Dave Lane on “Why St. John’s Budget Was So Insane This Year”

The City of St. John’s City Council just released a pretty intense budget. I’m one of the guys on that Council, so I want to explain what happened.

The City of St. John’s City Council just released a pretty intense budget. I’m one of the guys on that Council, so I want to explain what happened.

There are a number of things in our recent budget that aren’t going down very well with pretty much anybody: an increased property tax rate; increased business taxes; the elimination of a subsidy for water lateral repair; and a fifty percent cut to our arts grants funding.

Those are all pretty bad, and that’s not even the full list.

Why did we have to do this? Weren’t things going great?

At this point I’d like to interrupt myself and declare that I voted against this set of painful cuts and increases. But I’d be lying if I didn’t admit that part of the reason we’re in this situation is due to several decisions I approved of.

One major hit is an increase in salaries. That might sound bad, but the rationale is that this was the price paid to have our unions agree to a long-term solution to a looming pension deficit crisis that other municipalities are already suffering from. This has been viewed as a victory by several groups who advocate responsible government financial management.

As well, in another effort to cut long-term costs we offered early retirement packages to several high-level staff. While the positions will be re-filled, it will lead to fewer staff as empty positions are not filled at the end of the shuffle. This had an up-front cost but will reduce future yearly salary expenses.

Another biggie is a major investment in what’s called “capital works.” These are infrastructure costs we have to incur over the next decade, like: Federally mandated water treatment enhancements (to the tune of $200m); demographically demanded water supply additions (that’s $140m); and required replacement of aging, costly-to-maintain water and sewer lines like the ones under Water Street (estimated city-wide total: $200m+).

That’s just the water and sewer side of things. We also have lots of other projects in our 10-Year Capital Plan like bridges, buildings, parks, roads, and traffic infrastructure. This will all total $1.25 billion (!), and while we will be cost-sharing most of it with the Province and Feds, a lot of it leads to increased yearly operating and maintenance expenses.

This is all a really big deal. While a lot of our decisions have been made with the intent of “Investing in Tomorrow” (that’s the title of our budget), we are legally required to balance the budget each year.

That means we have to raise revenue (mostly through property taxes) to cover costs in the same year they’re incurred. Tax increases can be painful. So to minimize the tax increases this year, staff looked at where we can cut costs. Unfortunately, many of the cuts they were able to find really suck.

We’re in a serious pickle, folks. Expenses have skyrocketed at City Hall, and while it was all with the intent to improve the City for residents, many of us are hurting.

There has to be a better way to respond to our financial situation. Perhaps we need to go back to the drawing board, and there’s no shame in us on Council admitting that.

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  • The reality is Dave, at least looking at the City’s line-item budget as presented on your website, most Department’s saw significant increases in funding – legal, communications, surveying, inspections – all went up.

    It would seem that what cuts there were fell on the easily dismissed. The big line items of salaries and capital projects were not even touched.

    It was a foolhardy and ludicrous exercise during a recession, and everyone there, yourself included, knew better. The fact that the entire budget was presented, debated and then voted on during just one evening’s meting indicates just how messed up this Council really is.

  • The difference is truly striking when comparing how Dave Lane treats the citizens of St. John’s (respectfully), and how Jonathan Galgay treats them (as a nuisance). Thank you, Councillor Lane, for taking the time to explain the thinking behind the budget, and for admitting that it has its problems.

  • I’m curious about the fact that the city is legally required to balance the budget each year. Is this typical of municipal governments? I tend to think that balanced budget legislation is a terrible idea — after all, what business would deny itself the ability to temporarily go into the red in order to finance a profitable expansion? What family would refuse to put a kid through university because it would mean ending the year with some debt? But maybe there’s a good reason why the city is legally required to balance its budget from year to year…

    • Rob, I agree with your point, and there are pros and cons to the balanced budget requirement. The main pro is that it forces us to avoid major deficit issues like the Provin is currently going through.

      That said, cities are controlling more and more of our economic decision making and it’s worth exploring whether we need a new approach.

  • What members of staff are responsible for identifying arts, for instance, as an area for cuts? Were they directed to these areas by council? If not, what is the rationale for giving un-elected staff such discretion over sensitive budget areas? We have a real problem recognizing the value of seemingly intangible investments such as arts or heritage. It is not easy, but it is something we need to address with council and staff.

    I hope you understand that this is an incredibly opaque process for those of us outside City Hall, even if many documents are available somewhere or by request.

    • Hi Michael,

      Our Finance department asked managers from across the organization to identify areas to find savings given the financial situation we are facing. I agree that we have to work toward a more robust and inclusive approach, and hopefully this budget and the fallout will act as a call to action.

      The good news is that we’re going to start talking about the process as soon as we return in January.

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