Letter to Mayor and Council on Budget 2008

24 Jan 2008

Dear Mayor and Council:

Re: Keep 2008 Property Tax Increase to 3% or Under_____________

�.By applying ALL of the projected assessment growth ($4.9 mil) to reduce the tax levy requirement from tax rates.

On behalf of the Board of Directors of the London Chamber of Commerce, and its 1,000+ member firms, we respectfully submit our observations and recommendations on the 2008 Draft Budget for the City of London.

First, we appreciate the improved consultation process that has been implemented by Council and Administration. Several years ago we urged Council and Administration to adopt a more open, transparent and less convoluted method of sharing information with the business community and the wider population and we are most pleased that those recommendations have been acted on.

Second, we are equally pleased that this proposed draft budget is in line with the Chamber-supported Strategic Financial Plan including the continuation of a sound debt reduction strategy.

By continuing with a debt cap to control authorized debt and increasing the cap by $1 million in 2008 to $31 million (as planned) on all tax supported capital projects, you will ensure that London will continue to warrant its well deserved Aaa rating from Moodys.

Observations:

To continue our quest to be in the Top Rank of Canadian Municipalities is not only a goal worth striving for, it is at the root of our ability to compete as a municipality with jurisdictions at home and around the globe.

Financial Strategy:

The essential tenets of the City�s Financial Strategy are not only sound they are eminently achievable. We respectfully offer our commentary on the following financial strategies:

1. PROMOTE AFFORDABLE AND COMPETITIVE PROPERTY TAXES

2. REDUCE DEBT LEVELS AND DEBT SERVICING COSTS

3. DOWNLOADING, REGULATIONS AND A NEW MUNICIPAL DEAL

4. PROMOTE PAY-AS-YOU-GO FINANCING

5. CONTAIN COSTS

6. INVEST STRATEGICALLY

1. Promote Affordable and Competitive Property Taxes

As we have pointed out in our budget submissions in 2005/06 we continue to support fair and equitable property taxes for London as well as a proper balance of tax allocations between classes (residential, commercial, industrial).

While the 2008 Draft Budget effectively illustrates that London�s 2007 property taxes in each classification appear to be within the average for identified comparator municipalities in Ontario, there seems to be some discrepancies in the way that BMA consulting reports the variances between communities in Ontario and across the country.

As an example we have included an illustration from the City of Mississauga (Appendix #1) which clearly places London highest amongst comparator cities in Ontario when determining 2007 estimates of property tax values paid on a predetermined base CVA (Industrial-$4 Million, Commercial-$2 Million).

These illustrations in concert with those recently released by the City of Edmonton, (where London is identified as having the fourth highest taxes in the country amongst the 24 comparator cities based on a 1200 sq. ft. bungalow) should provide ample impetus for Council to keep the property tax increase for 2008 at 3% or less.

Furthermore, taxes and utilities in London have risen 28% in only five years from $3,179 in 2002 to $4,079 in 2007.

It is simply not acceptable to ignore these reports if for no other reason than to recognize the reality that investors, businesses people, doctors and the very knowledge workers we hope to attract to London are well aware of these numbers and will doubtless use them to form their decisions on where to locate.

Furthermore, existing London businesses and residents alike may use these statistical references to make decisions as to whether or not London remains a viable and affordable location for their purposes - great services and quality of life issues notwithstanding. Every effort must therefore be made to demystify these seemingly contradictory reports and provide Londoners with fair, accurate, and transparent comparator analysis.

Appendix #1

1. Promote Affordable and Competitive Property Taxes��continued

Recommendations:

1a) After careful review of the two proposed options identified in the presentation on the 2008 budget, we propose that the entire amount of the available assessment growth of $4.9 million (or 1.2 per cent) be used to reduce the submitted 4.4 per cent tax levy requirement from tax rates.

Note: We do realize that there are significant community needs that have been submitted to Council but feel that reducing the tax levy is more of a strategic priority opposite where we sit on a comparative basis as well as the current and forecasted state of the North American economy.

This recommendation would be in line with one of the Council�s strategic priorities which is financial stability. These �optional� service growth requests totaling some $10.5 million might best be absorbed by the affected programs.

We would also urge caution with respect to how property taxes are apportioned between classes in London. In other words the Assessment Composition. Using the same data from BMA�s Municipal Study 2007 (used by London to determine comparative property taxes) London derives 13.0% of its property tax levy from the commercial (business) sector while the average for the province is 10.8%. This may place London businesses at a competitive disadvantage when compared to other jurisdictions in Ontario and runs counter to the goal of being among the Top Ranked Communities in Canada.

1b) Therefore we would respectfully request that over the next three budgets years (2009/10/11), the City to re-align the balance of tax collected by class (Assessment Composition) to more closely reflect the provincial averages. By doing so, our commercial, industrial and residential rates will be on a level playing field with the rest of Ontario�s municipalities.

2. Reduce Debt Levels and Debt Servicing Costs

The Chamber supports the City�s initiative to continually reduce debt levels and the attendant debt servicing costs. It is critically important that the City continue with a sound debt reduction strategy which must include:

� Continuing with a debt cap to control authorized debt and;

� Increasing the cap by $1 million in 2008 to $31million on all tax supported capital projects as previously planned.

� Retaining our Aaa Credit rating

� Continuing to apply surplus and portion of OMPF funding to debt reduction. This should enable the City to retire approximately $2 million of debt annually over the next 10 years.

While the City seems to have a solid debt management strategy going forward, a strategy we note has the support of Moody�s rating service, we nevertheless caution the City to be ever mindful that our total debt on a per capita basis is amongst the highest in the country for municipalities in our population range.

As we have historically argued, it matters little what the bond rating agencies think about our debt levels if the citizens of London (who foot the bill) have no appetite or capacity for increasing the debt load.

2. Reduce Debt Levels and Debt Servicing Costs

Recommendations:

2a) We therefore strongly encourage the City to stay the course on the Debt Cap strategy and allocate as much planned and unplanned surplus to debt retirement. This strategy will enable the City to maintain its Aaa Credit rating.

3. Downloading, Regulation and a New Municipal Deal.

While Ontario cities have enjoyed some success in lobbying senior governments to either stop downloading service costs or to upload costs previously applied to municipalities, there remains a significant imbalance.

The Chamber recognizes that the City is still benefiting from the same �wins� as last year, i.e. Federal and Provincial gas tax, Ontario Municipal Partnership Funding (OMPF), Full rebate on the GST, Child Care funding.

Going forward the City will benefit from the upload of Ontario Drug Benefit (ODB) and Ontario Disability Support Programs (ODSP) over the next 4 years. It is our understanding that there may be some impact with respect to the OMPF as the social costs decrease with this upload.

3. Downloading, Regulation and a New Municipal Deal��continued

Specifically the ODB upload reduces the budget by $6.2 million, this is offset by an

increase to the ODSP caseload of $2.3 million.

.

Council will therefore have the opportunity to reinvest a portion of the savings in infrastructure and provide some tax relief.

Recommendations:

3a) The Chamber urges Council to allocate the savings of $3.9 million to be split between tax reduction of $1.9 million and increasing capital investment by $2.0 million.

3b) Working with other municipalities and the business community continue to lobby Provincial and Federal Governments for a �New Municipal Deal.�

4. Promote Pay-as-You-Go- Financing

INVESTING MORE IN EXISTING INFRASTRUCTURE

Based on our recommendations of last year, the Chamber is pleased to see the City accelerating its pay-as-you-go principles to be more in line with provincial averages. Given the recent events in London�s core area this winter, the City can anticipate more unfortunate events of this type, therefore more investment in maintaining existing infrastructure is not only prudent it is critically important to the health and vitality of London�s business community and by association our economy.

Obviously, the more we increase our pay-as-you-go philosophy, the more debt capacity we create for growth and new initiatives in the City.

Recommendations:

4a) The Chamber supports the allocation of 0.5% of tax levy increase (approximately $2 million) per year to be allocated to capital levy (pay-as-you-go) for each year of the capital plan to finance Life Cycle Renewal.

5. Contain Costs

Property Tax Supported Budget Overview

While most departments, Boards and Commissions have delivered budget requests in keeping with Council targets for 2008, the Chamber remains concerned that some departments appear to be exceeding Council targets on a regular basis. This makes for bad planning and adds additional pressure to compliant departments to deliver effective services within their own budget allocations.

Departments such as Neighbourhood and Children�s Services as well as Civic Departments under direct control including the Lower Thames and Kettle Creek Conservation Authorities are well over target as is the London and Middlesex Housing Corporation. The London Public Library budget request is also over target at 5.5% vs. the council approved target of 3.2%

The Chamber understands the rationale for the 5% increase (council approved target of 3.2% or $47,613 million vs. original 2007 Revised Net Budget of $45,328) to the Fire Services Budget for 2008 but will continue to lobby the Provincial Government for the removal of the 2007 arbitration award on �retention� pay for the firefighter training and prevention division which still awaits Provincial Arbitration decisions on key collective agreement issues. And, while the Police Service Budget asks for an increase of 5.8% it is at least under the Council Target of 6.7%.

Service Growth Funding Requests

The Chamber appreciates the efforts of many of the groups and organizations who contribute to the community and we applaud civic innovations that set us apart from other communities. However, given the potential for everything from a forecasted recession in the U.S., a world-wide downturn in stock market values, all-time highs in fuel and utility costs to major layoffs in the manufacturing sector right here in London � we are given to wonder aloud if this is the right time to be considering any of these nice-to-have projects, innovations or new positions.

5. Invest Strategically

Strategic investments in areas such as Industrial Land Development, i.e. Innovation Park and Forest City Industrial Park will continue to pay back to the community in numerous ways in the years ahead.

Similarly, investments in Economic Prosperity Initiatives such as funding for the London Economic Development Corporation (and under it the London Small Business Centre, Centre, Stiller Centre and Tech Alliance) are the catalysts for future development, investments and job creation in our area.

5. Invest Strategically�.continued

Equally important to our long-term competitiveness are the London Convention Centre and Tourism London both of which have earned their rightful place as key economic generators for our economy.

Significant investment in infrastructure (both new and existing) has been the Chamber�s mantra for decades and we continue to support this rationale. If one ascribes to the theory that infrastructure is the highway on which commerce travels, we must invest in it accordingly.

We support Administration�s Capital Budget request of $91.7 million for funded projects in the 2008 capital Budget and are pleased that the split between life cycle renewal ($46.8 mil), new initiatives ($14.5 mil) and growth ($30.4 mil) seems balanced and fair. If anything, we would hope that if Council has any notion of rebalancing these numbers it would err on the side of life cycle renewal.

Thank you for allowing us to comment and as always we welcome any questions you may have. Please refer to the Summary of Recommendations under Appendix #2 attached, as well as a recommendation (Appendix #3) as to how best to deal with the ever-increasing number of non-base budget request for Service Growth Funding items.

Sincerely,

Gerry Macartney, C.E.O and General Manager Chirag Shah, President

On behalf of the Board of Directors the Board of Directors

London Chamber of Commerce London Chamber of Commerce

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