Sutcliffe's Budget Has a $100 Million Hole in It

He's been raiding reserves since coming into office

I’m always happy to hear from readers, but will be unable to respond to any messages until December 11.

Mayor Sutcliffe presented his 2024 budget a few weeks ago, for approval in December. During his budget speech, Sutcliffe went to great lengths to explain “how we're able to keep tax increases so low when inflation is rising rapidly.”

He cites two reasons:

• “our costs fortunately are not rising as quickly as household costs”

• “we have done a lot of work to identify savings and efficiencies that we can reinvest in our greatest priorities”

There is a third reason he forgot to tell you about. He’s been raiding reserves since coming into office.

$227 million drained from reserves

All muncipalities hold reserves. Reserves are cash in the bank, that allow a municipality to manage unexpected swings in revenue and expenditures. They are often characterized as a rainy day fund, to absorb financial shocks and prevent municipalities from falling into a deficit (which, by law, they are not allowed to do).

When Sutcliffe came to office at the start of 2023, the City of Ottawa reserves stood at $663 million. By the end of 2024, they will be down to $436 million. He’s draining $227 million from reserves.

$131 million last budget. $96 million this budget.

And that is only for his first two years. Sutcliffe will have depleted a whopping one-third of Ottawa’s total reserves in his first two years of office.

What level of reserves do we need?

The City of Ottawa has a reserve management policy that, by design, makes it impossible for anyone other than city finance staff to determine if our level of reserves is too high, too low or just right.

We have multiple different categories of reserves and targets for each of those categories. But again, it is not possible for outsiders to evaluate how these are performing.

Having said that, we can cut through the complexity by using a simple best practice in financial management: reserves should equal about 9% of total expenditures.

For 2024, the total Ottawa budget is $5.9 billion in operational and capital spending. By that measure, Ottawa should be holding about $527 million in reserves. Not the $436 million we will be down to by the end of 2024.

Setting the record straight

For those who followed the 2022 municipal election campaign closely (and full disclosure, I worked on the McKenney campaign), you might remember when Catherine McKenney found a hole in Sutcliffe’s budget, to which Sutcliffe shot back:

"There are no holes in my plan. Catherine McKenney's plan is to take $90 million out of our reserves; those are emergency funds that should be there in the future. We're breaking the piggy bank."

McKenney was right. There is a $100 million hole in Mark’s budget.

The only problem is it’s $100 million per year.

2025 budget is not going to be pretty

For the 2025 budget, Mark is going to have to start making some difficult choices: continue draining reserves until the cupboard is completely bare, cut services, or raise taxes.

His “efficiencies” rely heavily on OC Transpo cutting routes that, along with increasing fares, is leading to a transit death spiral.

His other “efficiencies” — such as $2.6 million in savings in a Police budget that is increasing by $9.3 million — are largely bogus. They are not available for reallocation to higher priorities in the City, which is supposed to be the whole point of a spending review.

And while he is right that the inflation the City currently faces is less than the inflation you or I face, that is going to come to an abrupt end in 2025. A number of collective agreements covering the City workforce expire in 2025 and 2026, and those workers will be looking for wage increases that get them caught up to below-inflation increases over recent years.

The Mayor’s “easy” budgets are coming to an end.