Why are my taxes so darn high?

I often hear people complain bitterly about city taxes, and why they just keep going up and up and up. I thought I might devote an article to analyzing our property taxes. Are they really all that high? How are they calculated? Are they that bad in comparison to other communities? If they really are high, why?

&&&&

The first question is to ask "How do Guelph's taxes compare to the other levels of government?"

Let me start by trying to come up with an average tax bill in Guelph. According to the Municipal Property Assessment Corporation (MPAC), the average home in Guelph has an assessed value of $399,000. In 2017, the residential tax rate (ie: the Municipal taxes plus the special Infrastructure Levy, but not including the education rate---which Council has no control over), was 1.022948%. Multiply the assessed value of your home by this percentage (the "mill rate"), and you get $4906. (I would have much rather had a median assessed value of a Guelph home, but I couldn't find that number. The problem with average anything to do with money is that our society is becoming so stratified according to wealth that a very small number of hyper rich individuals can draw up an average and give casual observers the idea that most people are a lot better off than they really are. One Bill Gates or Warren Buffet added to the mix can draw up the average income of an awful lot of people making minimum wage at fast food restaurants.)

OK, let's look at the median household income for Ontario, which was $81,480 in 2015. That means that if a family earning the median paid the average Guelph property taxes (for the city, not the school board), $4906, that works out to about 6% of a family's income going to city taxes. Now let's see what that household would be paying in federal income taxes. First, let's assume that there are two people bringing equal amounts of money into the household. That means that each person is making $40,740. Now let's look at the federal income tax rates, which in 2017 said that people making under $46,000 had to pay 15% of their income. Next, let's look at the provincial income tax, which says that people making less than $42,000 have to pay 5%. This means that the average Guelph citizen pays 20% in taxes to the federal and provincial governments, which for my hypothetical median couple, comes to $16,300.

So through all that dubious, "back of the envelope" math, it turns out that we pay slightly more in city taxes than we do for the province.  But we certainly pay a lot less money to the city than the Federal government. (This is generally true, but be careful about specific numbers---the federal government also transfers revenue from it's slice of the tax pie to the provincial government. But if I tried to figure that out in detail, we'd be so far out "in the weeds" that I'd end up writing War and Peace.)

&&&&

The second question I'll answer is "How are the taxes assessed?"

The mass media report primarily on the federal and to a lesser degree, provincial. So many people vaguely assume that the local tax system is like those others. It is actually very different. Ottawa and Queen's Park start from revenue---what rates are people going to be taxed---and then develop a budget around that. This is how it has to be because they both raise their revenue through a combination of income tax and a Value Added Tax (VAT), which Canada calls the "Goods and Services Tax".

These two sources of income fluctuate quite substantially over the country's economic ups and downs because people's incomes fluctuate based on employment. And the amount that they buy also changes due to their income. Moreover, what the government spends also fluctuates in the opposite direction---as more people get laid off and stop paying taxes, they also tend to need more government services to support them during this "down time". Because of these two tendencies, both federal and provincial governments are forced to borrow money---at least some of the time---in order to navigate the up and down of what economists call "the business cycle".

Under Ontario law municipalities are not allowed to levy either sales or income tax. Nor are they allowed to run an operating deficit (except under extremely limited circumstances.) This means that they have to calculate tax rates very differently. What they do is decide how much the city is going to spend over a given year, then they divide that by the value of the total stock of property in the city. The resulting figure is known as the "Mill rate". When you get your bill, you get a statement that says that your property is assessed as being worth so many dollars, this is multiplied by the Mill rate, and, that ends up being your bill.

As you might imagine, the assessed value of your home has a big impact on how much property tax is paid. This means that it's important that a standard, impartial mechanism is used to come up with that number. Each city used to do this for itself, but in 1970 a provincial system was put into place that municipalities could use to assess the value of each person's home. This was voluntary, however, and some municipalities continued to use their own unique system to evaluate the value of homes. In 1997, the province created a mandatory system called the "Fair Municipal Finance Act". The next year, the government created a stand-alone, non-profit corporation titled "the Ontario Property Assessment Corporation", which eventually changed its name to "the Municipal Property Assessment Corporation (MPAC)".

&&&&

This property assessment issue is something to really think about. That's because for tax purposes the important issue isn't how much your house is worth, but how quickly it's increasing in value compared to other homes in the municipality. This is because the increase in value for a home is supposed to be revenue neutral. That is to say, if every home in the city goes up by a uniform 10% in one particular year, the share that each home owner pays for the city budget will still be the same. If the budget is the same in that year as the year before---and no new taxpayers have been added to the rolls, or, old ones subtracted---then each household will pay the same tax. But, if your home alone goes up by 20% and everyone else's only goes up by 10%, your taxes will increase---because your house now is a greater part of the total value of the real estate in the city. Moreover, if your house only increases by 5% and everyone else's goes up by 10%, that means that your taxes will decrease. 

If you have trouble following this, here's a video from MPAC that explains what is going on in a different way:

The issue that people now need to consider is the first law of home sales "Location, location, location". Remember this graphic from a previous article I posted? (You can click on it to get a larger view.)

This map shows the relative property values of real estate in the city of Guelph, based on their geographic location. As you can see, where your property is has an enormous impact on how much your property is worth. Buildings in the downtown core are worth a lot more money than ones in the periphery of the city. Moreover, I would suggest that they have dramatically increased in value---faster than similar buildings in other parts of the city. (I can attest to this myself, I have a modest home in the downtown and it is well on the way to quadrupling in value over only 20 years---a 15% rate of return on my initial investment. I am anticipating an interesting tax bill when MPAC gets around to re-assessing my property value.) When I hear people complaining bitterly about how much their property taxes have increased, I wonder if at least some of them are people who---like me---have had their homes increase in value a lot more than their friends, and don't understand that that is why their taxes have gone up, not because of excessive spending at city hall.

&&&&

The next question to answer is "How do Guelph Taxes compare to other municipalities?" To understand this, it's important to realize that the specific tax rate doesn't compare across municipalities. As I pointed out in the above, that is calculated by dividing the budget by the total real estate value of the city. In a city with a really hot market, the tax rate can keep dropping while at the same time the actual taxes paid can stay the same or go up. In a city with a stagnant market, the rate can be high but the actual taxes paid can be less than another city that has a very low tax rate.

To get a real feel for how taxes compare across municipalities it makes more sense to compare the specific taxes on one type of home across different municipalities. Luckily, (may the Dark Lord of the North forgive me for saying so) the Fraser Institute has published a paper where an economist actually did this. These are the results that Livio Di Matteo from Lake Head University came up with. As he describes in the paper,

"The basis for comparison is a detached three-bedroom single-storey home with 1.5 bathrooms and one-car garage with a total house area of approximately 1,200 square feet on a lot approximately 5,500 square feet."  

(As usual, click on the graph to get a bigger, easier to read, version.)

From Fraser Forum,
"Ontarians face growing property tax burden in many municipalities",
by Livio Di Matteo

As you can see, Guelph is in the lower end of the graph---between Waterloo and London---with taxes of a bit above $3000 for Matteo's hypothetical suburban home.

Personally, I find this somewhat surprising. Guelph is one of the fastest growing cities in Ontario, with a population increase of 7.7% since 2011, which is much higher than the Ontario average of 4.6%. This creates all sorts of "scaling problems" for the city as it tries to play "catch up" with infrastructure that was designed for a smaller population by building new stuff (like the new police station) that has to be big enough for what the population is going to be decades from now.

There is another graph in the paper, however, that makes more sense given this context.

"Ontarians face growing property tax burden in many municipalities"

This is the rate at which property taxes are growing in various Ontario municipalities. Guelph is the fourth highest, whereas Waterloo and London are the sixth and fourth lowest, respectively. This increase in the rate of taxes seems to indicate that Guelph is trying to play "catch up" in its taxation and move from the lowest third in the previous graph towards a higher taxation rate. This is why people might perceive Guelph taxes as being very high, even though they are less than the average.

But having said that, why are Guelph's rates going up so fast? I mentioned the scaling issue above, and why it costs a city a lot of money to grow really fast. And if you look at the latest numbers from the federal census, you can see that Guelph has had a rate of 7.7% growth since 2011, whereas London and Waterloo (which had comparable tax rates in 2016) had a population growth of 4.1% and 5.5%, respectively.

Of course, no one wants their taxes to increase dramatically, but the questions voters should be asking are "Why are the taxes going up so fast?", and, "Is this rapid increase a temporary trend? Or something that will continue indefinitely?"  Looking at the information that I've posted above, I'd argue that the rapid increase is an attempt to "catch up" to a more logical tax rate---giving the extended period of rapid growth the city is going through. And that once we do that, the period of rapid growth in taxes will probably stop.  

&&&&

Lately I've been talking to various people about this magazine. I'm trying to figure out how to make it into something that people will find easier to access and read. I haven't been getting a lot of complaints about the content, but I have heard some negative feedback about the design. On the basis of these, I'm going to explain a few things that people are missing.

First, several people said that they weren't finding out when new stories were being posted. These are people who aren't on FaceBook or Twitter---and have zero interest in doing so. I've found out that the majority of these people simply don't know what an "RSS Feed" is, and frankly, have zero interest in learning. I think that that's too bad, because this is a really good way to learn about new issues of blogs that you want to read. But I've learned that while it probably isn't true that "the customer is always right", there's no profit in arguing with them.

As a result, I've added another feature to the blog. If you look at the right hand string of links on this site, between the heading "search this blog" and "subscribe", there is now a new option of "follow by email". All you have to do is add an email address, answer a simple question to prove you aren't a spam bot, and, you will have a link sent to your email address. Click on it, and you will get a short message every time a new article appears in the "Back-Grounder".  Click on it, and you will have the article emailed to you. Now you have that option to keep informed.

Another person said that he hates reading stuff off a screen and would rather read a hard copy. If you are one of these people, then look at the bottom of this article and look to see if you notice a little button that says "print friendly". (I don't know why, but it doesn't seem to show up all the time for me, but it is usually there.) If it is there, you can click on it to see the article reformatted to remove all the advertising and other features that are extraneous to the article in question. At the top of the screen, you have the option of either printing it directly, or, making it into a PDF file that you can save and then print off. Moreover, I intend to reprint these articles in a book format before the next municipal election---primarily so people can buy copies to give to their angry relatives who spend too much time reading other blogs that put great effort into attacking local politicians and city staff.

Finally, I got the response from a local business person I was trying to hit up for an advert that the site is too "stodgy". My wife has made the same comment and is after me to move from Blogger to some other blog hosting platform. The thing for me, however, is that Blogger is free and these other sites cost money. They also require a lot more work to design and maintain, so I'm wary of taking on something that will cost both more money and time. All I can say about this is that if you want to get a more visually pleasing magazine, people are going to have to pay for it.

Which gets me to the usual blue type plea for support. A lot of young people simply won't pay for anything on the Internet---they expect their music, their movies, and their news for free. I don't know where they expect this stuff comes from, but a lot of young people are getting the short end of the stick in this economy, so I'll cut them some slack. That leaves boomers like me, who, on average, are in a much better financial shape. Most of us are used to paying for a local newspaper, magazines, etc. Why not pony up a buck a month to a Patreon subscription to allow me to do things like get a better blogger platform? 

&&&&

Now I'm going to raise a couple issues that will probably result in some very angry reactions. If I was a "real journalist", my editor would never let me mention them in an article. But if my readers aren't going to pay me more than a pittance, well, then I guess I don't have to pander to them, do I? ;-)

Consider this graphic. (And yes, if you can't read the fine print, click on it for a bigger version.)

Graphic from the blog "5 Kids, 1 Condo",
used under the "fair use" copyright rule.
Original graphic from the Wall Street Journal.

The main point I want to illustrate is that around the end of WWII the average US home size was under 1,000 square feet and the average family consisted of 3.37 people, whereas in the late 1980s this had changed to a little under 2500 square feet for 2.53. In other words, home size has more than doubled at the same time that the average number of people living in it has declined by 25%. (The Canadian situation isn't exactly the same, but close enough that I think that similar forces are at work---especially in Southern Ontario.)

The period of time between the end of WW2 and the 2008 economic collapse was a bizarre time to be a resident of North America. The industrial powerhouses in Europe and Asia were smoking piles of rubble, which meant that there was a tremendous need for the output of American and Canadian factories. In addition, the agricultural systems of most nations outside of the New world were in chaos due to either war damage, colonies fighting for independence, or, civil wars. This meant that farmers could get top dollar for their cereal crops---no matter what quality. It was as if the fleets of heavy bombers from the war had decided to bomb Canada and the US with money instead of ordinance.

In these "fat decades" whole generations of people got used to living in ways that would have astounded their grandparents. Fortunately for the rest of the world, damaged machinery got replaced and other nations started being able to make stuff again. And countries that had suffered from starvation enacted policies to ensure that they would never again be dependent on imported food. This all cut into the huge advantage that North America had over the rest of the world, and started to force us to learn how to compete with Europe, China, India, Japan, etc. The "fat years" went on a diet. 

At the same time that North Americans were getting used to being rich, a whole new set of costs were added to the economy. We started putting a price on pollution for the first time, which added to the cost of business. We also started funding social programs instead of just ignoring the poor---this also cut away at the bottom line. A whole raft of things like pensions, medical coverage, drug benefits, welfare, job training programs, childcare, etc, popped up and started fighting for some of the public pie. At the same time, unfortunately, cities decided to ignore the importance of things like density and public transit. (I've talked in detail about these issues in articles about the Places to Grow Act, the OMB, and, the real cost of parking.) This increased the frontage of roads, sewers, water lines, electricity lines, etc, per taxpayer and dramatically increased the cost of maintaining a city. All of these seemed like "just a little more" during the fat years, but started to weigh tax payers down when competition from Europe and Asia started to be a "thing".

What this all means is that for generations people in North America (and Guelph) have gotten used to being so well off that they never really had to think much about the real cost of various aspects of life. But now things are different. We simply cannot build anymore suburban sprawl if we want to have any farmland or potable water left in the province. This means that the vast majority of young people simply cannot afford to buy the sort of homes that their parents live in. Even worse, because of global competition with the newly rebuilt industrial powerhouses in Europe and Asia, business has become insanely competitive---which has totally redefined work. Increasingly, young people have to get by through stitching together a bunch of crappy, poorly-paid, precarious jobs.

What is happening is we are facing a tremendous decline in the wealth available to live something approaching the lifestyle of a middle-class suburban family of the 1960s. This isn't just a Guelph thing---it's happening all over the world. And anyone who's response isn't to adapt to the new circumstances is going to suffer badly as they try to "force" the world to go back to the way it was before. IMHO, that's what is fueling the support for tremendously counter-productive political tendencies.  People who support Donald Trump really want to "Make America Great Again". And people voting for Rob Ford wanted to "End the war on the car". I'm sure that people who voted for the Brexit wanted to see Great Britain go back to the "good old days" of the Empire.

The problem is, however, that the "good old days" aren't coming back. First of all, the problems that governments like Guelph are facing aren't just attempts at "Marxist social engineering".  Climate change, sprawl, and the other issues I've mentioned in previous articles, aren't fantasies dreamed up in a university seminar---they are real problems. And the economies of Europe and Asia are objectively real, and they are competing head-to-head with us. We simply cannot "wish" China, India, Japan, the EU, and Korea away.

Things aren't all bad, however. By any objective standard, Canada is far wealthier that it was when I was born. Even with the present's ridiculously unequal distribution of wealth, even the poor are far better off than they were during the 1930s. Women, gays, the First Nations, people of colour, etc, are all participating in society in ways that would have been thought impossible during the 1950s. Even more importantly, there is every indication that this progress will not only be preserved by will even accelerate. But having said all of that, people are going to have to become innurred to living in smaller homes in far more dense neighbourhoods. And they are also going to have to pay more money in property taxes in order to preserve the city we live in. If you cannot afford to pay the taxes on your present home, maybe you should cash out it's accumulated value and live somewhere cheaper. If you find you can still afford it, then perhaps you should just stop complaining and be greatful that for all the problems facing us, we still live in the most peaceful, prosperous, and just time in human history. There are still a lot of people who cannot afford to own any sort of home at all, and they are worse off than you. Be grateful that you have the priviledge of paying property taxes---lots of people will never do so as long as they live.  

Guelph Municipal Capital Investment

This post is really a case of "fools rush in", because I am writing about a very complex issue that I really know almost nothing about. But if I want to put a positive spin on this fact, I could say that in this case I'm starting from the same place as almost all voters. Let's just see if a guy with just a general education can wade through a mountain of information and find the most important points for voters to understand---. 

&&&&

The first thing to get a handle on is the scale of Guelph's capital budget. In the 2016 budget, the total revenue came to $483.7 million. Of that, $87.6 million was spent on capital investments, as opposed to operating costs, which came to $396.1 million. This means that 18% of the budget went to capital investments. The complexity for an outsider like me, is that when you read the budget document some confusing issues have to be remembered. For example, it is possible to present a budget in several different ways. You can split the money up in terms of which department uses the money (transit, versus water, versus police, etc.) Or, according to whether something is an operating cost (paying the wages of the water workers) or a capital investment (building a new water line) or a maintenance cost for a capital investment (repairing a water main that is worn out.) Also, there are a lot of different sources of revenue, such as taxes, operating fees, and, transfers from provincial and federal governments. Or, if something is a capital cost, the city can borrow the money---in which case you can record the money either as "debt" (what the city owes in principle), or as "interest" (the amount of money the city is paying just to pay for the borrowed money), or, as "interest plus principle" (the amount of money the city pays to both pay for borrowing money plus the actual amount of the borrowed money that is being paid off.)

To be totally honest, as a fairly well-educated generalist I find it very hard to understand all these distinctions. I simply do not expect the general citizenry to understand all of this. Nor do I expect a politician to understand it either. We simply have to accept the word of our paid staff because they have had the professional training and time to work through all this stuff. It's just the same thing as when I go see my doctor about an ache in my shoulder---if he says it's arthritis, that's pretty much what I have to accept.

Having said that, here's a table from the city that describes what staff say about the actual and projected costs of debt servicing for the city.

From the city of Guelph Website,
"Appendix 6: 2015 – 2017 Debt Report and Debt"

&&&&

There are even more complexities that people need to remember about capital debt. As I've mentioned before, it really doesn't do any good to just put a simple number in front of people and say that the city spent "X million dollars" on capital stuff last year, because unless you understand the context, it means nothing. That's why I try to express everything as a percentage when possible. In the above chart the cost of debt servicing is expressed in terms of percentage of net revenue. But it's also important to realize that there are two variables in this that can confuse people too.

First, you can lower the debt charges as a percent by either paying off the actual debt or by increasing the revenue. Think of this hypothetical example. If my business borrows some money in two equal loans that together cost me 10% of net revenue. I can cut that 10% in half, to only 5%, by paying off one of the loans. I can also cut the percentage in half, however, by using the money I borrowed to double my net revenue. (Let's say it both increases my sales and increases efficiency at the same time.)  This is a very important issue for Guelph, because it happens to be the one of the fastest growing cities in Canada. This means Guelph could cut the percentage of city costs due to debt servicing without paying off a penny of the principle---simply because the tax base increases.

Secondly, the percentage you pay in servicing debt can change as the interest rate increases or decreases over time. Sometimes existing debt needs to have the interest rate changed, and, sometimes you simply cannot avoid borrowing money---especially in a fast growing city where things like roads, waterlines, sewers, transit, simply have to be expanded because of increased demand. In actual fact, because the cost of borrowing money is so cheap now, this is actually a tremendously good time for the city to borrow money for capital investment.  See the following chart of the Canadian prime rate from a banking website (click on the image to get a easier to read image):

See that spike in the 1980s? Lots of people lost their homes then.

&&&&

I often hear people complaining about Council "borrowing money" to run the city. I also hear people retort that "it's against the law for the city to borrow money". Well, like a lot of things, there's a little truth and a fair amount of confusion in both statements. First of all, municipalities cannot run up a deficit for operating costs (like the province and federal government routinely do.)

Restriction
(2.1) A municipality may issue a debenture or other financial instrument for long-term borrowing only to provide financing for a capital work.  2009, c. 18, Sched. 18, s. 7 (1).
Term restriction
(3) The term of a debt of a municipality or any debenture or other financial instrument for long-term borrowing issued for it shall not extend beyond the lifetime of the capital work for which the debt was incurred and shall not exceed 40 years.  2006, c. 32, Sched. A, s. 176; 2009, c. 18, Sched. 18, s. 7 (2).

Ontario Municipal Act, 2001, Part XIII, "Debt and Investment", "Restrictions"

To understand this distinction, consider personal household debt. I'm a pretty tight-fisted guy and don't believe I have ever not paid off my credit card bill before I started getting charged interest. (In fact, I only stopped paying for everything with cash once I started having problems because I had no credit history at all.) But I have borrowed lots of money---to buy my house, to finance the boiler for my heating system, and so on. The difference is that when you borrow money to buy a house, this is "capital investment", whereas when you use your credit card, you are running a deficit on your operating costs. In effect, Ontario law allows the city to borrow for a mortgage but doesn't allow the city to run up credit card debt. (Actually, it allows the city to borrow against it's future tax revenue to be able to pay it's bills on a very short term---monthly---basis. But this is very tightly controlled.)

So yes, the city does borrow money, but only for capital investment. And yes again, the city is forbidden by law from running up a deficit, but only for operating costs. 

Moreover, the province has set a limit for how much of a city's budget can be devoted to servicing the debt on capital investments. As a general rule, most cities are only allowed to spend 25% of the money they raise through taxes on paying off incurred debt.  This is called the "Annual Repayment Limit" (ARL). In actual fact, the city of Guelph policy is that they will not go beyond an ARL of 10%, not the 25% set by the province. 

&&&&

One more thing that the Guelph citizenry should understand is that there are more than one type of "deficit". The city can borrow money to pay for stuff and run up a fiscal deficit. Or, it can "kick the can down the road", not borrow the money, and, let future generations pay for fixing stuff.

I bought my house off an absentee landlord who used to rent it out to students. When I had it inspected prior to purchase, I asked the guy I'd hired to explain why there was a line of white discolouration in the bricks a couple feet below the roof overhang. He told me that what had happened was the previous owner had let the roof go to the point where water was seeping into the walls, migrating to the outside, and, evaporating into the air. In doing so, it pulled out the lime in the mortar and that was what was discolouring the red bricks. He also pointed out that if I looked carefully there was the odd bump in the wall where a brick had been inserted length-ways into the wall. He said that the water had been in the wall for so long that the original iron clamps that held the two courses of bricks together had rusted out, and a bricklayer had been hired to painstakingly tuckpoint the rotten mortar and insert bricks at 90 degrees to the others to hold the wall together. In effect, the previous owner had let her roof go to the point that it significantly damaged the walls of the house---to the point where she had had to not only put a new roof on, but also pay a mason A LOT OF MONEY to repair the damage caused by the leaky roof.

The same sort of principle happens with public institutions. Politicians get elected that say that they can cut taxes by "eliminating the gravy train" and "cutting waste", but generally all they really do is defer necessary capital investments. Sadly, kicking the can down the road has become a key electoral strategy in our society.

It's important to understand this point, because a huge part of what it means to be a modern, civilized human being depends on the infrastructure in our cities. The roads, transit, library, hospitals, schools, etc, are not only what allow us to function as a community, they are also crucial to our economy and advancement as a civilization. Moreover, it turns out that the lion's share of this infrastructure comes from the level of government with the most limited means for paying for it.

From "The Canadian Infrastructure Report Card: 2016"

That's right, 57% of the built support for modern civilization comes from 18% of your city taxes. 

&&&&

By this point some readers have no doubt been asking themselves, "Just how much money does the city of Guelph owe? and what did Council spend this borrowed money on?" Thanks to the increased openness of our local government, it's easy to see, both in absolute terms:

From the City of Guelph Website,
"2015 – 2017 Debt Report and Debt Continuity Schedule" 

and, as a percentage of the budget:

"2015-2017 Debt Report and Debt Continuity Schedule"

The provincial government limits the amount of debt a community takes on according to a complex formula that is outlined in the Ontario Municipal Act as "O. Reg. 403/02: DEBT AND FINANCIAL OBLIGATION LIMITS". I couldn't find out what the province says is the absolute maximum debt that the city can take on under it's laws, but the Guelph policy statement on indebtedness says that the city has set it's own maximum limit at 55% of the yearly revenue (the red line in the above graph.)

Of course, $124 million dollars (in 2014) is a lot of money. But with a total city budget of $483.7 million (in 2016), that would only come out to 26% of the yearly revenue. (Please note the discrepancy with the chart. It lists the debt as percentage of revenue in 2014 as a little under 40%. I can only assume that the difference between this percentage and the one I just calculated is because of the growth in city revenues---both from increased taxation rates and also because of the increase in the number of people being taxed. Guelph is one of the fastest growing cities in Canada, and, as I mentioned before, this has an impact on percentage of debt to revenue.) 

Now put this into a context. I have mentioned before that it is not a good idea to make analogies between government and business or personal finance. But in this case I think it might be useful to consider the amount of debt that individuals and businesses routinely take on. My own personal economics guru, E. F. Schumacher, suggested that it is not a good idea to buy a house that costs more than twice your annual income. He also said that no business should purchase tools that cost more than twice the cost of the yearly salary of the person who uses them. Many people nowadays would find these "rules of thumb" far too conservative. But if we followed Schumacher's suggestion, the city of Guelph would be allowed a debt load of 200% instead of 55%, which would come out to a potential debt of $967.4 million---or just a shade below one billion dollars!

&&&&

Now I am not suggesting that Guelph take on a debt load of a billion dollars. It is really not a good idea to think of the city budget as either a business or as a household---it is substantially different. But I do think that it is important to understand what the debt load of the city really is as compared to many other sectors of society. It might just be that 55% is a either too low or too high---I just don't know. I do think that is something that, like me, very few people have an informed opinion about. But unfortunately, this doesn't stop some people from making very strong statements on the subject.

Please note, I haven't written a word about the levy fees that the city has introduced to deal specifically with the backlog of capital investment that many people in the city believe it needs to get working on. That's more of a topical story, and if you are interested in learning about the details of that issue, I'd suggest you follow Adam Donaldson at Guelph Politico. But if you don't know the back-ground that I've tried to outline above, it is very hard to understand the importance of the discussions between Council and staff.

&&&&

Thought you might get through this story without seeing any blue type?  No such luck!

If you like what I write, consider supporting me through either a regular "dollar a month" contribution through Patreon or a one-time donation. Just to let you know I practice what I preach, here's list of the people I regularly support:  "the C-Realm Vault Podcast", "Canadaland", and, "Guelph Politico". I've also given one-time donations to "The Professional Left Podcast", "The C-Realm", and, "The Number One Janitor". I've also bought podcast downloads from "Hardcore History". I've spent far, far more money supporting other creative people on the Internet than I've ever made. I just want to suggest that this is what needs to be the new normal. If you can afford to help people create content, you really should consider it "just part of the gig". I do.

One more thing you can do is to share this post in your social network so other people who might be interested but haven't heard about "The Guelph-Back-Grounder" can learn bout it. Again, I've just done this myself for the other content creators I just mentioned above. If you don't want to fall prey to the trolls in the propaganda farms of Russia, you have to support the people who are the "real deal", and sharing their stuff on social media is one way to do it.