To kick off our Budget Week podcast, Peterborough Currents spoke with Dean Pappas, city councillor for town ward and chair of the finance committee about the impact of COVID-19 on the city budget and how the process is unfolding this year.
The audio in this episode is an edited version of the interview. To listen to the unedited interview, click here.
Hi there, you’re listening to Peterborough Currents. My name is Ayesha Barmania.
I feel like I almost don’t need to say it anymore but I’ll say it anyway… 2020 has been an unprecedented year. The measures taken to prevent the spread of COVID-19 have had a ripple effect through everything. And as we come closer to the end of the year, we’re beginning to see how it’s impacted the city’s finances in actual numbers.
To kick off our budget week podcast, I called town ward councillor and chair of the city’s finance committee, Deans Pappas to talk about how the budget process works normally how it has been working this year, and also how the pandemic and its recession have impacted it. With city council set to deliberate on the budget next week. I also asked Pappas, what changes he’s hoping council will make to the draft budget before it gets final approval in December.
What you’re about to hear is an edited version of our conversation. If you’d like to hear the unedited version, we have that available on our website. You’ll also find there a transcript of this episode.
I spoke with Councillor Pappas on Tuesday last week. And here’s what we spoke about.
1:04 Dean Pappas
In my mind, it’s one of the most important documents that we have. It outlines how the city will operate for the whole next year, basically, right? It’s our, you know, people say what’s your strategic plan? Well your strategic plan is our budget, right? If you need if you want a project or you want a program or, or a capital project to go forward, it needs to be in in the budget, right?
One thing that I’ve been learning about in kind of preparing this podcast and learning more about city budgets is that it strikes me as like an interesting example and like a collision point for a bunch of different forces that city council has to pay attention to. There is the public and like constituents opinions, but there’s also advocacy groups weighing in, there’s the outside agencies, there’s staff at City Hall and and provincial legislation that you have to take into account. I wondered if you could speak to how these different interests get represented in the budget? And how do you do the kind of balancing act?
2:02 Dean Pappas
Well, and I think that is the big question, right? I think we have to be mindful of it, and I think people need to keep in mind that, you know, the biggest part of the budget that people think we have, is actually non discretionary, that, you know, that is money given to us by other levels of government, like on social services, to be spent for specific programs. So almost the biggest part of our budget is non-discretionary. Because that’s just what it costs to deliver those services. So, some of those costs are mandated like social services are pretty fixed costs. Right. So there’s not a lot of movement there.
Our union costs our collective bargaining agreements, they’re pretty fixed costs. So you might see that there’s, you know, there’s, you know, there’s, there’s a big portion of our budget is just just salaries. So when you see that big number, but we employ 1000 people, so our payroll is pretty big, right? It’s not quite 1000 people, but it’s, it’s in that neighborhood, you know. And so the payroll is pretty large, when you start thinking about what they all get paid. And, you know, and as you move through all the ranks, you know, and they’re all in different departments, from, from housing, to fire to police, on down to library staff to arts, culture, and heritage staff, you know, to arena staff to people picking up the garbage and recycling.
So, they’re, you know, it is a balancing act, right. It’s like, you know, if we fund that, do we, do we have to lay off people at the museum or at the Art Gallery, or do we increase that and do we have not as much garbage pickup? Right? And, you know, I mean, so it’s all intertwined? It’s not, it’s not a linear line? Like, if we cut you know, if – Are you gonna cut transit to pay for something in a different department? I mean, it’s a difficult choice. Right?
Sure. And you had spoken about how the budget can be viewed as almost a strategic plan for the city. Well, what can we read about the city’s priorities in this year’s budget, if we’re – go ahead.
4:25 Dean Pappas
We’re still kind of getting there. But I, I put a I put as much stock as we can in the public engagement piece. And that’s why we kind of started the – we call it the public budget roadshow. I started it two years ago. This year, it got cut short by because of COVID, obviously. However, we still had 500 respondents to our survey, which is a pretty good number. To me, that shows some, you know, people are engaged, there was still, even during COVID people bothered to care about the budget and fill out the public budget survey. And priorities in that were housing, cost of living and social services.
That was the number one, two and three. When you really break it down, there was 12 priorities. But realistically, the top three are what you’re going to be able to kind of tackle.
So how does something like the public survey, how does that get used in the budget deliberation process?
5:28 Dean Pappas
Well, we’d like to have it done in early May and and staff –
In the old days, council used to give priorities to projects like staff would show up with a bunch of projects and programs that they thought were important. And then council would then go ahead and prioritize all of those right? When you do it this way, it’s almost like the public whose community it is. Right? They do all the living and paying in the community – they’re the ones who get to say, well, these are our priorities here. So, and this year was a little bit of a, of an extra survey because of the PDI money. And what did the public want us to do with that? So?
Yeah, so and now staff – just to get back to your question, sorry about that, I wandered a little bit there. But to get back to your question, staff then take those results, instead of presenting them to council like they used to, then we would pick, the staff really take those top three priorities and try to answer some of them in the budget documents, right. You know they take their cue a little bit.
So yeah, well, to take an example, and like you mentioned, from the public survey this year, number one, and two that were listed were housing and social services. And I want to point out also that something like safety and criminal activity came in at eight. I want to try and understand how those results that came in, as I understand it, council directed staff to draft this budget with a capped increase to the police budget, up to 2.18% I think.
7:22 Dean Pappas
One eight. That’s correct.
But I believe there’s also a direction to hire KPMG to look for potential cuts in social services departments, which includes the housing portfolio-
7:34 Dean Pappas
That wasn’t just social services, they were to look at every department.
7:40 Dean Pappas
Yeah every department. They came with 16 areas, they felt that we could save money, and some of them are reasonable, some of them aren’t reasonable. But at budget time – I’ve asked staff to actually break out the 16 and insert them and have the reports ready for when we discuss them in budget, so that we can pull them out at that time, but we’ll see where they go on that. But like, but KPMG really did say that there wasn’t a lot of fat left on on the bone or meat on the bone. Did I mix my metaphor? Or meat on the bone or whatever.
You might be looking at meat to trim at this point.
8:23 Dean Pappas
Meat to trim, I know.
The police budget is up to the police to bring back. We recommend a cap or a guideline for their increase. And I believe that was a six to five vote at 2.18%. That, you know, there are some councillors that wanted to have a higher guideline. So yeah, you probably know where I would have gone.
But so then it’s up to the police by the Police Services Act. We can’t direct the police operationally. So we can give we can say no to the budget. Like when they finally do present their budget here on Tuesday of next week, the police will present their budget to Council and the council will debate it on Wednesday of next week or the week after. We can say no and send it back to them.
Could you have said – sorry – could you have capped the increase at zero percent? I noticed outside agencies had to be kept at zero percent this year.
9:37 Dean Pappas
Well, the police, you can’t cap it, you can suggest the budget guideline to them. So we could – so, because of the way the Police Services Act is structured, we could have suggested zero or a lower number than 2.18%. Which I would have been you know, I would have been up for debate on any number. Right. So. But we needed to but that was what council settled on. Six councillors settled on that. You know, there are many councillors that wanted a higher number.
Yeah absolutely, um, to kind of switch gears and talk a bit about – so we’ve been talking kind of more about services and expenditures at this point, but to kind of turn more towards the sort of revenue side of things, I guess.
10:25 Dean Pappas
There aren’t any this year. (laughter)
Well, I want to return to – so council was struggling this past summer to agree on a number for the property tax increase. And as I understand it, there was no consensus.
10:41 Dean Pappas
You didn’t and so staff has come back with a proposed 2.87% property tax increase.
10:52 Dean Pappas
I want to just kind of try and understand that process like has giving – has leaving it up to staff to propose the increase given a bit more leeway to this budget? Or, like what options has it opened up?
11:10 Dean Pappas
It’s the first time in my memory that council couldn’t agree on a guideline. Like we’ve always been able to get in the ballpark. Normally, it’s a range that we give them. Like in the past – when I was first elected to council, it would have been a range like 1.5% to 2% in that range, and staff would come in in the middle somewhere. And then when Darryl became mayor, we gave them a hard number. And then this is the first year that we haven’t been able to give them any number.
I think there’s a number of reasons for that. Everybody has a different number in their head I guess. I just think and I see this recession that we’re in, in a very clear way maybe because I’m on George Street every day. The people who could afford to work from home, you know, can afford to work virtually, many of them – I can’t say all because that’s never the rule – but there were many people who could work from home and they didn’t miss a lot of paychecks. Work virtually, right? Many of the other – the middle income people and the people in the service industry, they were minimum wage earners, they did lose their jobs. Right so to me, there’s a real discrepancy in this recession that we’re in.
You know, if you just look at all the billionaires – I don’t want to get on my soapbox but – you know the top one percent during the pandemic they really did increase their overall wealth during the pandemic if you look at the numbers. I just think, to me when I’m trying to argue for a lower number, I really believe that we need to give people a break here.
So you’d like to see the increase lower than 2.87%?
13:03 Dean Pappas
Absolutely. I don’t think people can afford that. And even in the commercial area, those costs are passed on by businesses. If a business owns its property, it’s paying taxes.
So this draft budget that we’re looking at is pretty, like perfectly balanced. With the 2.87% property tax increase, accounting for loss of revenue elsewhere. What would you suggest? Like what concrete savings solutions might be out there if we went with a lower percent increase?
13:37 Dean Pappas
Well, I think that’s what we have to go through and look at, right? I know that Councillor Beamer has offered up a bunch of cuts. There is 0.45% I believe – sorry I don’t have the budget book in front of me, I apologize – I think it’s 0.45% of that is, is going directly to a debenture, which is like a mortgage for a city this year, so we can do some more capital works this year. So our capital budget is $70 million. If you were to pull that out, it would come down to about $61 million. So that’s still a good chunk of money for capital this year. And you can shave a bit off the taxes there too.
14:22 Dean Pappas
So that’s just one example of how you can shave that down without touching services, you know what I mean?
It seems like you’re walking a very, very tight line between, like austerity, and but also like injecting cash and keeping up services for the folks who need it who are also hurting because of COVID.
14:43 Dean Pappas
Yeah, I’ve been telling people I believe we’re in a three year kind of recovery that we need to manage our way through, I think this year was really going to be about survival for people. Right, and then after that, we could almost relaunch.
The economy and the pandemic are hopelessly tied together. Until we solve the pandemic and save people’s lives, we’re definitely going to be in a recession and we’re going to be on hard times.
Absolutely. And what’s the starting point that we’re coming into this kind of recovery period? Like, what can you tell me about the deficit that we’re carrying?
15:29 Dean Pappas
Yeah, the COVID. The effects of COVID – because of loss of revenue and increased costs for services, that will cost roughly $21 million this year. So that’s $21 million dollars, we didn’t have.
We got some relief money for social services and transit, which was two of the bigger pots of money where we ran over, because we have to, because no one’s going to be left out in the cold, right? We have to make sure that we have services for people. And, yeah, we have to run transit. Even though it’s not a mandated service, it is an essential service.
Sure so not mandated by the province, but –
16:19 Dean Pappas
It’s not mandated. You don’t have to have a bus service. But you should have a bus service.
16:26 Dean Pappas
But social services is mandated by the province and both of those chewed up our budget. So we got some money from the feds and the province to cover off those two.
And then we’ve had to raid our reserve funds to come up with a lot of other money, which a lot of that will have to be paid back from future revenues.
And as I understand it, municipalities aren’t allowed to carry a deficit from year to year, has there been any leniency from the province on that kind of requirement? Or?
17:01 Dean Pappas
No, and I don’t expect there to be actually. So we’re still about $2.7 million short. But staff are confident that they’re gonna be able to make that up this year, the problem is that that affects future revenue streams, because they’ll have to pay back those reserves. So there’s going to be a bit of an accordion effect. We can pay it off now, but then future revenues will also be down.
Sure. So I wonder if you could make a little bit more concrete, what we might be looking at in terms of, you know, making up this deficit later. Like, are we thinking about higher user fees, higher tax rates, like in future years?
17:41 Dean Pappas
Well, I think – and here’s just my thoughts – we’re not counting on any casino revenues this year. So those are in the budget. So without going into austerity cuts, you could – that’s not money we’re counting on – so you could use that money to pay back the money you borrowed from your reserve accounts in future years. So that would be one year of the casino would actually pay that back. That’s about $3 million.
So we’re $2.7 million short. You know what I’m saying? So you’re almost there. If you just don’t budget anything for the casino for a couple of years, you’ll be up on the plus side
As long as it meets all of its costs.
18:42 Dean Pappas
And yeah. And before COVID it is it was paying around that – it was paying about $2.8 million is what we were getting from the casino.
Great. And so. So coming into my second to last question. So you talked a bit about how you want to see a lower property tax increase. But I also wondered, just in general, how do you feel this budget, this draft budget at the moment strikes its balance? And is there anything at this point that you’d like to see changed before it’s voted on in December?
19:17 Dean Pappas
Well, as far as the number goes – when you look at other communities that are, you know, there’s lots of other comparators that we can see.
You pay more for property tax in Peterborough like we’re the fifth highest taxed city in our classification in Ontario. But you know, it’s a bit of a – I don’t have the numbers in front of me, I should have looked them up and if you give me a second I can – but if you look at say, Milton, for instance, their average household income is about $110,000 a year, and they’re paying, they’re paying $1,700 per household in property taxes.
And if you start looking around what other cities are paying, and what the average household income is, then, we’re actually really high. Like we’re not anywhere where we should be on both of them. Our average household income is $54,000. And the average house in Peterborough is paying $4,200 in property taxes. Throw on insurance, and a mortgage payment, and, you know, there’s not much left.
20:46 Dean Pappas
You know, so I think it’s all tied together, like people’s ability to pay, you know, the fact that we don’t have enough jobs and jobs are important. And other people don’t like talking about jobs all the time. But it gives people a sense of purpose, it allows you to have some freedom that you can, you know, you have money in your pocket, you can do what you want gives you that kind of financial freedom, right?
So I think they are both tied together. I guess what I’m trying to say is that in Peterborough, we have high taxes and a low income, whereas other cities our size have a much higher income and lower taxes. So we’re a little the wrong way, and that’s a hard cycle to get out of.
So my last question is kind of on a different topic. So the meeting on Monday is one of the opportunities for the public to weigh in. There have been several over the year. And we’re actually not that far out from when the budget deliberations or the budget roadshow would start for the 2022 budget.
What do you think is most useful for the public to weigh in on? And how do you hope to engage with constituents on the budget?
22:08 Dean Pappas
You know, I always tell people to please, you know, there’s lots of ways to contact us. Most councillors are pretty happy to talk to their constituents, I always answer the phone when you call in. And you know, I’ll get back to you as soon as I can if I’m at work, or I’m from getting my flu vaccine, I’ll always try to get back to you as soon as I can after that.
And I just think everybody has their own whatever project and you know, what I’ve learned about the budget is people have their own what they think is important to them and their community. And we need to hear that, as councillors and as politicians.
The thing is, sometimes it might take a while. And I don’t want people to be discouraged that, you know, I went and asked for my road to get paved, or I went and asked for my community garden to get put in or I needed new playgrounds or I need a pollinator in my area. Whatever your project is or whatever your passion is – that’s great. We love that as councillors. So don’t be discouraged. Just sometimes it takes a while for that to kind of transpire. So, yeah, just don’t give up. Just keep coming back. Keep coming back and, you know, that’s how things get into the budget eventually..
That’s great. Well, thank you so much for your time today, Dean and for taking me through this. I really, really appreciate it.
That was my conversation with City Councillor Dean Pappas, who is the Chair of the Finance Committee. That’s all for this episode of the Budget Week podcast from Peterborough Currents. We’re covering the municipal budget deliberations over the next few weeks with podcasts and articles, which you can find on our website: www.peterboroughcurrents.ca
Have a question about the budget that you’d like us to look into? Email us at [email protected]
Music in this episode comes courtesy of Mayhemingways.
My name is Ayesha Barmania and I’ll talk to you later this week.