Rose-coloured assumptions tint mayoral candidates' fiscal plans
McKenney, Sutcliffe plans don't differ much when it comes to lightening your wallet
The first thing to know about the battling fiscal plans of this election's two key mayoral contenders is that their proposals aren't all that different.
Not, at least, when it comes to lightening taxpayer wallets.
The difference between Mark Sutcliffe's promise to raise your taxes — from 2 to 2.5 per cent — and Catherine McKenney's promised three per cent cap is relatively minor.
McKenney's plan adds $10 to $20 million more to city coffers than Sutcliffe's taxation target. That's not chump change, but is a teeny slice — less than half a percentage point — of the city's operating and capital budgets.
The extra stress on the average taxpayer? About $40.
So neither plan would amount to a dramatic change in the money that flows through city hall.
- Mayoral candidate Mark Sutcliffe promises tax cap of 2.5%
- Mayoral candidate Catherine McKenney promises tax cap of 3%
The second thing to know is that campaign financial promises are big-picture plans of how to manipulate a complicated budget of more than $5.1 billion. They make many assumptions, some more realistic than others.
Zero per cent tax increase without cutting services? That's the pledge of some candidates, like Bob Chiarelli, who's promised to hold the line on any new spending for a year. It's hard to see how that's possible. Consider that last year, keeping up wage increases alone cost $80 million.
The Sutcliffe and McKenney plans are more reasonable. Still, some details in both are worth unpacking.
Sutcliffe efficiencies not guaranteed
Sutcliffe's big assumption is that he will be able to find $35 to $60 million in savings.
He's promising to cut 200 vacant jobs — meaning no one would be laid off — for $15 million of those "efficiencies." He'd lop off another $20 million in consultants' fees and "better use of technology."
The rest would be found in a line-by-line review Sutcliffe would launch after taking office.
"Efficiencies" is a popular campaign buzzword. Can politicians successfully follow through? Maybe. Can't hurt to try.
Even the former federal parliamentary budget officer thinks so.
Two days after Sutcliffe released his plan, his campaign tweeted a comment from Kevin Page, who now heads the Institute of Fiscal Studies and Democracy. "Mr. Sutcliffe's financial plan to hold the line on taxes and look for efficiencies is a fiscally responsible approach," Page said.
2023 savings from cancelling tax breaks questionable
Another issue is the $5 million in savings Sutcliffe believes he'll find in 2023 from cancelling programs that give tax exemptions to some businesses — the brownfields policy and the community improvement program (CIP).
But that's not how these programs work.
Under these policies, companies get tax breaks after they build something new or improve their property. So cancelling the programs will mean less foregone revenue — down the road. But Sutcliffe says he'll honour already approved applications, so there would be no savings next year.
Finally, Sutcliffe isn't saying who contributed to drafting his plan.
His campaign said by email that he was "informed by financial and management experts with experience in municipal finance, including those familiar with the finances at the City of Ottawa, as well as current and former councillors."
But no names were provided.
McKenney optimistic on inflation
McKenney's fiscal plan is expressed somewhat differently than mayoral platforms are usually laid out. And because of that, it makes an apples-to-apples comparison with Sutcliffe's plan harder.
Using what they call a top-down approach to budgeting, the McKenney team looked at the average increase in the budget for the last four years, during which the annual tax increase was also three per cent. That figure was 4.6 per cent, which, when applied to last year's $5.1 billion budget, adds an estimated $235 million to the 2023 total.
McKenney also estimates a 4.1 per cent increase in costs, based on 1.4 per cent growth in population and a 2.7 per cent inflation rate. Applied to last year's budget, that comes to about $210 million — leaving $24 million or so left over for spending on some of their priorities, says the campaign.
The approach seems to borrow from federal budget-making, which might be because McKenney's campaign co-chair is Tyler Meredith, who formerly worked on six federal budgets as a top player in Prime Minister Justin Trudeau's government.
Meredith and Neil Saravanamuttoo, former chief economist of the G20's Global Infrastructure Hub, are key architects of McKenney's fiscal plan.
Page gave this plan his stamp of approval, praising its transparency.
"Key economic and fiscal assumptions, sources, and uses of funds and debt sustainability considerations are clearly laid out," Page said.
(Page assesses the way mayoral plans are crafted — he doesn't endorse any candidate's policies).
McKenney's inflation rate assumption is a key issue. The Bank of Canada forecast inflation of about three per cent by the end of 2023, and two per cent in 2024. So McKenney's 2.7 per cent assumption is definitely optimistic.
However, the team points out that they are also setting aside $15 million in contingency money.
Now, voters have to make up their minds about McKenney's plan to use $90 million in reserves for the next two years, but there's no denying that's available money.
The planned tapping of reserves amounts to about 15 per cent of the $583 million in discretionary reserves the city had at the end of last year.
Cycling infrastructure challenge isn't what you think
One of McKenney's signature promises is to build 25 years of cycling infrastructure in the next four years, and to pay for it by issuing $250 million of debt in the fourth year of the next term of council.
This may be a challenge — but not because of the money.
As McKenney has previously explained, the annual servicing of the debt would be covered by the $15 million the city already spends every year on cycling. This would make the debt cost-neutral on an annual basis.
Although taxpayers would pay tens of millions in interest, McKenney argues the city will get more infrastructure now for less money.
They frame the total cost by pointing out that council approved $239 million in debt to redevelop Lansdowne for the second time in a decade with little fanfare.
The real issue is whether it's possible to expand the cycling network so quickly to the extent McKenney is promising.
Consider that the city spent just under $6 million last year on stand-alone cycling infrastructure. The remaining $9 million was spent on cycling infrastructure that was part of other projects, like road reconstructions, the city treasurer's office has confirmed.
Clearly, 25 years' worth of road-building — with a side of cycling — can't be fast-tracked into four years.
Now, some cycling priorities might well be fast-tracked and the city has asked the public to weigh in on the most important missing links. McKenney's campaign pointed out that some areas could get temporary cycling infrastructure to improve safety.
Still, questions remain about the city's capacity to accomplish McKenney's full $250-million vision in four years.
Options laid out for voters
So both sides indulge in some rose-coloured assumptions and both have question marks hanging over some of their platform promises.
Another similarity: no candidate dares suggest cutting any services, no matter their tax plans.
It hardly seems plausible.
Keeping taxes at or below the rate of wage and price increases, while continuing to fund everything Mayor Jim Watson has been doing for the past four years, while paying for a bunch of new priorities? Something has to give.
But that tough reality shouldn't overshadow the good news in this election: for the first time in a decade, voters have a choice of different — and mostly realistic — visions for the city.
At least the value of democratic choice is inflation-proof.
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