Councillors are looking to cuts, hiring freezes, and dipping into savings to avoid a significant tax increase that municipal staff told them is all but inevitable.
Halifax regional council’s budget committee met on Friday to set the preliminary tax increase for 2023-2024. It’s a moving target, and the first step in the months-long budget building process, expected to conclude in April.
Councillors voted to build the budget around a 4% increase to the average tax bill.
As the Halifax Examiner reported last week, municipal staff recommended an 8% increase to the average property tax bill. That amounts to $173 for the average residential bill and $3,955 for the average commercial bill.
With assessment data not due until January, the municipality doesn’t have an actual tax rate in mind. Even with the higher 8% increase, the rate could go down.
What the municipality knows now is that, faced with high inflation and increasing labour costs, it needs to fill a $55-million hole. Chief administrative officer Jacques Dubé told councillors that’s after staff already found $20.5 million in savings and cut $6.9 million from municipal departments. They also proposed a $7-million cut to new sidewalks.
“Prior to this extensive budget reduction effort we were faced with a revenue deficit that would have required an over 11% increase to the average tax bill,” Dubé said.
“Without increasing the tax bill by 8%, the municipality would need to draw on its already over-committed reserve funds, reduce capital from operating funding, or reduce services. These options are not advisable.”
How to get down to 4%
Chief financial officer Jerry Blackwood outlined some of those unadvisable options. Council could use a combination of reserve accounts and cuts to get to more palatable 6% and 4% increases. He warned those lesser increases would lead to higher ones in future years, starting with at least 8.5% next year.
Coun. Tony Mancini moved to amend the increase to 4%.
“I believe as a starting point 8% is too much, that we should be really looking at the starting point being at that 4%,” Mancini said.
Deputy Mayor Sam Austin was opposed to lowering the targeted increase to 4%, suggesting it would be “fiscally reckless.”
“What I’ve heard from staff is to get to squeeze this down to 4%, we’ve basically got two options: we can use one-time money, which sets us up for even more pain and misery next year, or we get to go the austerity route and I’m not interested in either one of those programs,” Austin said.
“I think there are things that maybe we could do to actually get things down to six but I think 4% is such a pipe dream and I just can’t vote for that.”
Mayor Mike Savage supported Mancini’s amendment, and disagreed with Austin that austerity is required to reach 4%.
“If we start at six, we’ll be at seven by February, and we’d be above that by March,” Savage said.
Cuts, hiring freeze on the table
Coun. Shawn Cleary said if councillors want lower taxes, they’ll have to cut.
“We need to agree that over the medium and long term, the size of municipal government, its services, programs, initiatives, is going to be smaller,” Cleary said.
“Is it better to start with a lower number and figure out if we want to add or is it better to start with a bigger number and try to reduce? In my experience, in the six years I’ve been on council, we have never as a body been able to reduce.”
Dubé warned that cuts to services mean cuts to staff. Because of collective agreements, notice, and severance, HRM may not see savings from those cuts in the current year.
Coun. Tim Outhit said council needs to at least look at a hiring freeze.
“We’ve got to look at hiring freezes because next year isn’t any better,” he said.
Coun. Waye Mason said HRM may have to start employing vacancy management again. That’s the practice of keeping positions unfilled to save money. But he’s not in favour of cuts or hiring freezes.
“I’m concerned about our staff hearing us talking about cuts, cuts, cuts, and freezes, freezes, freezes,” Mason said.
“I have a lot of concerns about this, but I want staff to know that like all of council knows that staff are working hard than I’ve ever seen them work and that we’re gonna be cognizant of that as we work through this process.”
Insurance against next year’s hike
Mason proposed a friendly amendment to Mancini’s motion.
“We should only use one time money to keep the tax rate low this year if it’s matched now by a subsequent operating cut in the following years,” he said.
The amendment directed staff to find the money “by preparing proposals for reductions to the operating budget and only use onetime expense to offset costs in the current fiscal year if matched with an operating budget reduction in subsequent years.” That’s designed to ensure keeping the tax increase down this year doesn’t lead to a larger increase next year.
Mancini’s amendment, with Mason’s friendly amendment, passed with Austin and councillors David Hendsbee and Trish Purdy voting no.
After that amendment passed, Austin proposed a cut of his own: removing $8 million from the paving budget. Council voted to add that money to the budget to start to get HRM’s roads up to standards.
Austin’s amendment passed, meaning the budget will have less operating funding going into the capital budget. That could change later in the process.
Coun. Kathryn Morse moved for a staff report on restoring $3 million of the $7 million cut from new sidewalk construction. That motion passed.
Budget deliberations continue with an update on capital budget planning next month.