City could aim for 2 to 2.5% tax increase while facing inflation pressures

Ottawa Mayor Mark Sutcliffe remains committed to his campaign promise to raise property taxes by no more than 2.5 per cent as city staff embark on crafting a 2023 budget under "extraordinary inflationary pressures."

City council will vote on formal budget directions for staff next week. Ahead of that debate, the current recommendation is for all city departments, the police services board and the transit levyto increase by two or 2.5 per cent when draft budgets are tabled on Feb. 1.

That's a smaller increase than the current year's budget, which was capped at three per cent, in line with former mayor Jim Watson's own election promises.

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Thereport from chief financial officer Wendy Stephanson, who is the interim city manager after the departure of Steve Kanellakos earlier this month, agrees setting a predefined tax increase helps the city'sfiscal discipline, but the report also lays out the many challenges ahead.

Sutcliffe continues to sayhe's notinterested in cutting any programs and services, which he said during this fall's election campaign.

"That's what we owe the residents of Ottawa after the election campaign," he said. "People in Ottawa voted for low tax increases and that's what I intend to deliver in the budget."

Sutcliffealso intends to keep two othercampaign promises in the budget:reducing the costs of recreation programs for children and youth by 10 per cent, andfreezing OC Transpo fares for 2023.

Transit ridershipa little betterin October

OC Transpohas created the biggest hole in recent budgets as work continues to reach pre-pandemic ridership the 2022 budget was based on82 per cent average ridership, which was nowhere close to the reality.

After September saw ridership at63 per cent of 2019 levels, October saw 58 per cent. Para Transpo's comparisonwas68 per cent ridership in September and74 per cent in October.

When the city misses its ridership targets, it also falls short on fare revenue. It recently projected a$85 million shortfallfor the year, and then received more bad news Thursday. The province will supply $22 million less than the city needs to cover the gap, which means it might need toturn to reserves.

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The City of Ottawa has counted on those upper levels of government to coverpandemic-related losses and costs for the past few years, but staff do notexpect thatto continueinto 2023, except for grantsto Ottawa Public Health.

Staff plan togive council "mitigation measures" to consider to save money, such asdeferring capital projects, pausingdiscretionary spending, and"further efficiencies and wherever possible one-time reduction in expenditures."

As it stands, the 2023 budget is also to be based on a two to 2.5 per cent transit levy on the tax bill, whereas 2022's transit levy was to beup to 4.5per cent.

Fuel, construction inflation

At the same time, staff write of "unprecedented inflationary pressures impacting all city services" due to the supply chain and "current external economic conditions."

They expect "significant impacts" for the 2023 budget, especially when it comes tofuel prices, parts and supplies,and construction.

The major expense compensation and benefitsfor employees will also increase, along with the minimum wage set by the province.

The Ottawa Police Service under new Chief Eric Stubbscould beasked to crafta budget that rises only bytwo to 2.5 per cent, or between $13.4 and$15.2 million.

The police budget has been the subject of intense debate in recent years. Former councillorDiane Deans, as police board chair, directed former chief Peter Slolytocrafta budget with a two per cent increase. At the end of October, theforce was struggling to hit even halfits target of $7 million in permanent budget reductions.

The new Ottawa city council has also expressed interest in a wider review of city programs, or a line-by-line review of expenses.