Calgary Council Didn’t Lose $250 Million, They Spent It

Calgary City Hall by Michael J on Flickr

As the saying goes, the first step is admitting you have a problem.

After hours spent debating how to shift taxes around from one budget line to another, desperately avoiding the real problem, it’s clear City Hall is still in denial.

At the heart of council’s budget debate is a supposed $250 million ‘hole’ in the city’s budget due to the collapsing property values in the downtown core.

You might think the rational response to a drop in revenue would be to reduce expenses – that’s what many Calgary businesses and families were forced to do during the downturn.

But, that’s not how City Hall works.

Calgary Council operates what it calls a ‘revenue-neutral budget’ where if property values ever go down, our tax rates automatically go up to compensate, ensuring the City never has a budget deficit.

Council planned to just rely on businesses in surrounding communities to make up the shortfall while waiting for the economy to recover.

But the economy hasn’t recovered yet and downtown property values keep dropping, so now council plans to ‘shift’ the burden on to households as well.

The $250 million isn’t really a ‘hole’ in the city’s budget that council has to fill anyway.

Rather, it’s how much extra taxes everyone will have to pay to ensure council can keep their ever-larger spending spree going.

Council is still weighing options ahead of next Monday’s meeting, but filling this ‘hole’ could require as much as a 25% tax hike over the next four years, which would cost an average Calgary household an extra $500 every year.

This isn’t small change – we’re talking about a serious crisis.

The Alberta Institute’s Calgary Spending Tracker Report shows exactly how the city got to this point and why overspending should be blamed for council’s fiscal mess.

City Hall claims that spending has to go up every year because inflation pushes up the city’s costs and population growth increases the demand for the city’s services.

Even if this claim were true, our analysis shows that Calgary’s spending has outpaced the combined rate of inflation and population growth every single year since the beginning of the recession.

Yes, downtown property values have declined, but that isn’t why Calgarian’s taxes are going up.

Calgarian’s taxes are going up because, from 2015 to 2018, the City’s operating budget increased from $3.45 billion to $3.99 billion.

That’s a 16% increase in spending in just four years, at a time when the combined rate of inflation and population growth in Calgary was just 7.8%.

Had council limited their spending increases to inflation plus population growth, spending would have been $3.72 billion – $272 million lower than it is now.

That would mean no $250 million ‘hole’ and no need for a $500 a year tax increase.

Heck, if council had kept spending flat since the recession, they could give everyone an average $500 a year tax cut!

Council claims their 2019 budget will increase spending by less than the combined rate of inflation and population growth.

But they made that claim in 2015, 2016, 2017, and 2018 too, and look how that turned out.

Council should cut spending back to what it would have been if they’d been more careful, and use the savings to hold taxes flat – a real 0% tax increase for once.

If they refuse, when you receive your property tax bill next month, remember that the City didn’t lose $250 million, they spent $250 million more than they should have, and now you have to pay the price.

This article first appeared in the Calgary Sun.