Audio Councillors to debate spending and service levels during budget talks this month

City staff presented councillors with a draft of the 2024 municipal budget during a finance committee meeting on November 6.

The budget proposes $487 million dollars in spending for 2024 — $359 million for operating expenses and $128 million for capital projects. Local property tax payers won’t have to foot the whole bill. The city receives funding from higher levels of government and generates some revenues from user fees, sponsorships, and other sources. But after those revenues are accounted for, there’s $173.8 million left in the draft budget that must be paid for through property tax.

To raise that $173.8 million, Peterborough’s property tax rate would have to increase by 9.59 percent next year. For the median household in the city, that would amount to a 2024 property tax bill that is $434.61 higher than last year’s.

Inflation is one big factor behind the proposed tax hike, according to city staff. Another factor is the Peterborough Police — they’re asking for about $4.6 million more in 2024 than they received in 2023. Unspecified “compensation initiatives” are also a big driver of the tax increase. The city’s commissioner of corporate services Richard Freymond said council has recently approved in closed session wage hikes for some city staff, but he didn’t say which staff.

But the budget isn’t set in stone yet. Over the next month or so, city councillors will consider the budget presented by staff and debate whether any changes should be made to it. Then, they’re expected to give final approval to the budget at a city council meeting on December 11.

Peterborough Currents has teamed up with Arthur Newspaper to cover the budget deliberations in a podcast format. We’ll be releasing podcast episodes as city council’s budget deliberations progress.

In this first episode of the series, we discuss our initial reactions to the draft budget and we also check in with Harry Kitchen, a retired Trent University economics professor with an interest in municipal finance.

Kitchen argues that of all the taxes we pay in Canada, municipal property taxes offer the most bang for your buck. He says it’s the “lowest of all the taxes you pay, and you’re getting the most services for that tax.”

Property taxes pay for roads and bridges, paramedic and police services, the public library, garbage and recycling collection, drinking water and sewage treatment, and more.

Across the country, municipalities are finding it harder and harder to deliver those services without raising property taxes — the only revenue source they have complete control over. Kitchen believes it’s time to explore the creation of other revenue tools for Canadian cities, such as income and sales taxes. He says one advantage of income tax is that it targets people who have the means to pay. “Income taxes are paid by richer people, property taxes are sometimes paid by people who are asset-rich and cash poor,” he said, giving as an example seniors on fixed incomes, whose property taxes increase even as their incomes stay the same.

You can listen to episode one of our 2024 Budget Podcast in the audio player above, or you can find it in your favourite podcast app. If you prefer reading to listening, a transcript of the episode is below. Please let us know what you think of the episode, and if you have any questions about the municipal budget, get in touch so we can try to answer them in a future episode!

Episode Transcript

Sebastian Johnston-Lindsay 0:03
Hello I’m Sebastian Johnston-Lindsay from Arthur Newspaper.

Brett Throop 0:05
And I’m Brett Throop from Peterborough Currents. Arthur and Currents have teamed up for a new podcast series all about the city budget. City finance staff released Peterborough’s draft budget last Monday. It includes almost half a billion dollars in spending. $487 million to be exact.

Sebastian Johnston-Lindsay 0:24
To fund all that spending, property taxes would have to raise by 9.6%. And that would translate to an extra $435 in taxes the median household would have to pay next year, if the budget gets passed, as is.

Brett Throop 0:36
Over the coming weeks , city council will go through the budget line by line. And as they do, they will likely be looking for some cost savings. Councillors had indicated earlier this year that they wanted to keep the tax increase between 4.5 and 5.5%. So bets are still on as to what the final amount will be.

Sebastian Johnston-Lindsay 0:55
We’ve got our copies of the budget in front of us here, all 379 pages of it. What would all the money detail in these pages be spent on? What should it be spent on?

Brett Throop 1:06
That’s what we’ll be asking in this podcast series. And you know, we’ve been throwing a lot of numbers at you here. I can almost see listeners’ eyes glazing over out there. So hopefully you’re still with us.

Sebastian Johnston-Lindsay 1:18
Speaking of still being with us, Will Pearson the publisher of Peterborough Currents is here.

William Pearson 1:22
I am also here, yeah.

Sebastian Johnston-Lindsay 1:25
Will, the other day in the office, you chuckled and said, “I love the budget.” Why do you love it?

William Pearson 1:29
I love the municipal budget, and especially the process to develop it, because to me, there’s this like interesting disjuncture between the agonizingly boring nature of the meetings that produce the budget and the high stakes of the decisions that get made during during that week. I find it kind of exhausting to engage during budget week, because these meetings often go on for four or five hours for multiple nights in a row. And so that’s exhausting. But it’s just it’s also fun. And I think it’s a really interesting window into how the city works. You learn a lot about what the city does in the budget process and how it does it. So yeah, I just I always learn something about the city. And that’s why I like it.

Brett Throop 2:19
So we’ve all had a few days to you know, “Control-F” the budget, go over it. So let’s get some not-so-hot takes on what’s in these pages. Will, what stands out for you?

William Pearson 2:30
Well the first thing I did when I looked at the budget and saw that it was the draft budget is proposing this 9.6% tax increase was I tried to figure out, okay, what’s what’s really driving that? And what really jumps out to me is the police budget. The police are asking for a 15.3% increase to their budget this year. And when you factor — and that accounts for almost a quarter of the property tax increase that’s being proposed for for this year. So you mentioned that if the budget is passed as is, the median household will be expected to pay about $430 more in property taxes in 2024 than 2023. More than $100 of that is going to go to the police to help satisfy the police’s increased budget ask for this year. And then the other thing I looked for, and I look for this every year, when when the budget comes out is whether there’s any capital spending being proposed on the Crawford Trail. This is a trail that if it was completed, would connect to Lansdowne Street to downtown. A couple years ago, the city got some money to build two blocks of it. But then they didn’t keep building the rest of it. And so there’s this like isolated two blocks of trail. Those two blocks are beautiful. But I think it’d be really good for the city, the city’s transportation network, if we could just finish that. But every budget, there’s a little note that says that due to fiscal constraints, this project is being pushed further into the future again, and they just never seem to find the money for it. And that’s true in this budget, too. There’s no money for that trail set aside. Those are the two things that I looked for when I first opened it up, but I’m looking forward to diving into to get into it more over the next couple of weeks.

Sebastian Johnston-Lindsay 4:15
Yeah, and I think, more or less along the same line to pick up on some of the things that you were saying there, Will. For me, the big thing is, of course the police budget, but then also what’s not included in the budget. There’s a whole section here which, wherein staff kind of go through different requests or recommendations that they would like to be able to fill but we’re not able to include in the budget. However, on the other side of that we have this massive increase to police funding where as you know, things like social service workers and providers within the city to deliver services like Ontario Works and early childhood care clinics and things like that are not being recommended by staff, but are being recommended as almost like a wish list that they wish they could have included, but cannot within the constraints set by council, and taking into consideration the massive ask of the police.

Brett Throop 5:05
So I’m obsessed with cycling, active transportation. So those were the first things I looked up in the budget. And I saw there’s $1.5 million for cycling infrastructure and new sidewalk construction. There’s a plan for a new multi-use trail from Del Crary Park to Little Lake Cemetery. There’s a little bit of money to get that started next year. There’s also money for safety improvements for the spot where the Rotary Trail crosses Hunter Street in East City. There’s some funding to resurface trails, and there’s $500,000 for new sidewalk construction. I think this is important. You know, the city wants people to drive less as a way to reduce car emissions and tackle climate change. But if people are going to leave their cars at home and walk to work, or to go shopping, you know, they need to have sidewalks. But there are many streets in the city that are missing this basic piece of infrastructure. The transportation master plan calls for an aggressive investment in sidewalks. I don’t think anyone would call $500,000 particularly aggressive. But I think this speaks to a bigger theme, which is that there seems to be a mismatch between the city’s stated ambitions and its financial means. I mean, the last City Council declared a climate emergency in 2019. You know, that’s like a pretty strong statement. But I don’t think we’re seeing the urgency of that declaration reflected in city spending.

Sebastian Johnston-Lindsay 6:29
And this gets to something you and I have been talking about lately and wanted look at in this episode. We’ve been asking, why does the city seem unable to take more ambitious action on the big issues of our time, like climate change and the housing crisis?

Brett Throop 6:40
Yeah, it’s not to say that city hall is doing nothing on these issues. That’s definitely not the case. But there is a sense that the city’s efforts are being held back by financial constraints. So we wanted to understand this more, you know, what are the financial constraints cities like Peterborough are under and what can be done about it? So I called up a retired economist from Trent University, Harry Kitchen. He is an expert in municipal finance, a field that he knows is pretty boring to most people. And the first thing you should know about Professor Kitchen is, Kitchen, is he’s sort of a defender of property taxes. He told us taxes are the price you pay to live in a nice country, or a nice city in this case. And Professor Kitchen also plays golf, though pretty badly, he said. And every year when his golf buddies get their property tax bill in the mail, he hears all about it.

Harry Kitchen 7:33
Every friggin year, they complain about the property tax, and they know exactly what they’re payin’. I said how much do you pay in provincial income tax? “Oh, I don’t know, I never look at it.” What are you pay in federal? “Oh, I never look at it.” What do you think you’re paying sales tax? “How would I know?” So there you go. You don’t even know what you’re paying on those taxes. And when you look at the services that you’re using, you’re bitching about the tax that’s the lowest of all the taxes you pay, and you’re getting the most services for that tax. I mean think about it. Well then they started saying, “I never thought about that.” Well one of the reasons is they get in the car and they drive down the street and think it’s a free good. “Oh, why should I have to pay for this? I’m not gonna pay for this, it’s a free good.” Phone the police? It’s free good. They show up. Phone the fire department, they show up. Hey, it’s a free good. They never think about having to pay for these things.

Brett Throop 8:23
So the property tax is an easy tax to bitch about, as Kitchen says. But, he says, you know, consider all the services you get for that money, plowing roads and sidewalks, collecting garbage and recycling, sewage treatment, transit, fire services, police, paramedics. You know, that’s just a few. The list goes on.

Sebastian Johnston-Lindsay 8:42
So Professor Kitchen points out that property taxes pay for all of these services like plowing roads and sewage treatments, which are all the the traditional domain of municipalities. But then as he talks about, cities like Peterborough are also trying to tackle these these newer challenges like climate change and the housing crisis. So why are cities struggling to come up with the money to confront these challenges?

Brett Throop 9:01
When it comes to housing in particular, you know, it was not something that cities actually had to pay for in the past. Social housing used to be provided by the province. But in 2000, the Mike Harris government downloaded responsibility for running public housing agencies onto municipalities. So as a result today, Peterborough manages 2,000 social housing units here in the city, and in the county. And most of them are through the Peterborough Housing Corporation. And Professor Kitchen says the decision more than two decades ago to make cities responsible for social housing is still putting strain on municipal budgets today.

Harry Kitchen 9:35
I mean, most of us, I think, would argue that social housing is something that municipalities shouldn’t be responsible for. It should be from either the federal or provincial governments. But the reality is that the feds or province aren’t giving enough money for housing problems and cities have had to pick up the slack on the social housing. And I think municipal politicians are doing the right thing by saying look, we have to do something about this. In which case those of us who are paying property taxes, you know, are going to have to pony up, and pay some property taxes that will go into funding social housing.

Brett Throop 10:04
So Peterborough’s draft budget calls for the city itself to spend $6.4 million in housing and homelessness next year. There’s some funding from the province as well. But that’s like the city’s portion. And that’s a lot of money for a city the size of Peterborough. And you know, some would say that that’s a bill the province should be footing more of. But Professor Kitchen says, if you think the Ford government will take back responsibility for social housing, keep holding your breath. You know, Ford’s not likely to reverse this decision by Harris, who was Ford’s predecessor as the PC Party leader.

Sebastian Johnston-Lindsay 10:36
Okay, so some people want the city to do more to tackle the housing crisis. But there’s this other line of thinking that says actually, this shouldn’t be the city’s responsibility at all, it should be up to the province. So are there other services that the provincial government passed on the cities and said, Here, you deal with this. Like, why don’t you pay for it.

Brett Throop 10:55
So I mean, I was in elementary school when the PC governments of Mike Harris and Ernie Eves were in power in the late 90s and early 2000s. So I can’t really tell you like everything that they downloaded onto municipalities. But there’s one other big item in Peterborough’s budget that stands out. Every year, Peterborough has to pony up millions for social assistance, Ontario Works. It’s a provincial program, like the name is Ontario Works. But the city is partly responsible for administering the program locally. The cost for Peterborough taxpayers is expected to come in at $4.3 million next year. So again, many, would say wait a minute, the province has way more money, way more taxing power than the city. And the city already has this long list of other services it has to deliver, like firefighting, running the library, all these things we mentioned. So why is the municipality helping this much richer upper level of government deliver one of its services?

Sebastian Johnston-Lindsay 11:50
Yeah, and I mean, this gets back to a point I was initially making about like the allocation of the city’s money. And you’ve described a couple big examples where provincial decisions two decades ago, are really straining Peterborough’s budget. And the city doesn’t really have a say in those decisions. But is there anything the city can actually do to raise more money if it wants to make the progress on pressing issues like, again, say climate change or the housing crisis?

Brett Throop 12:12
Well, city council could always raise property taxes even higher. That’s the option the city has the most control over. But there’s talk in other cities like Toronto of finding new revenue streams for cities.

Sebastian Johnston-Lindsay 12:24
And what would that look like?

Brett Throop 12:26
So I mean, Toronto is facing a $1.5 billion deficit. It’s in, like, really big financial trouble. Premier Doug Ford has agreed that it’s a big deal. It’s a problem. And he agreed to work with Mayor Olivia Chow, to find a solution to the city’s budget woes. And those talks are still ongoing. But one thing that the city has proposed is a municipal sales tax. It’s something that some cities in the US have, and Professor Kitchen has looked into the idea. So I guess the idea is that like, every time you go buy a bag of milk, or a new laptop, or whatever it is, the city would collect some tax on that sale. And that would flow into the city’s coffers to pay for things like transit and fire services and whatnot. Another idea is a municipal income tax, which again, Professor Kitchen has also looked into.

Sebastian Johnston-Lindsay 13:10
So we already pay income taxes to the federal government and the provincial governments, and they take a portion of everyone’s paychecks. And I’m guessing a municipal income tax would allow cities to also skim a bit of money off people’s paychecks to go towards the city. But something tells me that’s going to be a little bit of a tough sell.

Brett Throop 13:24
Yeah, I mean, that’s how it would work in a nutshell, and no doubt it would be contentious, but Professor Kitchen says the tax wouldn’t have to be big to be effective.

Harry Kitchen 13:33
I did some estimates on this at one time. And, you know, a very, very small sort of 1% surtax on the provincial income tax could generate a lot of revenue for a lot of cities. Income taxes are paid by richer people, property taxes are sometimes paid by people who are asset rich and cash poor. You know, a lot of seniors live in homes, now prices have gone up, property values have gone up, their assessment has gone up a lot, but their income hasn’t gone up. And these are people who, I’m not suggesting — they’re not poor in the grand scheme of things because they could always sell their house I suppose and they’ve got revenue. However, do you really want to force them to do that?

Brett Throop 13:34
So he’s saying it would be more equitable to tax people’s income to help pay for cities to do all the, you know, extra things they need to do to adapt to climate change and all that rather than continually hiking up property taxes.

Sebastian Johnston-Lindsay 14:25
So I guess the question really is would either a municipal sales tax or municipal income tax work in Peterborough?

Brett Throop 14:30
The short answer is no, according to Kitchen. He says Peterborough is too small for either of those taxes to work here.

Harry Kitchen 14:36
One of the concerns if you give a city the opportunity to have a tax, let’s say if it was some kind of sales tax, or if it was even a surtax on the income tax. If you’re a small city, it can cause what we call cross border problems. It might drive people either to shop outside the boundaries or to live outside the boundaries to avoid that tax. The City of Toronto, — and the general argument is, if you’re going to give these cities an opportunity for new tax, it should be in as large a geographical area as possible. The GTA, which is large enough. It’s too large for people to be bothered driving out to try and save five cents on something or other or to get about 1% off their income tax when they probably have to commute into Toronto to work.

Sebastian Johnston-Lindsay 15:21
Okay, so new taxes are not a realistic option for Peterborough. It sounds like but what else can we do to improve the city’s financial situation?

Brett Throop 15:28
Well, Kitchen thinks that there’s at least a chance that Toronto’s financial woes could end up helping Peterborough. He expects Mayor Chow and her officials will likely push the Ford government to share a portion of the HST with Toronto. And if that happens, other cities would no doubt pile on and demand the same. So the HST is 13% right now. 8% goes to the province and 5% goes to the federal government. So even if the province gave 1% of that to municipalities, it would go a long way to helping cities like Peterborough tackle the challenges they’re facing.

Sebastian Johnston-Lindsay 16:01
So it sounds like there’s a few things to take away from this discussion. The city is strapped for cash and lacks options for increasing revenue. So they’re leaning on the only tool they have, which is to increase the property tax rate. And so the 9.59% or 9.6% increase kind of begins to make sense. Especially after years of the rate increase being so low, amid really high inflation rates. So things are getting more expensive, and cities aren’t exempt from that. But that’s going to be really hard on people too, I imagine.

William Pearson 16:27
Yeah, and especially for like, if you think of maybe seniors who live on a fixed income. I think that the thing about the property tax is is that it’s not connected to how much money you are necessarily making the way income tax is, right? And so, for people who have maybe lived in the home for a long time, and then live on a fixed income now, it’s, yeah, it can be hard to pay. I don’t own property I rent, but I know that part of the rent I pay goes towards the property taxes that my landlord pays, and that those property tax bills are factored in, when my landlord sets my rents, right. I live in a rent controlled unit. So it’s not like my rent can increase that much. But I fully expect my landlord to increase the rent at the next opportunity that he has, which is, which is in a few months to kind of make up for this. So everyone’s going to have to have to pay this money. But yeah, I can’t help but land on the same page as kKtchen in, like, I believe in taxes, I believe in government. And so I don’t necessarily like begrudge begrudge paying taxes.

Brett Throop 17:35
Yeah, like, I mean, Kitchen was talking to us about how there are consequences to not raising the property tax, too. And I mean, that’s partly why Toronto is in a difficult financial position right now, not only that, I mean, the city would also say it’s because of provincial downloading, but also the fact that John Tory froze income tax levels for for a few years when he was mayor. And, you know, we are facing all these challenges. We do need all these services from the city and someone has to pay for them.

Sebastian Johnston-Lindsay 18:05
Yeah and I think it’s important to note, just as we’re leaving people here, that there’s a whole democratic process that’s about to unfold in front of us over the next couple of weeks. And we’re gonna be with you every step of the way. So if you have any, any questions or or queries about this, feel free to write to us, but we’re going to be covering the process as, as you said, off the top very, very closely. And we’ll be we’ll be back with more coverage of 2024 Peterborough budget week.

Brett Throop 18:31
Yeah, we’d love to hear people’s questions about the budget. If you have questions about how it all works, or anything, just please send it to us and we’ll try to answer it in the next next episodes. Anyway, so yeah, thanks.

William Pearson 18:42
Okay, talk to you next time.

Sebastian Johnston-Lindsay 18:43
Thanks for listening.