Spending Other People’s Money Is Always Easier Than Spending Our Own.

Milton Friedman, one of America’s most respected economist, statistician and the recipient of the Nobel Memorial Prize in Economic Sciences, wisely observed that we spend our own money on ourselves very carefully. We spend other people’s money less carefully.

As a young teen-ager, I worked on a poultry farm, catching chickens from midnight until dawn. The money I earned went into a savings account to buy a car when I turned 16. In addition to my earnings, my father would give me money for my birthday and other special occasions. I still remember that this ‘free’ money disappeared relatively quickly and without much thought.

The obvious truth and lesson that I learned early in life was that it is much easier to spend someone else’s money than my own. Elected officials and civil servants at every level of government need to rethink how we spend taxpayer’s money. Expenditures should be evaluated as though it was our own money that we are spending.

The City of Abbotsford has increased expenditures at a far greater rate than the average taxpayer’s income. Since September of 2008, many of our citizens have experienced wage decreases, or worse still, have lost their jobs. Abbotsford’s unemployment rate has increased for three consecutive years and is now one of the highest in the country. We have reached a point where the general public can no longer bear the burden of taxation and all the other fees they encounter at every turn.

The obvious question is this; how did we get here? Let’s begin by looking at the division of tax revenue. Federal and Provincial governments receive 92 cents of every tax dollar, while local government receives the remaining 8 cents. In recent years, Abbotsford has taken on many costs that have historically been the responsibility of our two senior levels of governments, i.e., 3 freeway interchanges and social housing to name two, but there are others. Many local governments, including Abbotsford have bought into the concept of paying 33% of infrastructure costs that properly belong to the two senior levels of government who collect 92% of all tax revenue.

Abbotsford’s largest single line item expenditure is made up of salaries, wages and benefits. While we have many great employees throughout the organization, we cannot continue with the kind of increases we have seen in recent years…it is simply unsustainable. Tackling this issue will be difficult, but one that is necessary if we want to improve the sustainability and quality of life in Abbotsford.

Historically, public sector employees were generally paid less than an equivalent private sector position. The primary reason for this was because a public servant position usually has less uncertainty, while private sector employment is subject to the free market forces and hence employment is less certain. Unfortunately, poor public sector employees are grossly overpaid while good public sector employees are grossly underpaid. Salary schedules tend to be uniform and determined far more by seniority than any other factor.

Another factor is the debt levels that Government’s have taken on and Abbotsford is no exception. In B.C., Abbotsford’s debt obligations are second only to Vancouver. Contrast this with Surrey – their debt is one-tenth that of Abbotsford, while Chilliwack has no debt. How is it that Chilliwack has an arena, a cultural centre and pools and yet has no debt? One thing is clear; the average taxpayer in Abbotsford is upset and is demanding that elected leaders figure out a way to relieve/reduce the tax burden.

The subsidies that arose as a result of Plan A, also present a formidable property tax challenge. Instead of breaking even, or having a small surplus (which is what we were promised), we have poured millions of tax dollars into these projects every year, the most notable being the Entertainment and Sports Complex (ESC). We have to find a way to reign in these subsidies; otherwise, we will fall further behind in other areas. The good news is that this message is beginning to gain some traction at City Hall.

In my view, the City of Abbotsford does not have a revenue problem, the real problem lies on the spending side.

Elected officials and senior managers need to keep all of this in mind when it comes to developing our 2013 Budget.