OTAG’s Take On Budget

Jon Willing - January 23rd, 2011


From the Ottawa Taxpayer Advocacy Group tonight…
Budget 2011: $22 Million a missed opportunity to reduce property taxes


OTTAWA, Jan. 23 – Mike Maguire, the new finance critic for the Ottawa Taxpayers Advocacy Group, believes Ottawa Mayor Jim Watson is missing an opportunity to further reduce property taxes in this year’s budget. Maguire, who ran against Watson for mayor last Fall, says “claiming a 2.45% tax increase is meaningless without acknowledging that the substantial borrowing this year will simply mean a corresponding tax increase down the road. Running the City on borrowed money is neither sustainable nor durable.”


Maguire says while he applauds the Mayor’s willingness to take on the runaway costs of OC Transpo, more could and should be done to relieve taxpayers’ burden and/or reduce the City’s debt load. “The Mayor and Council have chosen to spend the $22 Million uploaded to the province instead of using it to offer tax relief or reduce the City’s debt load”, he says.
Maguire added that while we won’t understand the complete budget impact until we see how much debt will be added in 2011, the present estimates indicate the City will be borrowing heavily again. “Large scale municipal borrowing is a very risky approach to finance as we enter an inflationary cycle. Ottawa is risking a credit crunch as interest rates start to climb,” Maguire explained.


Every $12 Million borrowed represents a 1% tax commitment somewhere in the future, either as a tax increase or a corresponding service cut. This year the City’s debt charges will cost almost $80 Million. “This kind of borrowing is often used to disguise annual overspending. Its dangerous to rely on borrowing when our debt charge is so high,” Maguire says.
Ottawa taxpayers will find no relief on their Ottawa Hydro bill either. Ottawa Hydro will once again overcharge residents to produce a corporate ‘dividend’. “Last year”, Maguire says, “the dividend was over $17 Million and this year it is forecast to be another $16 Million”. And, Hydro Ottawa customers will pay an extra $10 Million in debt charges to pay back money borrowed to create the Hydro Ottawa Endowment Fund. That’s $26 Million extra this year alone that has been added to Ottawa residents’ electricity bills.

“Sadly”, Maguire points out, “our new Mayor and Council are continuing the practice of using Hydro Ottawa as a cash cow to expand City spending”. This, at a time when electricity bills are skyrocketing.
“Ottawa residents and businesses are paying millions extra to fund the Hydro Ottawa ‘dividend’ and to pay back the $200 Million that was borrowed to create the Hydro Ottawa Endowment Fund. These are nothing but back-door taxes that disproportionally hurt low-income families, fixed income seniors and small businesses,” Maguire says.
The Ottawa Taxpayers Advocacy Group (OTAG) is a non-profit organization advocating for responsible fiscal management at Ottawa City Hall on behalf of all Ottawa taxpayers.