Overspent: Ottawa's annual budget illusion

When the City of Ottawa's 2018 draft budget is tabled Wednesday morning, we can be sure of one thing: property taxes will increase by no more than 2 per cent.

Same as this year, and last year, and the year before that. That's the election promise that Mayor Jim Watson made in 2014, and he's planning to keep it.

But there's a difference between what the city budgets, and what it actually spends — often a multimillion-dollar difference.

$61M over budget in 4 years

According to its audited annual reports, the city has spent a total of $61 million more than it budgeted over the last four years.

It's been able to cover this additional spending partly through higher-than-expected revenues — the city took in almost $22 million more than anticipated over that same period. 

But more often than not, the city covers its budget shortfalls by raiding reserve funds.

There's a term for budgeting for what you'd like to spend, as opposed to what you can honestly expect to spend: aspirational.

And perhaps nowhere is the city's budget as blatantly aspirational as in the snow removal and police budgets. 

Snowed under

Over the last decade, the city went over its snow budget in eight of those 10 years  — often by millions.  

In fact, the average annual deficit for snow removal was $9.3 million during that period. 

A 2016 KPMG study said the city's key problem was that it expanded its roads — 400 kilometres were added in the past five years alone  — but didn't expand its budget for keeping them plowed.

The city has taken some action to close this gap.

The base budget for snow removal grew by $4.5 million in each of 2016 and 2017. The use of more outside contractors saved the city another $600,000.   

But other money-saving measures, such as waiting to plow after 10 centimetres of snow accumulates instead of seven, have not been made. This would have saved the city an estimated $1 million per year.

Police budget a fallacy

The police budget is a similar story. 

The Ottawa Police Service has approached overtime budgeting with what can only be described as an abundance of optimism.

The last time the police OT budget was in the black was 2010.

Why don't they just plan realistically in the first place? Wouldn't that be a more transparent approach to budgeting, instead of it being aspirational?- Randall Bartlett, University of Ottawa

The red ink appears to have "stabilized" in 2017 at $3 million — that's $3 million more than the police service actually budgeted for.

In fact, the police budget deficit is expected to be $7.4 million this year. And OT spending is just one factor.

Other reasons? Selling "collision reports" brought in $1 million less than expected (again), while the planned $2 million in "efficiencies" — the magic word for aspirational budgeters — fell short as well.

The police service says it has a plan to reduce this year's deficit to $1.5 million by finding "savings" — by spending less on vehicles, by cancelling projects and by freezing discretionary spending — think travel, conferences and minor building repairs.

This is hardly the first year the police budget has fallen short.

In 2016 the police service posted a whopping $6.4-million deficit; in 2015, a mere $2.2-million shortfall. 

But this year the charade has reached farcical proportions, with Chief Charles Bordeleau deploying the phrase "not financially sound" to describe the 2018 draft budget.

To reach council's two per cent tax increase goal, the police service will not be able to make $3 million of payments to its reserve funds, money that will somehow have to be repaid over the course of the next 10 years.

And to make this 2018 police budget work, the force is promising to find $2 million in efficiencies, something it has never been able to do.

We're paying the bills, so who cares?

To be clear, the city pays its bills. By law, municipalities are not allowed to run deficits.

The city covers its year-end shortfalls in two ways: from higher-than-expected revenues, or by dipping into one of its more than 30 reserve funds. The second method is the most common.

But experts say what should be an emergency measure has turned into an annual habit.

"You have reserve funds for various different purposes. But at the end of the day, the budgeting process should just be really clear," says Randall Bartlett, the chief economist at the Institute of Fiscal Studies and Democracy at the University of Ottawa. 

"If they consistently miss their targets and have to dip into the reserve funds, then the question is: Why don't they just plan realistically in the first place? Wouldn't that be a more transparent approach to budgeting, instead of it being aspirational?"

Realistic, transparent budgeting — now that's a worthy aspiration.