Council defuses 'foolhardy' budget bomb— no tax break from $31 million budget surplus

An undated image of London City Hall. (File)

It seems council is still feeling the heat from approving an 8.7 per cent tax increase earlier this year.

On Tuesday, city council considered a motion to redirect some of its $31 million surplus from the 2023 budget towards a future tax break.

“Let’s look at bringing down the tax burden in 2025 - where possible,” suggested Coun. Corrine Rahman.

Rahman’s motion would split the amount of surplus dollars directed into council’s Community Investment Reserve Fund in half, leaving $3.5 million to instead be set aside along with a request to Mayor Josh Morgan to direct that money towards reducing the tax burden when he prepares his 2025 municipal budget.

The money would shave about 0.4 per cent from next year’s property tax increase.

Coun. Paul Van Meerbergen called the proposal foolhardy in a scathing rebuke, “Why it’s foolhardy is because you are setting all taxpayers up for what I’ve described before as a budget bomb.”

Van Meerbergen said one-time dollars shouldn’t be used to fund an ongoing tax reduction year after year.

He warned, “If the following year, a surplus of that magnitude doesn’t materialize, then it turns around and bites you in the derriere because there is nothing there to [financially] support it, and hence a budget bomb.”

The surplus includes $28 million from the property tax supported budget and $3 million from the water budget.

The massive surplus from last year’s budget was largely the result of three temporary external factors.

Higher interest rates resulted in better returns on the city’s financial investments, delays in MPAC property value reassessments, and a deal launching the green bin program until January 2024.

The existing policy for the tax-supported budget recommends:

The surplus policy for the water budget would divide the $3 million evenly between debt reduction and a reserve fund.

Council defeated the motion to redirect some of the surplus towards a future tax break—although the mayor left the door open to using some of the Community Investment Reserve Fund to reducing future debt issuance in the future.

“If you want to give Londoners some permanent tax relief, put it towards debt reduction,” Mayor Josh Morgan told colleagues. “If you don’t want as much in the Community Investment Reserve Fund, put the $3.5 million towards more debt reduction. We’ll avoid issuing more debt; we’ll avoid interest payments on those debts.”