Five Frequently Breached Principles Of Economic Development As A Framework For Evaluating TSBP Budget Proposals
A Presentation to TSBP Council
by Craig Gammie
“The best thing a local government can do for a local economy is to stay the hell out of it” (participant at the January 25, 2012 Grey Bruce economic development workshop)
TSBP taxes are set to increase another 7.2 per cent in 2012, bringing the 5 year tax increase to a whopping 38 per cent.
Tax increases 2008 through 2012
2008 2009 2010 2011 2012 2008 to 2012
6.2% 3.3% 9.7% 7.2% 7.2% 38.28%
People are struggling. People are losing their homes. The situation is dire, and untenable. And the increases have been and are largely for expenditures that are unlawful, unethical, contrary to your oath of office, economically unsound and economically unfair. The increases are for the most part theft. Money stolen from the people.
Something must change.
Council is trying to pull the tax rate scam on us again this year. Tax rate increase is irrelevant, totally meaningless.
Tax increase is what counts, not tax rate increase.
Council is trying to blame MPAC assessments again this year. MPAC assessments are irrelevant. They have absolutely nothing to do with the taxes or the tax increase on the average property. All tax increases are caused by council – period.
I give this presentation knowing full well that the very controversial 2011 budget passed only five to four. So I am aware that in my comments I may be preaching to some who are already converted.
In this presentation I am going to say things that are controversial, and that are contrary to conventional wisdom, and to a large degree are diametrically opposed to conventional wisdom.
Because of the controversial nature, some of you, likely the ones that supported last year’s budget, may feel a strong urge to discount or dismiss my ideas. I challenge you to resist that urge. My ideas and opinions are very carefully considered and draw on a very strong academic background and extensive relevant career experience.
There are several Economic Development principles important to municipalities, including:
Principle #1 – conformance with the Municipal Act
Principle #2 – conformance to ethical standards
Principle #3 – conformance to oaths of office
Principle #4 – economical soundness
Principle #5 – economical fairness
The principles should also be used for much municipal decision making, including budget decisions, strategic plan decisions, and just about any thing else.
While such principles are universally accepted, and frequently spoken, they are, at least in the cases of TSBP and County of Bruce, almost universally ignored in the course of developing budgets and implementing economic development policy or economic development services policy. They are paid lip service only, and barely even that.
As a result of ignoring these critical principles, the welfare of the constituents of TSBP and County of Bruce is diminished. As a result of ignoring these principles, TSBP and County councils have been making bad economic development decisions for years.
As a result of ignoring these critical principles, and of making bad decisions, people have lost their homes, people have been pushed below the low income cut-off line (often mistakenly called the poverty line), and even the well–off have had to tighten up – totally unnecessarily and unfairly – as a result of the poor decision making.
The decision making needs to be corrected.
A step in the corrective action is to incorporate the principles described below into the budget and economic development decision making.
The rationale behind the 5 principles if provided below.
Principle #1 – ensure conformance with the Municipal Act
“ASSISTANCE PROHIBITED”. That’s the law. The reason it’s law is so councils don’t steal money from taxpayers and give it to private interests. This is only common sense.
I’ve been told many times that the Town has a legal opinion that grants to chambers are not prohibited – that paragraph 106 does not apply. But when I say let’s see the opinion, the answer I get is “that’s legal – that’s closed”.
But if there were indeed such a legal opinion, there would be no reason to have it in closed. I believe that there is no such legal opinion, and if there is, it’s only fair that it be subject to public scrutiny.
Council should eliminate all from the budget that does not conform to the law.
Principle #2 – ensure that the proposal is ethical
The rationale for the “ethical” principle is in the reason why we have municipal corporations.
We could all build our own roads and sewers and water systems and deal with our own garbage and even do our own policing.
But it makes a whole lot more sense to throw a bit of money in the communal pot and provide services to ourselves collectively. But there’s one little problem with a system like that. It’s called the free rider problem. Sometimes there’s going to be someone who says I can just help myself to the collectively provided services without paying for any of it. And if others who do pay see a free rider helping himself then they may say well I‘m not going to be a sucker so I’ll just get a free ride too. And you can see how the system could break down.
So to preclude the free rider problem, we make a law that says if you own property you have to pay into the collective pot, and if you don’t, the collective can take your property. It’s paragraph 351 of the municipal act. And it does fix the free rider problem. But it also raises another problem.
If someone collects money from you and uses it for something that you should have been able to choose whether to contribute – e.g. giving to charity – and you refuse to pay, then that someone could literally confiscate your home for not giving to some charity, or for any other thing that should be discretionary, and that are not intended to be part of the forced collective.
If you could not pay the taxes you could literally have your home stolen from you.
Taxpayers work hard for their money. Except for the money legitimately collected for legitimate municipal services, people have a right to keep their money, and have a right to choose how they will spend their money. For a municipality to try to take away that discretion is unethical.
Those services that absolutely make sense to be dealt with collectively should be the only ones in the Municipal picture.
Principle #3 – ensure conformance with council members oath of office
From the municipal act, the role of council is:
“to represent the public and to consider the well-being and interests of the municipality”
“Public” and “municipality” in this context mean the same thing, that is the members of the corporate body acting in their capacity as members of the corporate body.
The Oath of office includes:
“truly, faithfully, impartially exercise this office”
This means truly represent the members of the corporate body in their capacity as members of the corporate body and consider the interests of the members of the corporate body in their capacity as members of the corporate body.
Taking money from the members of the corporate body and giving it to the private sector or taking care of someone’s private interests is contrary to “taking care of the interests of the members of the corporate body in their capacity as members of the corporate body”.
The oath needs to be taken more seriously.
Principle #4 – ensure that the proposal is economically sound
There are very few budget spending proposals that don’t require tax dollars (and reserves are tax dollars too).
When you take money from residents in the form of taxes, right off the bat you hurt prosperity, you hurt the economy, you hurt the jobs situation.
And though it’s possible in theory to use that money in a way such that created prosperity, economy and jobs more than compensate for the prosperity, economy and jobs lost as a result of the taxation, the practice at least at the municipal level is far different than what is theoretically possible.
Because municipalities do not have the expertise to fiddle in the economy, they will almost invariably do more harm than good. Private markets and private transactions will almost invariably do a better job of managing the economy than any municipal government could possibly do.
That’s behind the quote:
“the best way for a municipal government to improve a local economy is to stay the hell out of it”
Principle #5 – ensure that the proposal is economically fair
Even if you did find an economic or budget intervention that was economically sound in the net, it should also go through the test of economic fairness.
If “A” has $100 dollars and has an opportunity to make it $105 dollars and you confiscate “A”s hundred dollars and give it to “B” and “B” turns it into $110 would that make it right? No it may be economically sound but it would also be unfair. Because the hundred dollar belongs to “A”, and the benefit of investing that $100 should flow to “A”.
So if you must wade into the local economy, and I advise against it, at least be fair.
The 2012 budget is not fair.
So to get back in control we should have taxes on the average property at a maximum at the 2008 level plus 5 years of inflation. This would be about 8% above the 2008 level. Meaning instead of a 7.2 per cent increase for 2012 we need a 20 per cent decrease.
Not a twenty per cent decrease in tax rate – a twenty per cent decrease in taxes on the average property.
The reduction is there. Just follow the five principles.
Below, some of the key budget proposals that contravene many or all of the five principles, and that if dropped will go a long way towards reaching the twenty per cent tax reduction.
proposal amount Lawful? Ethical? Oath? Economically Sound? Economically Fair?
Economic development 188,000 20% 20% 20% no no
grant to wiarton chamber $40,000 ?? no no no no no
physician recruitment ?? no no no no no
wiarton willie $11,400 10% 10% 10% no no
various grants no no no
Do not do the roads study – it is a waste of good money – the scoring system is ridiculous
The hope bay situation will never score high on the roads needs study – but it should be addressed anyway
Do not do the phase I pollution study – it is a waste of good money.
Grants: These should be denied – fail all 5 criteria
1 Mar Women’s Institute 2,056.00
2 GNN – The Real Uganda (Kelsey Baker) 1,000.00
3 Show Garden Club 1,000.00
4 Allenford Curling Club $
5 Wiarton Bluewater Car Show $
6 Women’s House Serving Bruce & Grey 5,000.00
7 Elsinore Community Centre Inc. 1,000.00
8 Sauble Area Medical Clinic Incorporated • 75,000.00
11 Wiarton Kid’s Den Day Care Centre 4,336.52
12 Wiarton & District Co-operative Nursery School 716.87
14 Crime Stoppers of Grey Bruce 1,000.00
15 Peninsula Adventure Sports Association 5,035.84
16 Allenford Improvement Assocation 4,000.00
17 Sauble Beach Chamber of Commerce and 24 Weeks of Summer Program $167,397.00
If you give a grant to the sauble chamber it will be the worst of all theft from the people – you may be surprised at the reaction.