Weekly newsletter: August 13, 2024

Hi everyone!

First, thank you to everyone who took part in the public virtual consultation/information session last night for the Marketplace apartment towers.

It was a productive discussion, and hearing concerns, general feedback, and support from residents (in addition to emails received) was immensely helpful to Councillor Hill and me, plus city staff and the developer.

I will opine and share a summary of what was said at the meeting in next week’s newsletter.

This week let’s discuss the Mayor’s press conference last Thursday.

Last Thursday, Mayor Mark Sutcliffe held a press conference at City Hall to highlight two challenges the City faces, both with heavy financial implications.

PILT wilt

The first part of his remarks centred around what’s known as payments-in-lieu-of-taxes, commonly known in the bureaucracy as the PILT (pronounced as it’s spelt).

Since distinct levels of government aren’t allowed to tax each other, the federal government provides municipalities with PILTs to cover the cost of the city services provided to the property.

The value of the PILT is based on how much the property would pay if it were taxable, in the opinion of the Minister of Public Services and Procurement. The federal government, through the Minister, decides how much it pays.

Imagine if homeowners and employers had that option!

According to the Mayor, the federal government has been slowly reducing its payments on some properties, citing examples of the buildings they still own but have vacated for a variety of reasons (mostly poor condition).

Private homeowners, on the other hand, pay double their property taxes on vacant properties through the controversial vacant unit tax.

This isn’t a case of the City asking the federal government to continue payments on properties they have sold or stopped renting. These are properties they still own, but don’t use, where they have unilaterally decided to pay less for them.

Unlike the federal and provincial governments, municipalities legally can’t run budget deficits. Any deficit must be covered by moving money from elsewhere.

In Ottawa’s case, we have healthy reserves, known as “tax stabilisation reserves,” across city departments that provide relief from the property taxpayer having to shoulder the burden of unpredictable tax changes.

For example, the city’s winter budget can (and has) wildly fluctuated from winter to winter as winters themselves can wildly fluctuate in intensity and longevity. While reserves have had to cover for the winters of 2021/22 and 2022/23, the surplus from the last winter has partially replenished the fund.

Revenue tools for municipal government are extremely limited. With property taxes and fees, limited by a legal requirement to balance budgets, and as the level of government that provides on-the-ground services that experience the most immediate fluctuations in operational costs, every dollar is important to the city.

I am supportive of that part of the Mayor’s appeal to the federal government.

It’s true the federal government has provided Ottawa with money in the last few years mostly on the housing file, but it’s not like that money was specially earmarked for Ottawa—cities across the country received proportionate amounts in grants, loans, and funding.

Though the federal government has properties in cities across the country, but the reduction (and, in some cases, the elimination) in PILTs disproportionately affects Ottawa, as the feds are the biggest landowner downtown.

As I’ve highlighted a few times in the past, the cracks in our downtown’s survival were already weak. The pandemic only made those cracks so much more obvious.

Forcing commuters to return an extra day does next to nothing to advance downtown’s revitalisation. Downtown needs a diversity in zoning to allow more people to live there to support the area 24/7. The federal government could help by speeding up its decisions around property divestment downtown.

Transit funding

The second part of the Mayor’s press conference last Thursday spoke to provincial operating dollars for public transit in Ottawa.

There is some truth to Ottawa being overlooked by the provincial government, (in the Mayor’s words) “because we’re not Toronto.” While I am appreciative of the Mayor’s efforts in speaking up for our city, I’m only partly on board with his argument for transit funding.

Traditionally, upper levels of government contribute only to transit capital projects, like building new infrastructure to expand or improve a local transit system, while cities fund their operation. Some provinces have funding formulas that provide added operating dollars to local transit systems.

That the provincial government is fully funding several higher order transit projects on the Greater Toronto and Hamilton Area, including cost overruns and pandemic-related legal actions, is indeed unfair as the Mayor states. It’s also true we are contributing to those projects in Toronto through our provincial taxes.

The numbers, per the information distributed by the Mayor, is each Ottawa resident has contributed about 5,250$ in provincial taxes to fund transit projects in the Toronto area compared to the 285$ for transit projects in Ottawa.

Additionally, Ottawa’s geographic size means OC Transpo’s service area resembles what’s covered by multiple local agencies and the Toronto Transit Commission.

So that’s where I agree with the Mayor.

But unlike his argument about the PILTs, I’m only partly on board with his message around transit funding.

I talked about the need for radical change in that area in last week’s newsletter. Interestingly, I had no knowledge of the Mayor’s press conference at that time, so it’s a fun little coincidence.

The full text of what I wrote last week can be found here, but to summarise, I believe the historical formula funding transit through the transit levy and fares, plus a reliable source of top-up funding from other levels of government, no longer works.

But because we’ve leaned so heavily on a formula that’s worked sufficiently for so long, we now lack the creativity to guide ourselves in what’s now our new reality.

For example, transit is unique in that it has many capital and land assets with varying levels of usefulness and value we can leverage. In Barrhaven East, transit uses almost 75 acres of land for park and rides along with some lands set aside for future projects.

The most glaring local example is the Nepean Woods Park and Ride, which has been severely underused since it opened in 2012. With a larger (and more useful) park and ride opening at Bowesville Station with Line 2, I see no future for Nepean Woods.

We also need to take a good hard look at what’s in the realm of possible in terms of planned capital projects.

We know LRT to Barrhaven won’t happen unless it’s 100 per cent funded by the upper levels of government, yet it remains in our books as a multi-billion-dollar long-term budget pressure. I believe that project should be shelved (not cancelled) until there’s more certainty around the funding.

Additionally, there are other types of administrative structures used for public transit around the world, which allows it to diversify its portfolio and give it some real and sustainable revenue generators. Some of those structures are already used here in Ottawa, but not for transit.

The bottom line is while the transit levy and fares are decent sources of revenue, our institutional over-reliance on them has led us to believe we don’t need to be creative. The current situation says otherwise.

It’s time for a radical bureaucratic/structural change in transit. As my related work and research matures over the coming weeks and months, I will share more about what I hope to bring.

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Enjoy the rest of the work week!

Wilson