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Understanding your City budget

City budget: facts and figures

Find out how the City budget affects your property taxes, and what your taxes pay for.

How the City budget affects your property taxes

The City budget helps to determine the amount of property taxes you pay to the City each year. If you are a home, business or property owner, you will pay your property taxes in two annual instalments. Even if you are a tenant, a portion of your rent will go toward paying the property taxes on the building in which you reside.

How the City of Ottawa compares

Taxation increases for major Canadian cities 2011 to 2017
City 2011 2012 2013 2014 2015 2016 2017 Cumulative Total Compounded Total
Ottawa 2.45% 2.39% 2.09% 1.91% 2.00% 2.00%

2.00%

14.84%

15.82%

Toronto 0.00% 2.50% 2.00% 2.23% 2.75% 1.30%

3.29%

14.07%

14.91%
Edmonton 3.85% 5.39% 3.30% 4.92% 5.70% 4.10% 3.10%

30.36%

34.57%

Calgary 4.60% 6.00% 5.50% 5.00%* 4.20% 6.10% 0.00%

31.40%

35.79%
Vancouver 2.00% 2.84% 2.00% 1.90% 2.40% 2.30% 3.90%

17.34%

18.67%

*City of Calgary: tax increase mitigated by 1-time rebate of $52 million

Components of property taxes

Three factors influence the amount of property taxes you pay, only one of which the City has control over:

  • Property tax rate - set by City Council every year when it approves the budget.
  • Assessed value of property - determined by the Municipal Property Assessment Corporation.
  • Education rate - set by Province.

Your residential property taxes are calculated using this formula:

  • Assessed value x municipal property tax rate = amount of municipal property tax
  • Assessed value x education tax rate = amount of education property tax
  • Municipal property tax + education property tax = your property taxes *

*Please note that, if applicable, other charges such as local improvements, municipal drains or business area improvement charges might be added to the tax bill.

What you get for your property taxes

The City of Ottawa provides many vital services to residents each day, which have a direct impact on the quality of life that residents expect. Almost one third of your property tax bill is effectively set or mandated by the Province. Education taxes are set by the Province and collected by the City. As well, employment and financial assistance (Ontario Works) and affordable housing are provincially mandated programs that the City is required to administer. City Council has a very limited or no control over these items.

Want to know what you get for $1,000 in property taxes?

2016 Services Urban Area Rural with
OC Transpo Service
Rural with
Para Transpo Service
Transit & Para-Transpo 147 51 15
Police 135 156 162
Capital Financing 104 121 125
Roads & Traffic 80 92 96
Fire 77 47 48
Program Support 57 66 69
Parks/Recreation/Culture 69 80 84
Social Housing* 46 54 56
Garbage/Recycling ** 28 32 33
Library 20 23 24
Social Services* 14 16 17
Paramedics 16 19 19
Planning/Economic/Environment 14 16 16
Child Care* 8 9 9
Public Health* 6 7 7
Long Term Care* 5 6 7
Municipal Property Assessment Corporation* 5 6 6
Non Municipal Tax Supported Services         
Provincial Education* 164 191 198
Conservation Authorities 6 7 7
  1,000 1,000 1,000

*Provincial Mandated Programs
**Includes special charge for Solid Waste

Why our City’s excellent credit rating is good for you

The City of Ottawa is rated AA+ by Standard and Poor’s Rating Services and Aaa by Moody’s Investor Services – the highest possible credit rating. 

The City’s credit ratings are based on a number of factors including debt levels, reserve fund balances, capital funding requirements, long-range planning and economic outlook and reflect strong fiscal outcomes and prudent financial management.

The City of Ottawa’s excellent credit rating helps investors and creditors measure the City’s ability to meet its financial obligations.  Excellent credit ratings mean that it is less expensive for the City to borrow money. The City’s lower costs for capital improvements can be passed on to you as a property taxpayer and as a stakeholder. 

Learn about the budget

How the City Budget Works - Video

Get informed about how the City budget works and how you can get involved.

Watch a short video and learn the basics of how the City budget works.

View a text transcript of the How your City Budget Works video. 

Get involved in the budget process

Take a look at a simple step-by-step guide that shows you the budget process from beginning to end.

City of Ottawa’s Budget Process Made Simple A key component to developing the budget is hearing from you!  To help you better understand how Ottawa plans its spending every year – and how you can get involved – we have broken down some of the key steps that go into developing the City’s budget.   Budgets approved by Ottawa City Council  Municipal Services Water Services Public Libraries Policies Services Public Health  A five Step Process  1.	Develop budget guidelines and priorities Start of 4 year Council term Derived from several key documents, the budget directions report provides the direction for annual City budgets  2.	Set budget timetable Spring/Summer Outlines public consultation schedule and dates for tabling and approval of budget.  3.	Develop draft budget Summer/Fall During this period, members of the community can provide input in a variety of ways.  4.	Present draft budget to City Council for consideration Mid/late Fall Citizens have the opportunity to register and present at Standing Committee meetings  5.	Review and approve final budget Early Winter Council approves budget in early December.  In an election year, this is delayed until the new year.

Get the accessible and printable pdf version.

Budget basics

Every year, the City of Ottawa produces a municipal budget. One of the City’s most important documents, the budget is the blueprint that defines how resources are collected and allocated. The overall budget comprises two main components – the Operating Budget and the Capital Budget.

Operating Budget

Every City program and service is funded through the City’s operating budget, which is designed to ensure the dependable delivery of a broad array of programs and services that residents rely on every day. Your municipal government is responsible for emergency services (fire, police and paramedics), roads, clean water, parks and recreation, public health programs, garbage and recycling programs, libraries and the buses that take residents to work and home. The Operating Budget funds all this and much more.

To keep Ottawa both affordable and prosperous, City staff needs to determine how best to deliver all these services while balancing revenues and expenditures. Given Ottawa’s size, that’s not as simple as it might sound.

Ottawa is one of the largest cities in Canada – larger than the areas of Toronto, Montreal, Vancouver, Calgary and Edmonton combined. Ottawa covers an area of 2,760 square kilometres. Only 10 per cent of that is urban while the remaining 90 per cent is agricultural land, villages, marginal and forested lands, and wetlands. Given the sheer scale of the city, it’s no wonder that a majority of City funds are spent on delivering existing services, many of which are available 24 hours a day, 7 days a week.

Capital Budget

In order to progress and grow, Ottawa must also look beyond simply providing existing services. A City needs to be guided by a clear and overarching vision of what it is to become.

City infrastructure is funded through the Capital Budget. The bulk of that funding goes to maintaining and rehabilitating existing infrastructure as identified in the Comprehensive Asset Management analysis. As funding allows, the City continues to fund growth, building new infrastructure and investing in the future. The City adds between $600 million and $800 million worth of new capital to Ottawa’s existing asset base every year – from buses and vehicles to water pipes, , roads to trunk sewers, from street lighting to libraries. These are investments that residents and businesses will benefit from for years to come and which contribute to the growth of Ottawa’s economy and quality of life.

The Capital budget also funds Council’s Strategic Initiatives, which support the Term of Council Priorities.

Developing the budget

With direction from Council, the City’s Finance Department is responsible for assisting departments in developing their detailed draft budgets every year. A series of budgets are tabled, broken down by category so that the various City Committees responsible can review and discuss what is proposed and ensure everything included complies with existing City plans.

The City must maintain a balanced operating budget. The Municipal Act prohibits the City from running a deficit on operating expenditures. The city can only borrow funds and incur debt for the Capital Budget.

Programs delivered by the City can be segregated into the following major categories. The amount of budgetary discretion that City Council has over the services listed under these various categories varies significantly: 

  • User-Funded (e.g., water and sewer, parking, garbage collection): These programs are funded entirely by the residents who use them. Revenues from user fees must be used to maintain related operations and capital.
  • Non-discretionary (e.g., long-term care, public health, social services, debt charges): These items are provincially legislated and the City is obliged to fund the related operations and capital.
  • Limited Discretion (e.g., policing): The police budget is developed by the Police Services Board. Council has no discretion except to refuse to approve it. Council does, however, work closely with the Police Services Board as the budget is developed.
  • Programs with Service Standards (e.g., transit, paramedics): Programs that have to meet minimum expected standards, like wait times, carry a minimum cost associated with maintaining that standard. Any improvement to that standard will require additional costs.
  • Direct Service Programs (e.g., Libraries, Parks & Recreation): There is some room to alter funding among these programs, but any changes affect the level of service delivered.
  • Support Services (e.g., Governance, Finance, Communications): These programs are essential both in supporting the departments that deliver direct services and in providing administrative oversight in running the business of the Corporation.

During development of the operating and capital budgets, Council has some flexibility for reallocating or reprioritizing funds between programs and services to address emerging issues. Given these limits on discretion and the financial realities of limiting tax increases to residents, it is difficult to address all these issues or to implement significant changes from year to year.

As real example, here’s how 2016 revenues and expenditures were allocated:

Where the money comes from

Pie chart of where the operations budget money comes from. Breakdown of the data in the following paragraph.

In 2016, property taxes accounted for about 47% of revenues. The rest of the funding came from Provincial and other grants (18%), Fees and service charges (15%), Water and Sewer revenues (10%), Payment in Lieu of Taxes (6%) and Reserves and other (4%).

Pie chart of where the capital budget money comes from. Breakdown of the data in the following paragraph.

For the Capital Budget, 48% of revenues came from Tax Supported/Dedicated reserves while 31% was financed through debt. The remainder of the breakdown included Development Charges (13%) and Rate-Supported reserves (8%). For the capital budget, the city can borrow funds, which means the future generations that will also benefit from capital investments, new assets and new infrastructure also share in the costs.

Where the Money Goes

Pie chart of where the operations budget money goes. Breakdown of the data in the following paragraph.

The total operating budget in 2016 totalled $3.2 billion. Here’s a breakdown: Transit Services (15%), Community and Social Services (13%), Water and Sewer (10%), Ottawa Police Services (10%), Capital Formation Costs (9%), Emergency and Protective Services (9%), Governance and Program Support (7%), Parks, Recreation and Culture (7%), Roads/Traffic/Parking (6%), Housing Services (5%), Ottawa Public Library (2%), Planning, Building Code and Economic Development (3%), Public Health (2%), Solid Waste (2%).

Pie chart of where the capital budget money goes. Breakdown of the data in the following paragraph.

In 2016, Capital Budget expenses went to fund Drinking Water and Wastewater Services (34%), Transportation Services (21%), Transit Services (16%), Police Services (3%), Integrated Roads, Water and Wastewater Services (12%) and other tax supported services (14%).

Budget planning tool

The 2017  Budget was tabled at Council on November 9, 2016.  As such, this tool is now available for information purposes only.  You may still provide comments directly to your Councillor.

City Budget 101- video presentation

Get a more in-depth look into the budget by watching a presentation from our City Treasurer.

City Treasurer Marian Simulik and Deputy City Treasurer Isabelle Jasmin hosted a one-hour budget session at City Hall on the evening of June 24, 2015.

Part of ongoing efforts to increase public understanding and engagement around the municipal budget, the presentation explained how Ottawa spends and how the annual budget is put together.

The presentation was recorded and you can watch it below.

Read a transcript of the presentation

Video transcript - How your City Budget Works

Okay. I would like to help you understand how your City develops its budget.
We always hear about them, and often this can feel like another language all together.

Before we get started, there is important information you should know. Ontario cities like Ottawa receive only 9% of all taxes collected, but are responsible for over 50% of the infrastructure.

Let’s start by looking at what the word budget means…Simply put, it is a planned itemized summary of money that is coming into to the City and how that money is spent for a specific period of time.

It is very important to note that provincial government legislation in Ontario states money coming in equals money going out also known as Revenue equals Expenditures...or a balanced budget.

The City of Ottawa provides more than 100 services to the citizens of Ottawa, so City Council and Administration always have to make difficult decisions to ensure this balancing takes place.

There are two main components of the budget when looking at the “money going out” side of
the scale. Operating pays for all the day-to-day activities of the Corporation: this includes items such as: salaries and wages, utilities, supplies, fuel, and insurance - just to name a few.

The Capital budget pays for all the new big investments or the rehabilitation of current assets under the City’s control.

So let’s focus on how the city collects to pay for all these services.

For every dollar that comes into the city... 53 cents comes from property taxes, 18 cents from provincial grants, and 29 cents from user fees and other sources.

So, now we have learned what a budget is, how cities collect money and how they spend it.

Now let’s take a look at how these pieces work together: Money comes in through property taxes, grants & subsidies, and user fees. The money collected is required for both the operating and capital budget.

We've already talked about the operating budget, including day to day expenses, but it also includes money for funding capital budgets.

The Capital budget pays for all the new big investments or the renewal or rehabilitation of city assets and infrastructure.

This connection is made through 2 methods:  the Reserve Fund method which sets aside funds to pay for capital projects on a cash basis.  These are usually projects that are paid for in the short term such as a road widening or replacement of a sewer line.  Or the debt payment

Ok. So let’s recap.

One - A budget is a plan for money coming in and money going out. There are two building blocks
to the City Budget: Operating and Capital.

Two - The operating budget is like your paying your house bills to keep the lights on. Just like
in a normal household, our bills go up with inflation.

Three - The capital budget is like your major outlays: vehicles, house, renovations etc.

Four - Money comes in from three sources: Property Tax Levy, User Fees, and Grants and Subsidies.

Five - Money coming in is used to deliver over 100 services to City residents.

Six - City Council and Administration, with the input of the public, decide how best to balance the City budget guided by Provincial legislation.

And that, is how your City develops its budget.

City Budget 101 Transcription

(https://www.youtube.com/watch?v=ohwGrmD6blU&feature=youtu.be)

[Slide 3; 0:09]

So, to start off with, the Municipal Act requires the budget to be balanced. For us, that means that expenditures—all of our costs—less our revenues (non-taxation revenues, so that would be user fees, fines, charges, etc.) equal our taxation. If you’ve seen your tax bill, you know we go to seven digits on your actual tax on the tax rate. That’s because we raise exactly, through taxation, what the expenditures less the revenues generates. Unlike the federal government and the provincial government, who start with an estimate of what they think their taxation is going to be. They then take away the expenditures that they plan on making in the year, and the “equal” part is debt. For us, there’s no debt in this line at all. We are not allowed to issue debt for our operating budget. This has to be balanced, and that’s the equation that we work through all the way through the budget. At the end of the budget, it sums up to how much taxes do we need to raise in a particular year.

So this is a fundamental difference between the way municipalities have to budget and the way federal and provincial governments have to budget. We have a number of tools that guide us with respect, though, in terms of how we budget. The main one in there is, we have a fiscal framework that sets out rules about what we want to see for user fees, how those are going to be set, how those will be identified, what kind of ratio between user fee and tax fee we have for various programs. It also sets all the rules around use of debt. It sets the rules around what expenditures, like—a very simple rule that’s in our fiscal framework is: you have a permanent expenditure, you have to have a permanent source to fund it. You don’t fund permanent expenditures with one-time revenues. All you do is create yourself a hole if you continue to do that. So there’s a whole regime of, basically, fiscal rules that we follow. The Fiscal Framework is available on ottawa.ca, under the “Financial documents” section. It goes—there are seven or eight different sections in it. We continually are trying to update it, but the current version there dates back, I think, to 2007.

[2:45]

After we’ve done the budget, we then deal with the taxes. How are the taxes being allocated among all the property taxes—property classes within the city of Ottawa. The budget doesn’t deal with how the taxes are going to be spread. That is tax policy; that comes afterwards. And there, again, is a whole series of rules about how taxation gets spread across the various properties. An example of one of those is… we have—assessment is weighted depending on which class you are. So, residential is weighted at 1. So $1 of assessment in residential property attracts the equivalent of $1’s worth of taxes. But commercial has a weight of 1.98, so it attracts taxes as if it was $1.98 as opposed to $1; it’s weighted. Now, the Province has set a rule that basically said: once you’re past 1.98 in terms of weighting commercial taxation, you can only tax into that class half of any budgetary increase that you pass in a year. And that’s why, in 2015, the tax increase that residential saw was 2%, but the actual taxes raised by the City only increased by 1.75—because commercial didn’t have the 2% increase. Commercial ended up with approximately a 1% increase. So, commercial has less, so that meant, that shifted onto residential. But tax policy is a whole area onto itself outside of the budget. The budget just determines how much taxes you want to raise. Where those taxes get paid and how they get paid is done through the Tax Policy Report, which comes after the budget.

[4:44]

The one rule about the budgets we have and how they relate to taxes is we have to have the budgets done first, and as you all know, our final tax due date is the third Thursday in June, and under law, we have to have those bills in the mail 21 days in advance, and with sending out 250,000 bills, and getting all of the calculations correct, that’s about a month’s worth of work. So we actually need to have the taxes, the policy adopted at the end of April in order to make our June tax due date. So we need the budgets done in a timely manner; we can’t sit and debate the budget for months and months on end. It has to be done in order for us to get our final tax bill out the door in accordance with the rules.

[Slide 4; 5:37]

So the budget itself is actually a number of budgets. I brought along the 2015 budget book… which you have all seen; it’s a massive document. But basically, we have separate budgets tabled and reviewed by various standing committees. So each of the City operations, the standing committees—Transit Commission has a separate budget, because Transit is its own tax rate. Transit costs are not spread across the entire city. Rural areas that only get limited transit service do not pay the full Transit fee. Only the urban transit area pays the full Transit fee. Police Services Board: they have their own tax rate, so they have their own budget as well. Library Services Board: because they’re a separate board, they get their own budget and they approve it. They are included in the city-wide tax, but they are dealt with separately. Committee of Adjustment and the Crime Prevention Council: two very small units in the City, but, again, not part of the overall City administration; they have individual budgets that they present.

[6:52]

The Conservation Authorities: they come to us, usually in April or… yes, usually April, with their budgets, and we tax for the proportion of their budget that is—it’s proportional of what the assessment of the City of Ottawa is in the total watershed. So it’s not just Ottawa who’s paying the conservation authority levy; the levy is spread between all the municipalities that are in the watershed for South Nation, for Rideau and… Mississippi, thank you. So, each of those are—now, Ottawa is the biggest municipality in the watershed and has almost all of the assessment, but it is spread between all of the municipalities that are in the watershed. So, they come to Council, and there’s very limited discretion that Council has with respect to their budget. There’s only programs in there that they deliver specifically in the city of Ottawa; special programs that Council can say “yes” or “no” to. Most of their levy is done as a general program, and under—they have their own act; Council basically just has to pass it on and we act as the collection agency for their taxation.

[8:19]

The Business Improvement Areas: I don’t know the number we’re up to now, I think 15 or 16 of them, and—how many? Oh, there you go. Councillor El-Chantiry chairs the BIA… [inaudible] Group… I knew they had a name. The BIAs are—under the Municipal Act, are allowed to collect a levy in a defined area, in the business improvement area, and it’s levied only on the commercial properties in that particular area. So they form, they get established, they determine what they want to do—it’s supposed to be to enhance businesses in that area—they come to us and they say, “We’ve decided we want to raise $50,000 for…” whatever it is, streetlights or whatever; we put it on the tax bill, and only those businesses in that defined area pay that particular levy.

We also have the Water and Sewer Services, which we—the budget is put in front of Council, but it has no impact on your tax bill whatsoever, because Water and Sewer Services are paid only from revenues that we receive from the consumption of water—it’s from the water bill itself. It’s on a per-cubic metre basis that we raise revenues for that area, and some of you may know, we’re in the process right now of looking at that structure of how we actually raise revenues in the Water and Sewer area.

Not reviewed by Council, and this is a question we get all the time, is the Ottawa Hydro: Ottawa Hydro is a private corporation wholly owned by the City of Ottawa. They do their budget all by themselves. It’s the Ontario Energy Board who determines what their rate is. It’s not the City of Ottawa. They are a creature of, basically, the electrical wires industry, and they go to the Ontario Energy Board to get their rate set. And also, Ottawa Community Housing Corporation. Again, Ottawa Community Housing Corporation is a separate, stand-alone corporation. It’s wholly owned, again, by the City of Ottawa. They have a board; that board deals with their budget in totality. They don’t bring it to Council for approval, because their money comes from the rents that they receive from the residents and from contributions from the City of Ottawa. The linkage between the City of Ottawa and Ottawa Community Housing is in the Housing department, you will see contributions to housing agencies; one of those housing agencies is Ottawa Community Housing. But they set their budget separately; Council does not approve it.

[Slide 5; 11:16]

So the Operating Budget. So what do we include in the Operating Budget? The first thing we include is all of our provincially mandated cost-shared programs. Social services in Ontario—and we’re unique in this—are delivered through the municipal level of government. Most provinces deliver this directly; in Ontario, back when Mike Harris was the premier, we shook it all up, and cities became more responsible. They had a role to play at that time; they became even more responsible for the delivery of social services. We were downloaded, I think, at that time, social housing, which always had been a provincial responsibility.

There are also direct programs and services to residents, and we build the cost for those based on the service standards that Council has approved. So, Council has approved that you get garbage pickup every two weeks, you get recycling pickup every week, you have to—the Fire, I believe, have to respond in, I think it’s 5 minutes in an urban area, 8 minutes in a rural area; paramedics have to be—respond to a call 8 times out of 10, at 7.4 minutes. There are standards that have been adopted, and we turn those standards around and say, “So what do you need to actually deliver that standard?” Road clearing: 5 cm of snow, you send out the plows, that’s your standard. So we build a budget based on “these are the services that Council has said we’re going to provide, and these are the standards that Council has approved.” And then we do the work to determine what are the resources needed to actually deliver that service.

[13:05]

There’s also Governance and Program support services, and these are really a function of all the other services that you provide. So, your council and the support services on the governance side, but also—included in there would be, like myself, Finance. You are delivering a series of services. We have a centralized administration in the City of Ottawa. In Finance are all the Finance people. There aren’t Finance people in all the departments; we have centralized. So, in Human Resources; all the Human Resources people are in the HR department. This was a decision that was made, an amalgamation, because there are considerable efficiencies to be gained by having people in a particular department dedicated to a function as opposed to working in a department and maybe finance is a quarter of their day, and then a quarter of their day, they do HR, and the rest of it it’s communications or IT or whatever. There is considerable savings to be had by having centralized services. So, included in our program support are centralized IT, HR, City Clerk, Legal, Finance, etc.

And then the last thing that’s in our operating budget is our contribution to capital. And there are two things that are in our contribution to capital. The first is the actual cash that we’re putting into our reserves, which then is used in the Capital program, and the second part is the debt servicing. Where we’ve authorized debt for capital work, we have to make certain that, included in the operating budget—and this is the first thing in the Municipal Act, when it says what should be in the budget—first thing it says: it has all the debt servicing that’s required in the year. So, the first thing we put in there is any debt servicing that has to be made in the year, from debt we’ve issued in the past, gets included in the budget. So we raise not only cash, but we also raise funds to repay debt that was issued in previous years.

[15:10]

The revenues we have from user fees, these are set by Council to offset program costs. Most of you are aware; one of the… we have two really—three really big user fees. The first one is Water and Sewer: 100% offset by the user fees, no taxes go into that at all. The second one is Transit. Council has a target with respect to how much users of the system should pay towards the direct operating cost—not toward the total cost, because the total cost would include all of the contribution to capital and the debt servicing, really, the infrastructure part of it, but they have got a target of 55%. That’s what users should be contributing towards the direct operating cost. That’s the maintenance of the bus, the fuel, the operators, etc.

The other limitation, for us, for user fees, really is the Municipal Act. The Municipal Act states that, as a government, we can’t actually have user fees that go beyond the cost of delivering the service. So that’s why Water and Sewer fees only raise enough to cover Water and Sewer costs. We don’t have a premium in there that we could then use for other things. Recreation costs cover a fraction of what it actually costs to deliver recreation programs. Transit: 55% of operating costs. But everyone, in the past—there have been questions raised about “how can you increase a user fee to a certain level?” and we’ve been able to justify it by saying, “Here’s the cost.” Now, the cost can include depreciation and capital cost, which, typically, we don’t have included with the area budget. In Recreation, I don’t have the debt charges that I’m paying for all the recreational facilities that are built and that we issue debt for. But that is another limitation on how much user fees we can generate.

[Slide 6; 17:33]

The Capital Budget: the requirements for the Capital Budget are based on a couple of things. The first thing is your maintenance and your rehabilitation of your existing assets. This was identified in the Comprehensive Asset Management analysis undertaken by staff. They do a state of repair of all the assets, and they look at it to see what, in fact, does the City need to invest in order to keep our assets in a good state of repair. Then there are growth requirements, because we continue to be a city that’s growing, and we identify all of our growth requirements in what’s referred to as the Development Charges Background Study. Again, something that’s online, and it shows you all of the projects that we have based on what we think the population growth is going to be in the next—up to 2031. All of the projects for all of the service areas: Roads, Transit, Water and Sewer, Police, Fire, etc.—all of those projects are identified in that particular background study. And that is the study that is the basis for us generating development charges.

And the last piece is Strategic Initiatives. Council has an envelope of funds that they use; it’s basically on operating side, it’s generated from room that the Province is taking over in social services. They use that to advance certain initiatives that are not rehabilitation and are not broke. They’re outside of that sort of parameter.

[Slide 7; 19:06]

So what does the 2015 Operating Budget look like? This is a bit small, I hope you can read it on your chart, but: every area, $3.1 billion. The three or the four biggest areas in there—the biggest area is Community and Social Services, and that is 13%. You then have Water and Sewer Services at 11%, Transit Services at 15% and Police Services at 10%. So that right there, that’s 49% of your budget goes toward those four services alone. Then you have smaller things, all the way down to Ottawa Public Health, gets 2%. Capital formation is 9% in here. But every service area is represented, gets a piece of the overall gross $3.1 billion operating budget. And how do we raise the revenues to support that?

[Slide 8; 20:05]

Property taxes only represent 47% of the revenues that we use to support the budget at the City of Ottawa. User fees, as I’ve said, are a big piece of it. Water and Sewer revenues are 11%. The fines, fees and service charges, another 15%. Provincial transfers for the Social Services area, 18%, and then payments in lieu of taxes, which is what the federal government basically pays in the city of Ottawa for their properties, because we can’t actually tax them as they are a senior level of government; that equates to 6%. So that’s how we spend it, and that’s how the revenues that support it.

[Slide 9; 20:56]

But if you look at it from the service areas and you look at that costs that it’s actually paying for, the types of costs, you’ll see that the biggest component in what we spend it on is salaries, wages and benefits: 49—48% (I need new glasses); 48% of the budget goes towards wages, salaries and benefits. And when you think about the services that we deliver, we are delivering services from—not from machines, but basically from people: it’s firefighters showing up at your door, it’s bus drivers driving the bus, it’s social workers who are meeting with clients and dealing with them. So we are a very labour-intensive operation. Materials and services represent another 18%. Transfers and financial charges are 14%. That—“transfers”—is really what we’re paying in the Social Services area; it represents really the OW and ODSP payments that are going forward, and then the financial charge component of it is the debt servicing. Contribution to capital, 14, fleet costs, 2% and program facility costs, 4%. So that’s the nature of the expenditures as opposed to the services that they support.

[Slide 10; 22:13]

The Capital Budget in 2015 was a total of $689 million. 59% of it was spent on maintaining the assets we already own. Growth—new roads, new facilities, new whatever is 28%, and then Strategic Initiatives is relatively small, 13%.

[Slide 11; 22:37]

Where do we fund this $689 million from? There really is only two sources: development charges, which you see here is 18%, and then, if you see, rate-supported reserves, tax-supported reserves. That is the contribution that we’re raising on the tax bill and the water bill that we transfer to a reserve, and then it goes to capital. So that is your—that’s the biggest piece, it’s cash that we generate from you, the residents of the city of Ottawa. We also have gas tax money. The provincial and federal governments give us gas tax money yearly under our agreements with them. These have to be used for capital, and Council has decided that they are to be used for Transit. And then we have some revenues in there; that would be where the provincial or federal government decides to cost-share a particular capital works with us such as they’re doing right now for the Confederation Line.

[Slide 12; 23:37]

So the Operating Budget. Annually, we develop budgets that reflect the increased cost to maintain current services including cost-shared or legislated programs. So, all the increased costs from salary awards, from inflation, from the Province saying, “We’re going to increase the OW rate,” whatever; we have to include all of those. We also have the increased cost to address program growth. When we build a new facility, we have to include the cost to run that facility, to staff that facility. We have a new road, we have to include the cost to maintain that road, to plow that road. Then, the increased costs to maintain capital assets—and this has been a particular concern of the previous council and this council, is to make certain that we’re maintaining our assets in a good state of repair. So, the increased costs not only from inflation on maintaining assets, but basically, we’re trying to catch up from prior years when we were not investing enough, to increase the contribution to capital significantly in the next little while.

[24:43]

Then, we subtract any savings from efficiencies, and in the last council, the administration, through the investment of technology, was able to shave off $40 million from the budget, but this is an ongoing piece of work that the administration is always looking at. How can we do things differently to basically reduce the cost in the delivery of the service without changing the service delivery standard; just looking to do things better and cheaper. Less the increase in user fees and new revenues. So, every year, we increase the user fees to reflect the fact that the cost of delivering those programs has increased. And less the taxes from new assessment. So every year, we get new properties added to the tax roll, so we value what those new properties will generate in terms of taxes and we take that off of the overall ask. The remaining amount that comes out is your taxation increase for the year in question.

[Slide 13; 25:51]

Capital Budget. Capital Budget is any—we define capital as any significant expenditure to acquire or improve land, buildings or equipment that confers a benefit of more than one year. We have a lot of work that takes place that doesn’t have a benefit that lasts for more than one year, so it’s not defined as capital; it’s defined as basically regular maintenance. Funding for approved capital projects does not lapse at the end of the year. The Capital Budgets stay open. This is different than the federal government, which at the end of the year, they close all of their capital projects, you basically have to re-ask if you haven’t spent. In our world, these projects stay open until they’re completed, and the reason why we do it is because the nature of the work we do, it can take five, seven years—a prime example is Confederation Line at seven years of construction.

[26:47]

So, as opposed to re-asking every year, when we approve the capital works, it has to have all of the authority on at that time, and then it stays open it is complete. Every project has a specific date it’s supposed to be complete. We go through, every year, a review of all the works in progress that are open, and the ones that are supposed to close have to come forward to Council to be either closed or to ask Council to extend them for whatever reason that they’re not being closed. Under our rules, when we close a capital project, any money that’s on it gets sent back to its source. I cannot take—say a capital project is closing and there’s development charges that are remaining on it that are unspent, I can’t use those development charges for anything other than what they were generated for. So I have to return them to the reserve—the development charge reserve, to be spent on assets that are in the Development Charges Background Study. I can’t just take that and say “oh, I’m going to spend it on… firefighters.” Everything goes back to the source. So, development charges go back. Gas tax has to go back to the gas tax reserve under our agreements with the federal and provincial government. We send—if there’s city-wide money left, it goes back to the city-wide reserve and gets—Council can then reallocate it to other projects, but we have to follow those rules in order to be compliant with the various pieces of legislation that dictate how those funds are spent, because we get audited every year. So that’s the Capital Budget, and this is the reason why the Capital Budget is so significant in the City of Ottawa.

[Slide 14; 28:38]

These are the assets that we own and are responsible for. So, we’ve got $11 billion, that’s billion dollars, in transportation network. Transit has $1.4 billion’s worth of buses and garages, etc. Water and Wastewater: the pipes, the linear pipes, the plants; $16 billion’s worth. Recreation and Culture, 1.9 billion’s worth of facilities—and the list goes on. So this is a significant amount of effort that needs to be put in to make certain that these assets are maintained in a good state of repair.

So the annual infrastructure investment. As I mentioned before, this council has focused in on trying to rectify what was a historical problem in terms of not investing enough in our assets.

[Slide 15; 29:34]

But based on the asset values that you saw on the previous page, the annual investment, if we depreciated at basically 1% a year—so that meant every asset has to live—has to be viable for a hundred years (which is not the case), we would be investing 320 million a year. If all of our assets only lasted 20 years, which again is not the case—we do have assets that are quite long-lived, we’d be investing 1.6 billion, just if we were investing what the depreciation is in each of those years. Right now, we’re investing about 400 million a year, and every year, our asset base grows. That 32 billion you saw on the previous page? We add roughly 600 to 800 million in assets every year to the City’s books. 200 million of it comes from the developers. They build the subdivisions, they turn it over to us who are now responsible for the streets, for the street lighting, for all of that. That gets added to our books and then becomes our responsibility to maintain forever and a day. And then in addition to that, there are the works that the City is undertaking itself: building light rail, building new facilities, building new roads.

[Slide 16; 30:56]

So just to touch briefly on debt, because this is an issue that raises itself every year at the budget. People always ask—are concerned about how we manage debt at the City of Ottawa. As I mentioned before, we can only use debt for capital works. We cannot use it for operating, so it’s not—I always equate it to the difference between credit card debt vs. mortgage. We can only have mortgage debt. It all goes—there has to be a capital asset behind it. Council has—because they’re concerned about the use of debt as well, because they know what can happen if you start adding debt on, what that can do to your taxation in the future, if you don’t control it—is they have put on an imposed limit (it’s in the Fiscal Framework) on the amount of debt repayment that can be in any one budget. So they have said, “We are never to exceed 7.5% of our own source revenues.” Our own source revenues are taxes and user fees. They never want it to be greater than that. And so that’s the parameters that we work with. Right now, we are just a little over 5%. To get to 7.5 would be billions of dollars more, but this is something we manage every year. That’s on the tax side, and 15% for Water and Sewer revenues. Water and Sewer has a different level because Water and Sewer is all about infrastructure. It’s really not about delivering services by people—that really is—that’s pipes. So, that one, because it’s so capital-intensive, has a higher limit. The Province, as well, monitors our debt. They have our limit at 25% of own source revenue, which is quite frankly ludicrous. We are at about—the way they calculate it, we’re around 7%, so… But Council is more concerned about it and has imposed tighter limitations than the Province has done.

[Slide 17; 33:06]

So, development charges, quickly, I talked about this. Every five years, we have to do a review of our development charges by-law. There’s an act—the Development Charges Act. It determines what we can include in the development charge, what services, how we’re to calculate them. We go through—it’s a very extensive process with the development industry and the planning staff to figure out what are the projects that need to proceed into the future. The development charges are specific by function. So, in the overall charge, there’s a portion of it that’s for Transit. There’s a portion of it that’s for Water and Sewer. We have to account for it by the individual service. I’m not allowed to put it into a big pot and say, “Here’s the development charges, just take out of it as we need.” I raise dollars for Transit, I have to use it on Transit and Transit only. The rules are very specific on this. I have to report to the Province every year on the money we raised from development charges. Development charges are paid by the developers when they take out the building permit. So I have to report on what we raise and where it was spent. And the development community watches it because this is their money until we spend it.

[Slide 18; 34:25]

Other sources of funding in the Capital Budget, though, there are some others: cash-in-lieu of parkland, when a developer builds, there’s a requirement that they have a certain amount of parkland. It’s very difficult when you’re in the inner city to actually have that parkland, so they are allowed, under the Planning Act, to give us cash instead, and then we turn around, under the Planning Act, use that to fund projects that are related to recreation. Provincial and federal gas tax, as I spoke to you about before. Those come in—we have agreements with both of those levels of government that dictate how we spend that money.

And then there are parking revenues. The parking revenues from the parking meters go into the parking reserve and only pay for parking-related activities. We do not use parking revenues as a general source of revenue. And the reason why we do it is because parking revenues come in from a very concentrated area in the city. They don’t come in from the city writ large. They come in from very specific areas and those are areas that have parking issues. And they want us to reinvest that money. The BIAs in particular made a case to reinvest that money to help with the parking situation in those areas. And then there are the reserves, which I spoke about before, which is how much we take from the tax bill and the water bill, put into a reserve and is used for capital.

[Slide 19; 35:57]

So, just quickly, I’m going to go through what we refer to as Council’s budget discretion. So, you have a 3.1 billion operating budget.

[Slide 20; 36:06]

When you take out the items that are funded by user fees—water and sewer, parking, garbage collection (which is a flat fee on your tax bill and is only used for garbage collection), Building Code services (only paid for by the permits and the fees that the development industry pay) and by-law, which is the revenues that they generate from their offenses, from the parking tickets, support their services. So any changes in these areas, all it does is serve to generate, to reduce the user fee. It actually doesn’t affect your taxes at all. So you take out—that’s $411 million.

[Slide 21; 36:48]

Then you take out the non-discretionary. This is the piece of the pie that Council really can’t touch. It’s long-term care funding, public health, housing, social services, the legislated part of childcare, planning; there’s the debt charges, we have to make those payments, we don’t have a choice in that; lease payments that we’ve entered into, what we pay the Municipal Property Assessment Corporation for returning the roll to us every year and what they do on assessment, and then tax remissions, which by—under the Municipal Act, we have to make. Council can’t change any of those, because those are all obligatory under various pieces of legislation.

[Slide 22; 37:33]

You then get limited discretion: the police budget. The police have—Council can only accept and reject their budget. They cannot go in and do a line-by-line review of their budget. The Police Act basically gives them the discretion, if Council rejects the budget, to take their budget to—there’s a provincial agency called “O-COPS”, where they can go and say, “We don’t agree, and this is the budget that we need,” and they would make a determination, and Council would have to enact whatever they decided. So, they really—they have another higher level that they can go to if Council doesn’t approve their budget. Now, that being said, Police Services work very closely with us and respect the targets and the guidelines that Council has set. But really, this is not an area that Council can go in and cut as they see fit; they have no control over it other than to say “yes” or “no.”

[Slide 23; 38:34]

Then there are all the programs that have service standards with them. So, there’s Transit, Paramedics, Roads, Traffic; Parks, Building and Grounds Maintenance; and the capital contribution. All those services or those budgets reflect what is needed to provide those services as per Council’s direction. So, if you’re going to change the budget in this area, you’re probably going to affect the delivery of the service.

[Slide 24; 39:04]

Then you have direct service programs. These are areas that Council could go into, but again, you’re going to be affecting delivery to the public. Library, Parks and Recreation, Forestry and Recycling. There are not service standards associated with these; these are ones that Council provides and could go in and change.

[Slide 25; 39:24]

And then lastly, you have the support services, $219 million. General Government, Finance, Human Resources, City Clerk and Solicitor, IT and Communications. There’s a portion in here that is—you will need regardless of the size of the city. You will always need a group that’s going to send out the tax bills. You will always need a group that’s going to run your Council meetings. These are costs that you cannot get away from, but they’re probably—this is probably the most flexible piece of the budget that Council has overall. This represents 7%, though, of the total budget. When you think about what administration costs in most organizations, 7% is fairly lean.