WRITTEN SUBMISSION to KPMG by “Midlandcommunity.ca”, August 16, 2012
This presentation is entitled, “The Imperative for Controlling Midland Town Spending”.
The organization we represent has made past deputations clearly outlining our position regarding Midland’s budgets and taxes. Historically, since 2000 spending and resulting taxes have increased well beyond any reasonable level, leaving Midland in the low income, high tax hinterland. Midland taxes are higher than necessary to support the services a town our size requires. Those in our community with the least ability to pay are impacted the most by spending increases and will benefit the most from future decreases. Furthermore, reduced taxes will help spark economic development, further assisting the jobless and working poor.
Without going into the details of past presentations, following are some sample data and conclusions:
- Between Midlandcommunity.ca and KPMG there have been 23 unique comparators studied over the last year or so. In each case, when comparing household income versus residential tax rates, Midland is found in the farthest reaches of the bottom-right quadrant – the quadrant reserved for municipalities with low income and high tax rates. KPMG cautions us not to draw conclusions from these data but given the overwhelming evidence we must recognize that Midland is overtaxed relative to its ability to pay.
- Over the twelve year period from 2000 to 2011, Midland’s taxes for the average household increased 84% while inflation only accounts for 23% of this increase.
- KPMG is forecasting a further 34% increase over the next 5 years if no steps are taken to stop the bleeding. We commissioned a survey on our web site in which over 80% of respondents support reductions.
- In our group’s 2011 study looking at the years 2000 – 2009, we showed that Midland’s spending for Fire protection services rose 97%; payroll costs nearly doubled with a 93% increase; Parks and Recreation increased by a whopping 215%; full-time staff climbed by 39%, and on it goes. We found the study helpful in highlighting areas that require review and in making suggestions on where change in direction and action is needed. One can always argue that comparing Midland with any single municipality is unfair or “apples and oranges” or based on bad data, but taken holistically those arguments are clearly without merit. Midland is overtaxed, and it has resulted from many years of excessive budgets leaving us with a legacy that we cannot afford to continue.
- In 2011, the Globe and Mail reported on a study of 100 cities that illustrates a clear correlation between tax rates and economic growth. “The data for the largest 100 metro areas show that areas with low taxes do indeed tend to grow faster than those with high taxes.” Midland’s investment in economic development will be hobbled and wasted unless we scale back our present tax structure. One means for Midland to close the gap is by adopting a strict policy: Budget increases in any given year will be at least 2% lower than the assessment growth from new development the previous year. So if new development adds 1% to the assessment base, the maximum spending increase becomes -1%.
- Some people say high taxes are only the concern of the wealthy with their big houses and high assessments. KPMG has even suggested that residential taxes are akin to an income tax because high income earners typically live in more expensive properties. Both assertions are misleading. In Canada, higher income earners pay a higher income tax rate; low income earners pay a lower rate or no income tax at all. Municipal taxes are not a progressive system – modest homes are taxed at the same rate as the most opulent estates. The poorest 20% of Canadian families pay over twice as much in property tax (either directly or as part of their rent) as they pay in income tax. Municipal taxes are a far greater concern for the lowest income earners in our community than for the wealthy. Fixed income pensioners, the working poor, the unemployed – all of these residents are facing true hardship from taxes that have increased way more than inflation.
- Members of our own Council have expressed concern that pursuing cost savings will impact the Town of Midland as a major employer in the area. On this issue we must be clear: It is not the role and cannot be a goal of the Town of Midland or any other government to be an employer. Employment of people is an outcome of government’s role as an enabler and service provider but cannot be a goal unto itself. Improving efficiency, eliminating duplication, adopting alternative service delivery methods, finding new revenue sources and otherwise reducing unnecessary spending will reduce the tax burden, thereby triggering a positive cycle of economic development, employment, population growth, and municipal development, rather than the negative spiral of increased taxation, economic decline, unemployment and population stagnation.
So what can we do about this? Well, we could throw up our hands and concede that it is out of our control. We could moan that the library, the fire service, the parks and recreation facilities and the burgeoning staff count are all albatrosses around our necks that we and future generations must accept. At MidlandCommunity.ca we disagree. We believe we can rein in our costs and usher in a new era of smart frugality without sacrificing the important municipal services all residents depend on. We can do this without sacrificing our future economic growth opportunities – in fact, we will increase the odds of success by reducing taxes. We can accomplish this without reducing the appeal of this beautiful town. We must learn to manage our town finances as each of us must manage our household finances, or as a business manages its costs and revenues, without the perceived bottomless well of taxpayer funding that can be tapped at the stroke of a pen.
We introduced our deputation by describing what MidlandCommunity.ca is, but perhaps we should take a moment to emphasize what it is not. It is not an organization of simple critics or idle complainers or passers of the buck. It is a group of intelligent contributors, former and current professionals and trades people, executives and entrepreneurs, factory workers and bureaucrats who volunteer their time and energy to contribute to this town. As such, we have come up with some cost saving approaches, indeed even specific suggestions of areas where an objective, alternative analysis should be undertaken. We have identified potential opportunities in our Fire Department, Police Department, Parks and Recreation Department, Public Works Department, Library, and General Administration where we can take steps to reduce the cost to Midland taxpayers. Please refer to Appendix A of the written submission for a few of those areas for investigation and ideas for innovation that could begin to pave the way to a more responsible, economical and successful future for the Town of Midland.
Appendix A – Midlandcommunity.ca Top Ten List of Cost Improvement Ideas
- A complete review of staffing with a plan to reduce it through a hiring freeze, attrition and other means including reallocation of staff resources to meet needs based on operations and economic growth plans. The 39% increase in full time staff over a ten year period against a population growth of 5% is unwarranted. Each year going forward Midland’s current staff complement will demand a spending increase in payroll and related costs of approximately $600,000 – alone amounting to a 3% increase in taxes. This is not sustainable.
- We have one the highest costs for fire protection services among all comparators in the Midlandcommunity.ca study. Benchmark the experience of these other communities and learn how costs can be reduced. Initiate changes in the operational model for fire protection services, such as shifting to a greater reliance on part-time/volunteer firefighters. Explore a stronger partnership model with neighbouring Penetanguishene and other communities.
- Establish a parks master plan and then dedicate land from developers as parkland only when it fits within this master plan. In other cases, apply levies in lieu of parklands so the monies can be put to effective use in more suitable locations.
- Parks and Recreation has rapidly grown to represent 15.7 cents of every tax dollar spent in Midland fuelled by a 215% increase in spending over 10 years. Consider selling unused or under-utilized parks and other parcels of land in the Town’s ownership for a triple-play of benefit to the town:
- It raises funds that can be allocated to better economic investments;
- It eliminates the ongoing maintenance costs of under-used parks;
- It generates new tax revenue from the homes or businesses that locate on previously untaxed properties.
- Reduce the North Simcoe Sports and Recreation Center (NSSRC) 70% subsidy by increasing user fees for all users of the NSSRC whether Midland residents or not. Offset the impact on low income residents through directed subsidies.
- Public Works represents approximately 26 cents of every tax dollar spent in Midland. Reassess service levels for maintenance services such as snow plowing, grass cutting, road repair, and similar services to seek opportunities for service reductions and cost savings.
- Undertake a complete fleet management review with an eye for rationalizing equipment whenever possible. Under utilized equipment should be sold and then rented or contracted on the odd occasion it is needed. This will not only reduce the capital budget, it will also yield savings in operations, maintenance, licence and insurance costs. Fully leverage Simcoe County’s vehicle/equipment purchasing programs.
- Critically reassess the new Public Works depot. Consider amalgamating equipment from multiple departments in a single location, or even amalgamating with other municipalities.
- Yearly spending increases well above the rate of inflation have raised Police costs to approximately 24 cents of every tax dollar spent in Midland. Even if otherwise justified, these annual increases will only be affordable if Midland can achieve a healthy population growth or expand its Police services to neighbouring communities and achieve greater efficiencies through scale.
10.The Library represents over a million dollars of annual cost to Midland taxpayers. Lower operating costs by shifting to a volunteer-based model. Increase revenues by renegotiating the fees charged to neighbouring municipalities for Midland library cards to eliminate the subsidy Midland taxpayers are now providing to non-residents.
We believe the above-noted suggestions will allow us to maintain appropriate service levels and importantly, also allow Midland to re-direct some much needed resources toward its tourism and economic development initiatives. Lower taxation as an outcome will also stimulate growth.
We appreciate the opportunity today to present to KPMG through Midland Town Council. We recognize that this is difficult work. Nevertheless it is work that must be done in order to help Midland’s future arrive on schedule.
Roy Ellis on behalf of MidlandCommunity.ca