An Overview of Ottawa's Situation

As more and more experts agree that with no change in the current distribution of revenue and authority among federal, provincial and municipal levels of government, cities cannot sustain growth, it is also clear that the City of Ottawa must continue to find solutions in areas it controls.

Recognizing the challenges faced by taxpayers, the 12 former municipalities that became the new City of Ottawa had frozen or reduced property taxes and rates for a number of years prior to 2001. Faced with revenues growing at a slower rate than the services they fund, municipalities in the Ottawa region continuously improved their methods of providing service while reducing expenditures. Following amalgamation, in 2001, the tax rate was cut by ten per cent; this rate cut was maintained in 2002. The freezes and cut in rates meant absorbing both the cost of inflation and the cost of downloaded provincial responsibilities; the costs of downloading alone have added over $50 million per year to the City's budget.

As a result of the property tax rate freeze, when adjusted for inflation, the average urban resident now pays 20.5 per cent less in property taxes than in 1993, and the average rural resident pays 21.9 per cent less. (see Chart below).

During this period, Ottawa has been one of the fastest growing cities in Canada. To examine potential solutions and plan for long-term growth, therefore, Council adopted a realistic forecast that clearly recognizes current growth rates and increases physical infrastructure requirements. In the past, growth had led to traditional suburban development that was matched by increasing demand for lower density, largely car-based infrastructure. Indeed, this type of infrastructure demand has been responsible for a significant portion of the present capital infrastructure gap. This demand is forecast to increase as the long-range financial plan moves toward 2011.

The City must adopt a more sustainable
approach to development and growth.

As a result, the City must recognize that it cannot afford to continue to subsidize development and growth as it has done in the past. The City must reconsider where development takes place, as well as its true cost. In turn, ways must be found to recoup a portion of the City's funding shortfall by changing the way in which the City develops. It should be noted here that a substantial portion of the costs of growth in the City has been subsidized by property taxpayers.

Lifecycle maintenance of existing physical infrastructure-roads, bridges, pipes, and buildings-also presents a unique challenge. Historically, resources sufficient to maintain physical infrastructure have not been included in forecasts and planning. This situation is, in fact, common to municipalities throughout the country. Again, the recent report by TD Economics provides the underlying figures:

The Association of Consulting Engineers of Canada (ACEC) estimated that the total municipal infrastructure shortfall in Canada is at least $44 billion ... TD Economics estimates that the total infrastructure shortfall is growing by about $2 billion per year.

Although all available tools are being examined to determine the ideal way to address the City's capital and operating needs, every city in Canada requires more flexibility to generate revenue. Further, stable funding arrangements with federal and provincial governments are critical if cities are to enjoy long-term financial health and economic growth.

The City is meeting its challenges directly and with foresight. While continuing to improve ways to provide service while reducing expenditures, finding greater efficiencies in service delivery alone will not be enough to close the funding gap. The challenge for the City between now and 2011 will be to continue to find innovative ways to improve services and reduce costs and, at the same time, carefully examine and cultivate new sources of revenue. Without these new sources of additional revenue, and despite the City's best efforts, the funding gap will only continue to grow.

[top]