March 12, 2004 Report

The meeting began with a speech by Mayor DiIanni which is reproduced below from the mayor's website. The initial part of this report is from notes because there was a sound system problem at City Hall that prevented tape recording.

Working Towards Fiscal Responsibility

Notes for remarks by Mayor Larry Dilanni
Committee of the Whole
March 12, 2004

As members of Council we have a big task ahead of us for the next three years. If we are going to attain any measure of long-term fiscal stability, we are going to have to exercise restraint and good judgement. We are all going to have to work as a team like never before - both within Council as we make our budget decisions.and outside of here as we develop an ongoing working relationship with the senior levels of government.

A few weeks ago I attended the Big City Mayors meeting in Gatineau, Quebec. I can tell you that budget shortfalls are not just a Hamilton phenomenon. From Vancouver, to Edmonton, to Saskatoon, to Winnipeg, to Toronto, to Montreal, to Halifax, and to St. John's Newfoundland each mayor expressed the same concern: we cannot keep up with the demands being asked of us without a 'new deal' from the federal and provincial government. As everyone here will attest, municipal governments can no longer - especially with only one main source of revenue - do it alone. Cities are the economic engines of the 21st century and we provide all the municipal infrastructure necessary for the success of local and national economies.

For anyone looking for a quick fix, let me assure you that there is not one. It took a number of years and many factors such as the inequity of provincial downloading to get us where we are today. Still I am confident that the citizens of Hamilton will have the patience to allow us the time to make the decisions necessary to get our financial house back in order. They will judge us on the quality of those decisions and on our ability to work as a team on their behalf. The fact is we must tackle our fiscal problems head on.

The problem is a simple one: there is a growing gap between the services that we MUST deliver and what we can AFFORD to deliver. These services are essential to the everyday life of Hamiltonians, yet the resources do not meet the need. Municipal revenues are not keeping up with the cost of living, let alone their additional responsibilities. For example, from 1999 to 2003, federal government revenues increased 16%, provincial/territorial revenues 21%, and municipal governments only 4%.

As I mentioned, one of our first steps in order to get back on track is that we must work closer with both levels of senior government to get through these next three years-and we have already started that process. For the first time in memory, I think everyone understands that we all need to be equal partners - as really there is only one taxpayer. I am confident that we have the local MPs and MPPs who will come through for all of us. More than that, we are very fortunate to have people like Dr. Marie Bountrogianni, Tony Valeri and Stan Keyes as our local cabinet ministers. I feel that the Team Hamilton approach introduced by Minister
Valeri is key to helping us deal with Hamilton's challenges.

I have already met with Premier McGuinty, Finance Minister Greg Sobara, and Public Infrastructure and Renewal Minister David Caplan. They all assured me that something had to be done to help Hamilton, but they also said it's going to take time to happen. For the people of Hamilton we cannot wait much longer for a fair deal from the province. Some action must be taken immediately.
One area of extreme concern is our provincial social service costs. Unlike Toronto and the rest of the GTA we have been left out of the social service pooling arrangement brought forth by the previous provincial government. This costs our taxpayers at least an additional $19.5 million per year on average. This includes costs for social housing and Ontario Works.

A few weeks ago I met with the Mayor Miller around the need for Hamilton to receive the same type of social service assistance from Queen's Park as Toronto. He like I, believe that we should be part of the social service pool that currently exists.

Hamiltonians know first-hand that for the last few years their municipal government has made some very tough decisions. There has been difficult service cuts, staff positions lost, and we have increased our reliance on our reserve funds. This year's budget cannot continue those band-aid solutions.

As I am sure Council is aware, from recent reported events in the media, that the City of Ottawa is now discussing the drastic program reductions and service cuts that Hamilton has already initiated over the past few years. It is clear to all of us that there is no more "meat on the bone" to be removed.

Let's turn our attention to property taxes. We know that our home owners have repeatedly said they can't stand endless increases in property taxes. Yet, in our recent public budget consultation meetings a total of 67% of respondents suggested that they would tolerate a 3% to 9% tax increase. Of that number, the top acceptable increase would be 6%. I interpret that to mean that they recognize that municipal services are "worth paying for; so they're prepared to "bite the bullet" to preserve services while a fairer deal with the province and federal government is developed. I do not interpret that as an open ended willingness to see taxes go up continually.

I should say at this time that I would like to have come to Council today with the recommendation of a 0% tax increase. But this is not realistic and I am not prepared to play politics with the issue of tax increases.

Another interesting result was that when asked if you support increasing user fees by up to 5% to help offset a property tax increase a total of 75% or ¾ of the respondents said yes. Of that number, 64% felt that user fees should be introduced in the culture/recreation area or in arenas (ice time rental).

So where do we go from here? This year's budget plan can be compared to putting together a puzzle with five main pieces.

These puzzle pieces would be; program reductions, tax increase, user fee increases, new federal government contributions, and a new social service arrangement with the province. Let me explain how this would look:

1. Program reductions/cuts = $23 million
2. Tax increase of 5.9% = $32.7 million
3. User fee increases = $1.9 million
4. New Federal government funding (GST rebate) = $6.6 million
5. Social Service new arrangement with province = $19.5 million

This is a plan that is fair and just as important, preserves the services that our community considers needed to sustain Hamiltonians quality of life. It also allows the province to rectify a provincial social service arrangement that has never been fair to the people of Hamilton. It is time that the province fixes this inequity and I have faith that our local MPPs and new Liberal Premier will do the right thing. Our Liberal MPPs have all said that they will be supportive.

Some people have asked - what happens if the province says no? My response has been - THEY CAN'T SAY NO! This plan has been thoroughly discussed with CMT staff as well as Councillors. Senior Management is aware and supportive of the plan. The Chamber of Commerce, Social Service Agencies and many more citizens of Hamilton are also supportive of the province's ask.

Thank you for your attention. Now let's get down to work as a team to make this financial plan for the future of our city a reality.

The mayor's powerpoint presentation was continued by City Treasurer Joe Rinaldo . He outlined the details of the proposed budget beginning with a review of the events from the January 7 presentation of the draft budget, and noting the public and stakeholder consultations. He noted that the base budget pressures for 2004 are $80.4 million plus $2.9 million in enhancements, and that the latter is to meet the provincial government's safe water regulations, and to provide additional emergency shelter beds. In the January 7 presentation, staff recommended cuts of $18 million, bringing the budget shortfall down to $65.3 million which is equivalent to a 13.4% residential tax increase.

Mr. Rinaldo then outlined recommended amendments to the budget. These are provided in detail in the accompanying staff report that was distributed at the meeting. He noted an decrease in lottery licencing revenue of $100,000 because the popularity of bingo is declining. An addition to the budget is $724,000 to address the threat of West Nile virus. An additional $766,490 is being added to the downtown renewal budget through the utilization of work accommodation savings. Rinaldo also noted that 13.65 full time equivalent positions are being added to the planning and public works departments to service increased development activities but this has no dollar impact on the current budget because they are being funded from fees and/or reserves.

Rinaldo announced savings of $735,000 as a result of an increased grant from Waste Diversion Ontario, as well as $100,000 in savings on the waste management contract. An extra $70,000 is expected in golf fee revenues, and transit is reporting an extra $100,000 in marketing revenue. He also noted that the Library Board is asking for $206,030 less than originally budgetted.

Several financial adjustments were also announced by Mr. Rinaldo. The contribution to the reserves for fleet renewal is being reduced this year by $500,000. The City will delay issuing debt for capital projects to achieve a saving of $3,016,000 and is also cutting the capital contingency fund for 2004 from $2 million to $1 million.

The March 12 draft budget also calls for a $20 per hour increase in ice rental rates (from $80 to $100) which is expected to generate $550,000 in additional revenue. Room rental rates in recreation centres will be increased by 10% for an expected revenue of $20,000.

The federal government has announced it will exempt cities from paying the GST. In 2004 this is expected to lower the city's costs by $4.5 million. It will also lower the expenditures in the water and wastewater budget by $2.1 million and Rinaldo is proposing to transfer this to the operating deficit.

These changes lower the budget shortfall to $52.2 million. If the requested provincial contribution of $19.5 million is received, the budget shortfall goes down to $32.7 million. This is equal to a 7.4% increase in city residential taxes, but it is expected that the province will not increase the education portion of the property tax, so the actual impact on residential homes is 5.95% or $154 on a home assessed at $160,000.

[The remaining portion of the report is assisted by a tape recording].

On the business tax reduction (BTR) program, Rinaldo presented three options for council to consider. "In discussions with the province, they have indicated to me that they would entertain a business tax reduction plan this year. So, what I'm proposing at this time is not to finalize this, but let's get a commitment from the province as to what they will do and then council will have the various options before you knowing whether or not there is funding from the province."

Option 1 - no growth dedicated to BTR. In the past the council has followed a policy of providing anything above the first 1% of the assessment growth toward reducing business taxes. Last year the growth was 1.4% so 0.4% would go to the BTR. "If we applied it all [growth] against the tax levy, that means the residential impact would be 5.7% [instead of 5.9% proposed]." There is $7 million that we're using in the budget to help reduce the clawbacks". "This is what council has done over the last 3-4 years and we've maintained that $7 million in there. Last year the province actually matched that contribution for the first time. We are proposing to attempt to get that same matching contribution which would mean that we would have a BTR program of $14 million.

Option 2 - recommended: "What's in the proposal before you today is that $2 million be assigned to the growth. We tax the commercial class at $1 million, which is the amount below the threshhold. And indications are they're not going to move the threshhold so we would have the ability to do that but I need to get that confirmation. That's where we're at the 5.9. If we do that, we would have $9 million that we would be contributing towards our BTR program - $2 million is the assessment, $7 million is the original. The $2 million would be directed to the industrial class. As you know, the industrial class is facing some significant challenges, and we would have the ability to direct that directly to the industrial class. That's what I would be proposing to you." If the province matches the total reduction would be $18 million.

Option 3: "go with $1 million growth toward the BTR, $1 million in taxes. That still has the same tax impact but it would in fact have an $8 million contribution by the City".

Mr. Rinaldo briefly described the unaffordable enhancements "and in essence about $8 million of it is dealing with forestry. The tree trimming program, in an ideal world what we'd like to be able to recommend is that the tree trimming program goes from a 12 to a 5 year program and expand to all of the existing urban area, because it still deals with the old city urban area, and also develop an active replacement program." "It's not because we don't want to recommend them, it's strictly because they are unaffordable."

Capital levy: "In 2003 we had a capital levy, which is the amount we raised from our operating budget to fund our capital program, of $66.3 million. We had recommended a $7.4 million levy increase, which is 1.5%, to help sustain the capital program. As I indicated, we are recommending a reduction of $715,000 to offset the reduction in interest [from the Hamilton Future Fund because it's being depleted by $15 million for the capital program] that we're currently [2003] budgetting for at $4 million." Adding in the delay in debt issuance, the net amount being transferred from the operating budget to the capital budget in 2004 is proposed to be $69.3 million. The Hamilton Future Fund board has agreed to direct $15 million to the 2004 capital budget, "providing we develop a plan to pay it back." "We will come back with a full report on a plan to pay it back. What that enables us to do is provide a capital program of $182 million instead of $141 million."

"There's meetings set up for March 23 and March 26. There will be reports with all of the information that committees requested. They will be distributed on March 19 and specific budget details on any of the initiatives that we've got before you at this time. There's tentatively a special council meeting set up on March 31. That will obviously be determined by what council does on March 23 and 26.

Merulla: "Regarding the BTR, what year did we implement the BTR?". Rinaldo: "Actually the BTR was in a different format, was in fact initiated I believe in 1998. there was some contributions in 1998 by the former City of Hamilton and Region, and we continued it in 2001-02-03 at an accelerated pace." Merulla: "What was the actual industrial/commercial assessment base at that time in dollar value?" Rinaldo: "I don't have that with me but I can certainly get that information for you." Merulla: "How much as the residential class paid in total since then towards the BTR?" Rinaldo: "The amount that's in the budget to help reduce the clawback, which is the primary amount that's in the budget is around $7 million, $6.8 million in the budget. The balance of the fund you may recall relies from the Future Fund and other source of revenues but the base budget was roughly around the $7 million annually." Merulla: "Since 1998?". Rinaldo: "I believe that, I haven't checked prior to that what the numbers were. I know there was an amount in the previous budgets. I just don't remember what the number was for that." DiIanni: "The plan is that when we debate this, for some decision making, you saw the options that staff will be recommending, we'll have all the background information with those figures and if I can suggest all the sources, because there were multiple sources for funding. Assessment growth was one, Future Fund and the levy as well." Merulla: "And lastly, I think we do require a report on this, probably the most important part is: what is the actual industrial/commercial assessment base today compared to 1998. And I'd like something in writing or a report on that." Rinaldo: "We'll develop a report on that, and hopefully the staff made notes on the questions you asked and we'll incorporate that into the report."

Merulla: "Can I have a clarification of the work accommodation? Was that $22 million we were allocating.?" Rinaldo: "22 staff". Merulla: "Amount of money?" Rinaldo: "$1.2 million?" asks another staff person to respond: "It was $1.2 million in the initial enhancement report." Rinaldo recommending that we reduce that allocation and use it through the downtown initiatives program. Merulla asks for an explanation of the terminology of work accommodation: Response by Staff [Catherine ?]: "We have an obligation where employees injure themselves, either as they're performing their duties or in the course of their own external activities. We have an obligation in either case to accommodate their return to work when they're physically capable of performing either their pre-injury occupation or another kind of work that's available in the organization. . We obviously want to return people as much as possible to productive employment. We either return them, which is our legislated obligation to do, or they continue in receipt of benefit. So WSIB, or short term or long term disability benefits. The reality is that we're paying for the staff either way and obviously the most prudent course and the most appropriate course from a human resources perspective is to return them to meaningful employment. And that has been the practice of the organization on an on-going basis. The difficulty is we don't have funded places to return them to. So as an employee is brought back to work, if they can't do the full scope of their responsibilities, it's likely in some cases, for instance, that you would have effectively two people, both of whom would be drawing salaries, to get the work done. So we return them and find productive work for them to do and then obviously we bear the salary costs associated with that." Merulla: "How was this dealt with in the past, or prior to this type of approach?" Staff: "In the past what typically happened is that if we were able to accommodate them in a budgetted vacant position, we would do that. In the alternative, we bring them back to work and we incurr their salary over and above the replacement costs associated with their base position. So I think the point that Public Works is making is that it's driving a fairly significant budget pressure for them. They're returning people to work, and to do meaningful work, but it's not necessarily in the budgetted positions." Merulla: "So this is not a new or increased.?" DiIanni: "No. It's what when I worked at Stelco we used to call light duty as you phase yourself back in. I think that's the concept." Merulla: "I believe we were dealing with this differently three four five years ago where there wasn't any additional cost associated with it, with rotating staff, and apparently. That might not be the case, but I'd just like clarification on that." DiIanni says this can be dealt with later and Rinaldo adds that "there is a full report coming on work accommodation that will be before Public Works committee".

Horwath: "Just on the work accommodation, and the strategy there. I have a bit of a concern because I'm already hearing from people on the ground that people who are being accommodated to do that kind of work are not necessarily able to do that kind of work. So people with back problems, neck problems and walking day in and day out picking up garbage and different things like that, and don't get me wrong, we need the services in the downtown, there's no doubt about it. But I get concerned that we're using this particular opportunity budget-wise to do something that really not going to do what we need which is to clean up the downtown. And so I'm concerned if this is embedded in the budget as a program the way it sits, and it's not going to work, and I don't know that it's not going to work, we are hearing that there are problems already. It's only been in place for about two weeks, maybe three. I'm hearing there are problems already in terms of accommodation and I want to just flag that and get it on the table, and say that I'm very concerned. If the goal is to achieve two birds with one stone, that's fine, but if only one bird gets achieved, and the other bird that suffers once again is the downtown, then I think that's an inappropriate thing to have happen and I just want management team to keep an eye of that for us, please." DiIanni: "Thank you and the concern has been noted. Hopefully that will be part of the report that comes forward to us as well."

Kelly: Question to Neil Everson, Director of Economic Development: "because we did talk about the BTR and how important that has been, and there's a couple of goals in mind here. We've had some problems, obviously, with some businesses that have left town, and we've characterized those and talked about those at length. Some of them of course are well beyond our control, but we've had some successes here in the last few years as well which Neil's department has outlined. . To Mr Everson: How important is this BTR plan in trying to attract interest to this community when it comes to looking for new businesses, Stackpole and places of that nature?" Everson: "It's extremely important. Taxes are one of the factors that companies compare when analyzing different municipalities and we have very strong competition from municipalities around, both to the east of us and to the west. We have to be competitive as well with our own development charges or we simply aren't in the game of attracting and retaining existing industry." Kelly: "Is it fair to say that although we're not as competitive, especially in the industrial section, as other adjoining municipalities, the fact that we're putting a program in place and attempting to do that is that a factor here, is that piquing their interest?" Everson: "I can absolutely confirm that. Every ICI realtor in the Greater Toronto Area knows the move in industrial and commercial taxes. For example in Stoney Creek we've come down from roughly 11% to roughly 7% in the last three years and we are getting very competitive." Kelly: "Thanks very much for that Neil and I look forward to that report, Mr. Mayor because I think that's obviously going to one of the hotly debated issues. We have to keep in mind that there were two different goals that we had in mind, although I think there's a great deal in common between them. First of all was to try and promote business, which I think we've done, to try and maintain some of the businesses that were there. But second of all from a strictly revenue standpoint, what we're tring to do is bring it down to the provincial average so we could tax these people again. And we're reaching it, so from that standpoint alone, the program has been successful. And we do have that option, for the first time in lord knows how long, so I look forward to the debate on that. That's going to be an interesting report that staff are going to bring forward. And I look forward to the comments from others, but I think we have to keep in mind what we're trying to do there."

Kelly: "Question to Mr. Rinaldo. The proposed, and I stress the word proposed because all we're talking about at this stage is proposals, reduction in capital impact. One of the problems that we've had in this city in the past has been when there are reductions made to capital projects. It was the old you can pay me now or pay me later. The city at that time didn't invest properly in capital projects and as a result had huge and overbearing maintenance projects as a result from work that wasn't done. Is there going to be a quid pro quo on this, where we're going to get nailed on this at some point in the future because we're not investing?" Rinaldo: "The proposed reduction doesn't affect the program. It's simply the timing of when we're actually going to plan to issue the debt charges for new initiatives. I usually don't like to defer them too long because if in fact the initiatives actually go faster, then we have a problem, but I feel pretty comfortable that we can do this without having an impact. So it's not having an impact on the capital projects themselves. It's having it in terms of timing as to when we issue debt, and so on and so forth, is what we've made the adjustment for. In an ideal world I would leave it where it's at because it recognizes by the way that when you make a commitment to a project you gotta pay for it in the original proposal. But I think we can do this, and given the budgetary pressures we have, we're recommending it that we go on this basis." Kelly to the mayor . "the one thing I would like to see Council make a commitment toward today is your recommendation for a social services deal with the provincial government. The discussions I had with Minister Bountriganni at the Power Conference a couple of weeks ago up at Carmen's were very heartening as well. And I got a real sense from her, and I know you have from some of the ministers that you've talked to, there's some really positive vibes coming along on that. But there has to be solidarity from this council. There has to be from the community as you and I made that point I think at that meeting that day that this is a sense of fairness and we have to move forward on this. So even if we don't make a commitment on the other impacts and the other suggestions you're talking about, I think the Council has to stand behind your request, Mr. Mayor, for that social services new deal from the province. It might be the push that actually gets this whole program over the top. It's not going to save us, but it's a key element, I think, in the long term viability."

DiIanni: "There's a few individuals who want to talk about the BTR. We are going to be able to debate this once we get the report, so keep that in mind. And we thought we'd reserve today for questions of clarification, but having allowed Councillor Kelly I've got to allow Councillor Whitehead and Merulla on this issue."

Whitehead: "Question to Joe. It's great to have more information, and I do support the BTR and efforts to bring commercial to competitive rates so that we can enhance the commercial business and increase the tax base in our community. The question I had to Joe is when can we expect. I'd like to see the analysis. I'd like to see the numbers. When can we expect that report?" Rinaldo: "We're trying to get some confirmation from the province. In an ideal world, you can have it when I know whether the province in fact tells us whether they're going to commit to it. But if that isn't the case, we can try to develop it and send it out anyways, and we'll do it for the March 23 or 26 th . The only thing I may not have by that time, is to know whether or not the province is up for matching the contributions because I don't know the timing when the staff in the Ministry of Finance is going to go to the Minister with this proposal, but I was planning, as long as Council's okay with this, at least finding out from the province as to whether or not they're willing to match the contributions, so at least then you can make the decision knowing whether or not there is matching funding from the province. . but we can do the report for the March 26 th date."

Merulla: "Just a point of clarification. I think I've supported the BTR every year since I've been on council. I have no problem with the concept of the trickle down economic component of the whole idea, but I need someone to show me where the money is, and frankly at this point my understanding is that the value is a little shut off, and nothing's trickling down and that's my concern."

Ferguson: "Mr. Mayor, do you have a plan B?" (laughter). DiIanni: "We have a plan A, and the plan is that the province has to be a partner. They've said they want to be a partner and we're going to hold them to that." Ferguson to Rinaldo , asks to see slide on BTR. "If we go with option 2, how soon will that get the industrial to the provincial average? How many years will that take off?" Rinaldo: "Depends on the matching. I think we're still far away. . The tax rate for large industrial, for example, is almost 8%. For small industrial it's around 7. The commercial we're down much lower. But I think we're still a few years away, at least three years away in terms of the industrial. As I've indicated, in terms of the threshhold for commercial, we are, subject to the final budgets, it looks like we will be there this year.". "The only thing I don't know is whether or not the province will make a change in what the average threshhold will be, but they're telling me that they're not going to change it at this time." Ferguson: "If we did not do BTR this year, with the tax shift, what would that do for commercial and industrial?" Rinaldo: "The industrial would still be capped at 5%. The only increases they can have is an assessment related increase. We would not be able to increase anything for the budgettary impact. And likely in terms of the commercial they would also be limited to 5% because they'll have a combination of either assessment or budgetary increases. But again it would be limited to 5% in accordance with the legislation. That's basically how it's going to work and it's also going to be like that even for the multi-residential class. None of the properties will face an increase beyond 5%." Ferguson: "Does 1, 2 and 3 reflect the tax shift for 04?" Rinaldo: "No we haven't factored that into these calculations because we don't know whether council and/or the province has brought it in. ." Ferguson: "I mean the shift in assessment between commercial and residential and industrial?" Rinaldo: "No, these numbers do not factor in the shift in assessment, the $6 million shift from the commercial/industrial class to the residential class, no." Ferguson: "I wonder if at some point if you could factor that in." Rinaldo: "It is factored into the threshhold calculations that we've done, in terms of when we've done the analysis, in terms of our ability to tax the $1 million that we've recommended as one of the options.." Ferguson: What's the drop dead for approving the budget? Rinaldo: "Ideally we'd like to have the council approve the budget in April." . DiIanni: "We're shooting for the end of the month if possible depending on how the discussions go on those two dates. The end of the first week of April would then give us the administrative time to do before it starts costing us."

McCarthy: "Joe, can you outline for me the $36 million increase for staff and where that comes from or could you bring a report back to council so we can analyse it? Is it cost of living or is it beyond that? And where is that being generated from?" Rinaldo: . "I know about $10 million of it is related to pensions alone, but we can provide you a breakdown".

McHattie: . "I'd like to talk about the overall direction of the budget and it's not just the budget. It's the overall direction of the city. the strategic direction of the city, where we're going. What I'm concerned about, sort of a little bit, is the risky nature of some of the things that we're doing. And I'd like to outline a couple of these and maybe have a quick response from Joe. . On the financial side of things, we've got this alternative capacity financing approach, saving $3 million there, and I know Joe indicated some discomfort from the perspective from following sound business practice, and how he was a little bit difficult on that. And then the contingency on the capital as well, the $1 million. So those are two under the category of business practices that we're pursuing that cause me some concern from a risk perspective. And I'm talking about risk more than anything else. I'm also very concerned about the $33 million in capital funding for the Red Hill Creek Expressway, and I speak to this from an economic perspective. It's premised on the fact that we'll be able to attract people to the business park up on the mountain. There's a risk if that goes residential, versus industrial, we don't accomplish what we want from an economic development perspective. We know we've got to spend somewhere in the range of $40 million to service that business park. So those are some risky factors that I think about when I think of going ahead with the $33 million in capital for that project. The business tax reduction program, I won't spend a lot of time on that because that's been discussed just a couple of moments ago, but again I'm very much looking forward to hard numbers on that. I've talked to Neil [Everson] about this and I know he has the sense that businesses are looking for the reduction, and that they may be locating here or staying here, as a result of that, but I have yet to see hard numbers on that and we really do need that. There's a lot of reasons why businesses come and go. Quality of life is a huge one. We read all about the creative city movement and that businesses are actually moving to cities because the employees are moving to those cities. And they're moving there because they are creative cities with a vibrant arts scene, a strong environmental support, with lots of parks, lots of greenspaces. There are lots of other reasons why businesses move around, so isolating this factor is critical for us in order for this council to make a decision - whether we spend $7 million. Huge money, maybe very important to do that, it may turn out that way, but for me that's a risk factor and unless .[tape break] . the expressway from a health risk perspective. There's a study that's been done, that we asked for, that talks about the asthma issues in the communities around the east end where the expressway is. If that's built, the study says, that people are going to have to move. They're simply going to have to move out of the area if they have asthma, and those kind of factors. There's a risk, a health risk, and I would suggest that the expressway also continues to support a sprawl type development versus intensifying downtown, lower-city type development. With the business park up there, it may in fact go residential, and we know we've got a cap in our Official Plan that no further residential units are going to be built until the expressway is built up on the Highway 52 area and the ROPA9 [Regional Official Plan Amendment 9] area, at the very edge of the urban boundary. We know that supports sprawl, and sprawl has a whole series of health impacts as well as financial. And we are also looking at a 5 cent, at least a 5 cent HSR fare increase. That means the ridership decreases. It declines. There's a very clear relationship between the fare increase and the ridership going down. So to me that's a huge risk as well. Perhaps there's more cars used and all the health impacts of private automobiles. You and I, Mr. Mayor, spoke this week about the gas tax from the province, and how they are going to allocate that money. And they're going to be looking towards ridership - what communities have the highest ridership. They're going to be allocating that gas tax money to those communities that have made a commitment to public transit. So if we actually increase fares by 5 cents, or 15 cents as the second recommendation that we've seen, then the ridership's going to decrease significantly. And I would suggest there's a financial risk in doing that, in that we may not be eligible for some of those gas tax funds coming from the province. The federal government may follow the same approach. Ridership is the measure. If we're not committed to public transit in a serious way, and that's obvious by a declining ridership, then we simply may not be looked at for that money, or at least any significant amount of that money. So there's the health risk on that; there's also the financial risk. So I'll wrap up there by saying that I think the strategic direction the city is going in is worrisome for me. I appreciate the budget approach you've presented today, Mr. Mayor, in terms of how you've allocated it, and going after the $19.5 million, the province for that, I support that 100%, but I'm very very concerned about the risks. I'd like to see an analysis of these risks, through you Mr. Mayor, to staff. And maybe if I can just have a general comment from Joe Rinaldo. And Joe, not wanting to put you on the spot, obviously I've had a lot to say in the last couple of minutes. It's a broad ranging comment that I've made. I think we talk a lot about risk assessment, risk issues in this city, and I think these are the kinds of issues that we have to deal with with our budget as well - our strategic direction for the city. If we make some of these decisions that we're comfortable with, and we've done our homework, and we feel that there's a 90% chance or pick a number, that we're actually doing the right thing, that we're going to get the economic development that we expect, we're going to have a healthy situation and we're going to be able to attract people to a green city - that's one thing. But if we haven't done that analysis, and the BTR is one example, but we haven't done analysis on some of the other things that I'm talking about, then we may be in a very difficult situation a couple of years from now when we realize that we've made mistakes. So I'd appreciate a response through you Mr. Mayor from Joe."

DiIanni: "Joe can respond, and I'll give him a chance to do that, but I just want to remind us again that all of those items that you listed are going to be the subject of our discussions when we deal with allocating monies to either support or not support some of, all the items that you mentioned. And they will be political decisions that need to be made. If the question to Joe is will we get some analyses on all of those items, it wouldn't be just Joe that will provide it, but why don't you help the councillor with that." McHattie: "Let me just quickly rephrase that, because I understand your point. There's a lot of detailed stuff we're going to talk about in the coming weeks, but maybe if I can ask through you to Joe as the person I look to provide financial direction for us: When we're thinking about the financial issues in this city, do we do a risk analysis along the lines of what I've been talking about, like categories, and maybe I'll just ask that question." Rinaldo: "As any initiative is proceeded with by council, the various operating departments do in fact look at some of those factors in determining that. So, yes, as a rule they are. I'm not saying every time they are, but as a rule they are." McHattie: "I think in the triple bottom line approach we're interested in that we've got through Vision 2020, I think it's imperative of us to do that risk analysis, so I'm hoping as we go through the next couple of weeks, we can actually see, as almost a category of the discussion, the staff presentation and the risks for doing this. If we do this, there's the risk. If we don't do this, there's the risk. Otherwise we're making decisions that could really come back to haunt us in the future."

Powers: "When can I comment on the budget direction being offered up by Mayor Larry DiIanni?" DiIanni: "Well, well, now's a good time." Powers: "Sir, I'm very supportive of the direction that you're suggesting for us to consider. I guess the only comment I have is with regard to the $19.5 million. I think it's a very, very optimistic approach. However, I think on a parallel we should consider in a realistic manner, not only asking for $19.5 million for support. The province has clearly snubbed us on the fact that we should be rolled into the social services pooling. And I think that this is clearly deserving of us. It's a number that I think you've indicated, it's a number that is owing to us, and if they won't include us in the social services pooling, when it's an amount of money that's owing to us. I'm hoping that it's not another one of these phantom revenues. It perhaps has the potential to do it. But I think as a parallel process we should look at the alternatives if it doesn't come about. In other words, does the tax impact to the individuals increase, is there increase in user fees, is there reduction in further programming. One, and I hate to do it, but we are saddled with mandated provincial programs. Ones that require us to provide, in some cases, a major share of those mandated programs. Those programs perhaps should be reviewed, and where we're not receiving 100% of the funding, those are perhaps some of the first to go. So I think as part of a parallel process, as we move along this, and being optimistic and certainly with yourself and the dialogue that's been ongoing with both our federal and our provincial partners, I'm hoping that it counts. We're now only asking for $19.5 million, we're also asking for funding toward the BTR, we're asking for funding for continued enhancement under the CFR. So the reality is there's so much money to go around, but I think we should come up with a what-if scenario and to determine what the impact will be."

Jackson: Commends mayor for public consultation program and budget plan. Offers some general comments. "very supportive" of the demand from the province. "I'm a little concerned when I hear some local MPPs who don't necessarily sound favourable towards this, but Mr Mayor I know that through your office you're working diligently behind the scenes to ensure the premier and the appropriate ministers understand the $19.5 million dilemma that we're in". "I now you've had informal chats with members of council individually as well as collectively. I think that's important to keep us apprised every step of the way." Says comments won't come as a surprise on items 1-3 of DiIanni plan. "I've said last term of council, and I think this applies more to some specific geographic areas of our city more so than others. Of course, it applies across the board, items 1, 2 and 3 tax increases, user fees or program reductions. But in some parts of our community it impacts worse than it does in others, and we heard that loud and clear in the last term of council. So Mr. Mayor it won't come as a surprise to you that when I see program reductions, and I know that's $23 million and that could be a wide range of things, and I see that wrapped into a tax increase, a fair substantial tax increase, and I see that wrapped into some user fee increases, over and above what we've contemplated before, it concerns me." . "If we're going to possibly pass on a sizeable tax increase, and I know we're not there yet today, and if we're going to add some more user fee increases, I would strongly urge that this council does not go the way of program reductions as well because we need to sustain services and/or enhance services to our community to let them know that they have not had a net loss since amalgamation. And in this second term of council, we're moving forward. I sense there is a greater bridging, greater collaborative efforts, but the top three there, in collaboration with each other scare me and concern me to a certain degree. And we need to wrestle with those three so that all three do not come to fruition, because if they do I fear we'll be in the same boat we were to a certain degree in the last term of council. Mr. Mayor, I'm fully supportive of the continuation of the BTR. That ultimately is jobs for our community. We've heard from our citizens, we've heard from the parents of children that primarily are working elsewhere outside of our community, the BTR is important to creating more jobs, helping local business and new business come to our community. So I'm fully supportive of that. At a recent Power Conference that was hosted by Laura Babcock and Dennis Concordia, one of the top items of priority from the 200 people who were in attendance that day was land use and development, which again leads towards commercial and industrial assessment growth and jobs, and taxes paid to our community, which hopefully in the future will ease the burden on the residential and multi-residential component. So I'm fully supportive of that direction to help our economy turn the corner and be more competitive, primarily with the GTA and the Niagara region. I read here on slide seven 'ice rental fee increase of $20' to raise over half a million dollars. I understand that there's been verbal talk about that in the fraternity, the hockey fraternity, but I'm putting this to the culture and recreation department now.. I want to make sure that that is authorized. I want to make sure that there's documentation from the local fraternity, at least understanding that this is a real possibility. The last thing we need Mr. Mayor is a few weeks from now with this gallery full like we've been through before. We just need to get ahead of it. And if there's been talk in the ice-using and hockey fraternity, I want Culture and Rec to shore that up from a documentated standpoint. Mr. Mayor, I have talked to the acting city manager Glen Peace. I've talked to various general managers. I've offered from last year and continued into this year close to $2 million worth of savings that have not materialized. Obviously it's a discussion I want to have with you further, privately, and ultimately it would be something probably in camera because it would be involving staff personnel. There's potential for savings. I understand the general managers have given me there justified reasonings where they can't. The acting city manager has tried, but I just think it's going to take council to say: 'you know what, this is a good one, let's move on it', and direct the corporate management team to find those savings where we feel they're legitimate and would be more palatable than some of the suggestions that are here before us. Councillor Powers talked about within social services mandatory versus discretionary programs and within the mandatory I fully support Councillor Powers. Full discussion we need to have here, Mr. Mayor. We have not had this discussion. All we've been told by Social and Public Health in the past, and very legitimately, is they are mandated programs. And we've never gotten into, well what constitutes the mandated program, what's the degree of the mandated program, where's the provincial government at the table or not at the table, and are there particular programs that could save this corporation money that we don't need to do, because the province isn't either fully at the table. Or there may be degrees within that mandate that we don't have to extend ourselves to. So we really haven't had that full discussion either. And I fully support Councillor McHattie's point about the tree replanting program in this community, as well, Mr. Mayor. I'm obviously disappointed to see that it's in the unaffordable enhancements, and I understand it's over a $1 million program across the city. But again as we get into a fuller discussion in the next two or three weeks, maybe there's opportunities there in trade-offs that can provide for the types of things that Councillor McHattie has pointed to that will lead to this healthier community. So Mr. Mayor, I want to commend you overall. If this today is an outline to take us further down the road, I'm fully supportive, but I'm putting my cautions and concerns on the table."

DiIanni: "Absolutely. And as I said, items 1, 2 and 3 are within the purview of this council and we'll be having that debate and making decisions on all of the items that you listed, and some of the other speakers. Can I just point out in terms of the local MPPs that all of them have assured me that they are supportive of the provincial ask and they'll be doing what they can to get their government on-side."

Mitchell: Thanks DiIanni for leadership. "I think it's time that this council took a stand against the province. I know that last term of council we talked about it, but only having one of five in the current level of government last term we knew it wouldn't go too far. And if I remember correctly, we passed a motion last term that this council would rent the buses, and go with the Chamber of Commerce, go to Toronto to present our case to show how unfair it was. I'd like to go back to that motion because we passed it , and in future and unanimously this council go to Toronto with the Chamber with the two or three Chambers we have in this new city and show the support. And now that we have five area MPPs, all five, unanimously with the majority government in power, working for that government in power, now's the time to go forward. So I agree with you, and with the community partners hopefully we can take that message to Toronto unanimously. . I didn't see anything in here - I believe in this and I know you do as well - that there's some savings to be had from some geographical multi-tasking work crews. And we're working towards that. I think there's dollar savings that haven't been credited to that idea yet, that could help Forestry and so on throughout this whole city. I question the 5.9, Mr. Mayor. We've spoken on this. I'd like to see it just a little lower, simply because what wasn't reported to the public today is there's still costs to the former municipalities from amalgamation that has to added on to those figures. So we can't mislead all the public out there." DiIanni: "about CVA?" Mitchell: "No, I'm talking about amalgamation phase in costs. So what's up here, the whole picture hasn't been presented to the public yet because there is some costs from the phase-in of amalgamation. The people need to remember that's still there. I had a question to Joe on the stormwater budget rate that was presented here. Stormwater management was area rated in the past. Does this change that in any way?" Rinaldo: "Yes, obviously when we come back with the area rating that will impact. It will take some of the area rating out of the tax budget and put it onto the rate budget." Mitchell. "There is a positive to stormwater management through the new development charge bylaw that has to be presented to this council in June. It is proposed to put stormwater management back into the development charges part of the bylaw which I think is a more appropriate place for it to go. . Could I request.that the idea of area rating on leaf and yard waste, that that information for savings be brought back in a couple of weeks with those figures as well." Rinaldo: "We'll do that as part of the area rating report, when we analyze the budget."

Whitehead: "Appropriate slide to have up there. I don't know whether we refer to residential tax reduction as RTR, but I'd love to see, for the benefit of the public that when we refer to BTR, whenever we have options we. I don't want to hide from the public what we're doing. It's a business tax reduction and we should be saying it. So I don't mind using shortforms and acronyms throughout the supplementary, but when you're titling the slide it should probably say business tax reduction for the benefit of the general public. . Specific to the tree trimming and the tree planting, I'm just wondering - I think Councillor McHattie raised a question with respect to assessment. Mine's more from the insurance perspective, risk management. Has there been an assessment relative to the types of claims that come in and the savings that we may endure if in fact. Actually, my concern is the risk, is that we're not taking into consideration the insurance claims and that if we reduce the trimming for example, we could have more insurance claims. So I want to ask staff if that's been taken into consideration in the analysis." Rinaldo: "We haven't an analysis of the types of claims that we get, but we could certainly provide that to council." Whitehead: "I would ask staff that in future when we go into the budget deliberations that in fact everything should be under that microscope with regards to risk management or insurance claims to see if when we start cutting programs if that's going to increase the insurance claims in those areas. I think we need to take that risk assessment and understand the implications of any decisions we make in the future. . Lastly, I just want to commend the mayor for the approach that we're taking. I know that we're going to have some very interesting discussions in the upcoming days. As a staff person who worked both at the provincial level for a cabinet minister and one at the federal level, I know the challenges that present themselves with respect to going to cabinet and fighting for your city. The reality is that we have some very good representation, both the the provincial and the federal level in Hamilton. There's no question in my mind that they are very committed to moving the city's agenda, but the challenge they have is they have to convince. And it's very competitive at the provincial and federal levels. We have to convince their counterparts and that's why I think actions like today, Mr. Mayor, the position that you've taken and put forward is the type of action that helps, I call it tilling the ground. We till the ground in advance for our MPs and MPPs so that they can make their points and make their cases. . I will be supporting this particular part of the initiative and the only concern that I throw in the area is when you look at programs like BTR and the provincial contribution, and perhaps fuel tax, and then we're asking them for $19.5 million to offset social services costs, that there might be a sawoff here. They might take a look at those costs and say fine, you lose BTR and you lose the fuel tax, but in fact you get $19.5 million for social services. That's the only caution I throw in the air."

Braden: "Like others I want to commend you for the approach in terms of going round to the communities and for the direction you want to go. Always with me there's a but, so we'll get into the but. What I want to do is I want to expand the focus. The focus of this whole approach appears to be on our operating budget, on making some realistic cuts, and increasing some revenues, and going to the province because we need to go there. And I'd like to suggest that we expand that. So I'm not critical of that. I'm only critical that it doesn't go far enough. So I want to expand the focus big time. I think that we have not so far taken the opportunity to look at what's driving the budget, in particular with employee costs. One other person brought this up before me. I forget who that was. But if the total of the employee costs in terms of pensions and other kinds of funds, benefits and bonuses are increasing our budget $36 million, I don't think you just give that as a given. I think that's an issue, like policing costs going up, that needs to be dealt with. And I don't think it's a sacred cow. I think that we need to figure out how we're going to deal with that, because that's our problem. Not the police one, but all of the other labour ones. So there's an area that I think is avoiding our focus. We need to look at it. The second one is, in this whole thing we really haven't, almost this whole thing, we haven't really talked about the whole idea of reserves going down, and debt going up. If you look just at the figures that our staff have given us, our reserves are going down per year, for the four years that we have the numbers, $40 million per year. Per year, no one shot deal. Our debt's going up an average, I think over six years, of $58 million. You do the simple math. Our position is changing for the worse, a $100 million a year. It's got nothing to do with any of this, cause we're going to pay for that later. So really, and there's this thing that I've said there are different numbers than $65 million, it looks like from our book we're spending $100 million per year more than we're taking in. And that's an average. It's not a one-shot deal. And that's what's not sustainable. And it's very difficult because those numbers are overwhelming I agree. Easy for me to bring them up. It's a very different story to hit them on the head. So when we talk about going to the province for some $20 million, that's commendable and that should be done. I mean it's immoral if we don't get that money. But we need to check about morality and fairness and find out, because they need to be given a chance to respond and we have really all the ducks in order and again I commend you sir for doing the work you do. But don't forget, there's also the inequality or the inequity of the PILS program - the payment in lieu for all those institutions that we have here, and we're grateful we have them, that probably should be paying, and I've got a number written down, might be something between $20 and $25 million. So that's $20 or $25 million that we are also being shortchanged by the province. And there are other things that you can put your hand on that are clear categories that we shouldn't be doing. So while I want to be diplomatic, and I've got great strengths in being diplomatic, right (laughter), to get the $20 million that we deserve, let's be clear that that's only a small part of the problem. And again measure the $20 million in terms of the extra hundred million we're spending per year averaged over those years. It's a one-fifth of the bucket. So let's not kid ourselves. What I'm trying to say Mr. Mayor is that we need as the leadership council here to give some focus to this issue, because although it's overwhelming and most difficult, and if we all dealt with it we'd all get un-elected real fast, and I admit that, but we've got a huge problem here. And we need the press, and we need ourselves, and we need the business community to understand that situation. Because it's not flattering. So I would ask that we have the time for our staff to explain clearly that reserves-debt issue. Cause it's getting scary. Anybody who's been in business knows those numbers have to be dealt with. And in fact if you listen to the discussion, the discussion has really just sort of flew right over that thing. So I would suggest, based on that, that we expand the debate and deal with the bottom line in a bigger way. And when I'm dealing with the bottom line I'm also interested in the quality of life thing. So I'm not just pretending I'm right wing. We gotta deal with the numbers and quality of life. The last thing I'd just like to throw in. There are new challenges that are going to face us that are going to be tough. And they're going to require not only commitment, but they're going to require money. And you have to have money set aside for that. That guy, the honourable Maurice Strong was in town yesterday and I went to talk to him. He's one of the top corporatist environmentalists in the world. Works for the UN Secretariat; tons of money; understands business; understands government; talked to the president of Russia last week; and he's here telling us: 'you'd better get ready for the next paradigm'. And if you're not, he wishes you good luck. We are not preparing for a different economic order at all here. We are going along with what we've had in the past. I just think that's terribly risky. Those of us that read or are suspicious or concerned, know that change is coming. It's our responsibility as the leaders to get ready for that."

DiIanni: "Thank you councillor and as always there's a good deal of logic and and uh, and uh, and I can't find the word, not controversy but certainly provocative thinking in what you're saying. And I do agree that we need to look at the future. And I can tell you that there are some initiatives that will come to this table, I hope at the appropriate time, that will have us look at the long term debt and how we might be able to deal with capital projects and put them in a context, a future context, rather than just a one budget item. I know that the province is looking at that as well - different ways of financing capital projects - and we need to as well, and I'll be committed to, at some point in the very short term, looking at those issues also [tape break]

Collins: "Mr. Mayor I just want to start by commending you as others have for taking a very proactive approach to this year's budget. I think you've been a part of a small group of municipal leaders across the country who have really pushed the agenda with both our provincial government and the federal government in regards to a new deal for municipalities. And I think the plan that you've put in place certainly emphasizes the shortcomings . and some of the funding irregularities that exist and have existed for a number of years in our relationship with those levels of government. My concern is, and I think we had this discussion during our informal chat in your office, and it's in relation to the $19 million. Can I get a sense of either we endorse this concept here today in principle. I don't think we're setting the numbers in stone, but we're certainly giving due direction on our behalf and on the community's behalf with regards to pushing the envelope with the provincial government, in regards to those funds. And there's no debating that they are owed to this muncipality. In fact they have been owed to this municipality for a number of years. That being the case, are we setting a deadline, or are you setting a deadline in regards to when we will receive a final answer from the province. Is it upon the passing of their budget that we know either yes or no that Hamilton is entitled to these funds or will be receiving a cheque from the provincial government. Is it some time this summer or later in the year that we expect to sort of set a drop dead date. Can I have an understanding from you?" DiIanni: "The recommendation that we have before is essentially to receive this for information. I've heard somebody mention, it was Councillor Kelly, and it's been repeated a couple of times, that maybe we endorse the provincial ask, and if somebody wants to make that amendment, I'll certainly accept that. And that's just the provincial ask portion. It's not the other stuff that we're going to have to debate and make some decision on. In terms of a drop dead date, I mean we are asking the province to respond to this, and sooner rather than later. I mean the speech contained the information that they need to signal their intention right now. I don't know whether we are in a position to tell them by a certain time, and that whole strategy is with some discussions as well that are being held, but I think we need to make absolutely clear that the ask is hopefully unanimous, and supportable. And then let this move forward." Collins: "And I believe it will be unanimous, especially around this table. My concern is the scenario that may unfold which is one where we do not receive the funds. And when I was looking through the budget several weeks ago, if you look at our 2005 pressures, and I'm just looking at the chart and maybe they've changed today with Joe's new information, but I believe we're still in the $40 million range for 2005, despite the fact we may receive additional funds from the federal government. So give or take a few million, we're around the $40 million mark. If the $19 million doesn't come forward, not only are we forced to find those funds this year out of our reserve, and my question through you to Joe would be, if. And we can knock on wood, but if it doesn't happen where does that money come from?" Rinaldo: "I think it's really important that the province understands that we cannot sustain these programs on an on-going basis. I just want to emphasize that." Collins: "No I understand that and I think we're all in agreement on." Rinaldo: "Obviously we would have to look at finding it within the budget and/or use up or reserves is what we'd have to do." Collins: "But if we pass the budget with this as a revenue source, I think someone, councillor Jackson, mentioned that it could end up being a phantom revenue source. I'm assuming that the only recourse we would have after we set the levy is through reserves." Rinaldo: "Reserves or looking at constraining the various programs throughout the year." DiIanni: "Let me just jump in here. It's part of the strategy, but not the strategy because that sounds like almost an artificial thing, but the reality. I mean this is exactly why we're saying to the province that they have no option. They've got to come to the table because we're going to have continuing pressures. And if they don't come to the table, those pressures are going to be very disastrous for this community and other communities. So I think our push has to be exactly that. That they have to respond to allow us to get on sound fiscal footing. And that is just the position that I think we need to take very very strongly." Collins: "I agree with that, but again if it doesn't happen, and we've been let down many times by many levels of government, we'll be forced to make some very difficult decisions mid-year or at the end of the year. And I think that puts us in a very dangerous situation, in that we've already run deficits for the last three years and our reserves, as many have mentioned around the table, have been depleted to a point where almost, I mean I know in the tax stabilization fund alone there's probably, what, a half million to a million dollars left in that fund. I think the only other non-dedicated reserve would be the future fund, and Joe just mentioned this morning. that we're looking at $15 million this year. We're already relying on it through the tax levy situation that we have today. It's built into the budget. So every time you reduce the capital or principle of that reserve, you then affect the levy. So it's almost a double triple whammy that you have. And those are my concerns, and so when Councillor Mitchell talks about maybe 6%, that we can improve upon that number, I'd like to go through as we have in the past, and I don't think two meetings is going to be enough frankly, and I really would hope that, and I know that next week is March break and people have made plans, but I really think that we're going to have see ourselves, as we have in the past, delaying the budget date and putting more pressure on staff to find the in-year savings. Even if we do make cuts and increase fees, the longer we wait the more pressure we have later on this calendar year. So I would ask that if we are giving direction, that I'd be happy to move that we, under your signature, we send official correspondence on behalf of the municipality to the province for the $19.5 million. But I, at no point in time, want to build that revenue into the budget only to find out later that maybe in whole or in part we're looking for those funds somewhere else."

DiIanni: "And indeed we will have, we've set aside two meetings. My sense is that we'll probably need more than two, but we need to be focused and we need to be committed to finding the resolution. And I accept the comments that you make and obviously the risk in this strategy, and the importance in having our municipal colleagues support this strategy, having the community support in and our MPPs as well. So I'll take that as a recommendation then that this report be received for information and that we support the provincial ask portion of the report, moved by Collins, seconded by Ferguson. All in favour of that? That's carried."

Adjournment