Understanding your City 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.

Get the accessible and printable pdf version.

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.

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?

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

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

How the City of Ottawa compares

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

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. 

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.  For information regarding the 2018 budget breakdown, see our Budget 2018 Budget Highlights.

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.