that could change.
Standard and Poor’s, Hamilton’s credit rating agency, said the city has limited flexibility to relieve its debt due to a lower average income base to raise needed revenue. The credit agency has recommended the city take immediate action to alleviate the basic financial problems.
Will politicians take action? Probably not. Raising taxes isn’t popular, and with limited revenue opportunities, such as raising fees, the city has already pushed the envelope on those options.
The only avenue councillors feel is open to them is to cry poor and call on the federal and provincial governments to help the city out. This is a song that has been heard many times at Queen’s Park. But provincial politicians have become used to tuning out the noise from Hamilton, leaving the city to boast about its prosperity based upon fool’s gold.