Deachman: Ottawa’s financial crisis is also Sutcliffe’s fault

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When Premier Doug Ford visited Ottawa this spring to announce the opening of a regional office here, as though we were Ontario’s version of France’s St. Pierre and Miquelon, Mayor Mark Sutcliffe presented him with a welcome mat, no doubt intended in a genuinely friendly way.

At the time, though, I wondered if Ford might instead receive it about as kindly as he would a poke in the eye with a sharp stick. After all, didn’t the gift also say, “Hey! We’re over here! Where’ve you been all these years?” The only things missing were a compass and a map of Eastern Ontario.

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But when Sutcliffe announced Thursday that Ottawa’s current “financial crisis” was because the city was getting shortchanged by provincial and federal governments, this was the equivalent of the sharp stick.

Sutcliffe took aim at Ford and the feds for not treating Ottawa as befits the nation’s capital and second-largest city in Ontario. He decried that the feds get to arbitrarily decide how much the city will get in payments in lieu of taxes, or PILTs, for the vast portfolio of properties that it owns and occupies.

“If they want to pay less, they pay less,” Sutcliffe said, adding that the federal government is paying the city $30 million less in PILTs this year than it did in 2016, instead of the $95 million more he argues it ought to be giving the city.

Sutcliffe also begged relief for Ottawa’s beleaguered LRT system, noting how the pandemic and accompanying switch by public servants to remote work has killed ridership. Cost overruns, meanwhile, have upended the original agreement, which saw the city, province and feds each contributing one-third of the tab. Sutcliffe noted Ottawa now pays 56 per cent, while the other levels each contribute about 22 per cent. Over the next three or four years, he added, OC Transpo faces an annual operating shortfall of $140 million.

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“We don’t even have the money we need to operate our existing system,” he said. “If we don’t get the help we need, it won’t even make financial sense to open Phase 2 of light rail.”

Kudos to the usually mild-mannered Sutcliffe for wielding the sharp stick. Ottawa certainly gains much by having the federal government here — employment, museums and increased tourism, for example — but the PILTs have been a thorn for decades.

As for LRT, the province’s rules have changed in recent years, and as a result, municipalities in and around Toronto, for example, are now getting public transit without having to pay for it themselves. Admittedly, it’s taxpayers throughout the entire province who are paying for these projects, but Ottawa residents are additionally saddled with the lion’s share of their own transit costs.

So Sutcliffe isn’t wrong when he calls out the feds and province for better treatment. But he’s disingenuous by insisting that the city’s current financial crisis “is not of our own making.”

Yes, the pandemic was an unforeseeable event that helped send LRT into a tailspin, but the equal division of costs that the three levels of government agreed to was based on the city’s unreasonably low estimate in the first place. By the terms of that agreement, any cost overruns were solely the city’s responsibility, and now we’re paying for that decision.

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According to Neil Saravanamuttoo, economist and director of the non-profit urban advocacy group CityShapes, Sutcliffe should take responsibility for the choices that were made by city hall, rather than passing the buck, and collection hat.

“Budgets are about priorities,” Saravanamuttoo says, noting the hundreds of millions of dollars spent or promised for Lansdowne, a new Rideau Centre police station, support for a new police helicopter and expected infrastructure costs for the Tewin development, all of which could have been earmarked instead for transit.

“Sutcliffe already had the chance to make the case for more transit operations funding from Ontario in the March New Deal for Ottawa,” Saravanamuttoo adds, “He chose instead to ask for a new police station and highway interchange.

“A few months prior, (Toronto mayor) Olivia Chow had negotiated $330 million in transit operations funding in her New Deal for Toronto.”

Saravanamuttoo believes Sutcliffe is simply preparing residents for larger tax increases in the final two years of his term and putting the blame for it on the province and feds.

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But raising taxes is what he should have been doing all along. His promise during the 2022 municipal campaign to keep tax increases to no more than 2.5 per cent for the first two years of his term may have helped him get elected, but it wasn’t responsible, not with inflation running at 6.8 per cent that year, 3.9 per cent in 2023 and 2.8 per cent in the first six months of this year.

The argument that the Consumer Price Index used to calculate the inflation rate shouldn’t apply to city operations, since it doesn’t buy a lot of green grapes or TVs or whatever other spiralling costs residents face, is only valid to a point. One of the city’s largest expenses is salaries, wages and benefits for its 17,000 employees, and they buy grapes and TVs. And with the collective bargaining agreement between the city and its roughly 10,000 CUPE Local 503 workers expiring at the end of this year, and the agreement with its nearly 2,800 Amalgamated Transit Union Local 279 workers expiring next March, the city’s hole will only deepen.

No one wants to pay higher taxes, but finding “efficiencies” can only go so far, while reducing services or increasing user fees disproportionately affects those who can least afford it.

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Other major cities in Canada have taken necessary, if unpopular, steps. Toronto Mayor Olivia Chow raised taxes 9.5 per cent this year, turning a massive projected deficit into a projected surplus of $63 million.

Calgary residents, meanwhile, are paying 7.8 per cent more this year than last. ”We didn’t make a popular decision, said Mayor Jyoti Gondek. “We made the right one.”

Hopefully, Sutcliffe’s pleas will find receptive ears on Parliament Hill and at Queen’s Park. In the meantime, the right decision would be for Ottawa’s mayor to take in the welcome mat and tidy the house before inviting company back.

bdeachman@postmedia.com

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