OPINION: Inflating the wrong numbers

It’s the first time that London’s city council embarks on a multi-year budget — laying out the spending plans for 2016,’17, and ’18.

Multi-year budgeting is said to be more efficient and allows politicians to make long-term decisions so the public gets better value for money.

The base budget starts with an average annual tax hike of 2.6 percent, or $71 yearly for a house worth $221,000. That would equal a total of $284 in new taxes over the next four years.

But it could get as high as 3.1 percent, or $85 annually for a four-year total of $340, if council approves 23 big-ticket strategic projects.

The underlying problem with this tax hike is that it is not tied to inflation as Mayor Matt Brown promised during his campaign in the 2014 municipal elections.

In Canada, the Consumer Price Index (CPI) is used to measure inflation.Multi-Year Budgeting

The CPI is a measure of price changes in consumer goods and services such as gasoline, food, clothing and automobiles.

Consumer prices in Ontario went up 1.3 percent year-on-year in November of 2015. Therefore the multi-year budget should not be above a 1.3 percent tax hike for the 2016 fiscal year.

This year, Mayor Matt Brown said in a press conference that this year’s budget and the tax hike is going to be tied to the Non-residential Building Construction Price Index (NBCPI).

The NBCPI is a quarterly series that measures changes in contractors’ selling prices of new non-residential building construction in seven census metropolitan areas: Halifax, Montréal, Ottawa–Gatineau, Toronto, Calgary, Edmonton and Vancouver.

Year over year (third quarter 2014 to third quarter 2015), the composite price index for non-residential building construction rose 0.5 percent with an increase of 1.78 percent over an average of five years.

Unless one measures inflation on NBCPI by taking the average increase of the index within a 10 year period – which is 2.65 percent – it remains lower than what is proposed in the budget.

At that point you have to ask yourself why we’re measuring inflation within a 10-year period. Because that sure is a great way to manipulate and use data to fit a desired outcome.

Where is the consistency? Why is the city’s 2015 budget tied to the CPI yet the 2016 multi-year budget is taking an abrupt reversal of inflationary measurements and proposing a tax increase at the same pace as the NBCPI?

The 2015 budget summary on Page 16 says, “from 2011 to 2014, the average council approved tax levy increase from rates was one percent while the average increase in the Ontario CPI was 1.9 percent . . . CPI does provide an indicator of general inflation.”

Recommendations by the city’s CFO to the Strategic Priorities and Policy Committee on May 11, 2015 for the multi-year budget (2016-2019) even states, “…the tax levy from rates increase at the same pace as the consumer price index.”

This seems to be an unfounded excuse to raise taxes at a time when Londoners are feeling the pinch from the sliding loonie, record household debts and hydro costs.

London’s working age population is becoming increasingly older and the labour force has been shrinking since the dawn of the 21st century.

This means that every year, London is left with fewer people paying taxes and more people in need of government services.

It also means that the city is going to be consistently pressured into raising taxes in the coming years.
Similar to other cities, we need to attract business and talent. So how is the city going to address this issue and take action?

Amir Farahi
Amir Farahi

Amir Farahi is the Co-Founder & Executive Director of the London Institute. He is an entrepreneur, columnist, public speaker, and is currently specializing in Economics and Political Science at Western University.

Recommended Posts

Leave a Comment

Contact Us

We're not around right now. But you can send us an email and we'll get back to you, asap.

Start typing and press Enter to search

Mayor Matt Brown