OP/ED: WHO REALLY OWNS CITY HALL 4: Referendum Exemptions
By Andre Carrel
My last column gave examples of referendum procedures with less than democratic consequences and of a two-stage referendum process which conforms to the principles of the Yukon’s Municipal Act. In this column we will examine the rationale for the Act’s exclusion of two politically sensitive issues, budget and taxes, from the referendum. Is that exclusion consistent with the Municipal Act’s principles?
At first glance, the exclusion of tax and budget bylaws from the referendum appears to be unreasonable if not in outright conflict with the legislation’s lofty principles. We live in an era of growing demands for balanced public sector budgets and growing tax fatigue.
One would therefore assume that budget and tax referendums should not only be a right, but that such referendums would be an effective tool with which to bring government spending under control. A closer look at the legislation, however, shows the exclusions to be reasonable, rational, and consistent with the legislation’s principles. The Municipal Act’s regulations of financial matters (25 sections over 15 pages) are specific and provide municipalities — councils and citizens — with precise parameters for their financial decisions. Balanced budgets are not a recommendation for Yukon municipalities, it is the law. Municipalities are thus not exposed to the risks of deficits and to the associated consequence of chronic debt.
There is a simple but critically important rationale for the exclusion of taxes and budgets from the referendum. The citizens’ responsibilities under the Yukon’s Municipal Act are not those of a municipal inspector or municipal auditor —public participation is fundamental to good local government. The citizens’ democratic responsibility is to engage at the policy formulation stage to provide direction for council deliberations. The budget bylaw is the second to last phase of a municipal decision; the tax bylaw is the last. Everything a municipality does affects the budget. There is a cost to everything, with no exceptions. Costs range from the trivial (replacing a light bulb) to the momentous (a new fire hall). Many costs are consolidated in a single budget line (building maintenance) while others (a new fire hall) may be spread over several budget lines.
A budget is the financial consequence of all policy decisions council made for the coming year. Municipal budgeting is a long, tedious, and at times a painful process. Draft budgets are reviewed, amended, revised, checked and double-checked before they mature to become the municipality’s operating and capital budget bylaws. Balancing a budget involves more than ensuring that revenues equal expenditures, although that balance must be achieved in the end. Budgeting is a council/management team effort. Council’s responsibility is to maximize the municipality’s effectiveness. In other words, to define priorities. This means separating the essential and unavoidable from the desirable. Management’s responsibility is to maximize efficiency, and to achieve the best possible results at the least possible cost in the delivery of council’s program. The balancing process goes on until council is satisfied that the three budgeting criteria of essentiality, desirability, and affordability are in as near perfect a balance as possible. One legislated principle is that municipal governments are responsible and accountable to the citizens they serve. Councils, not citizens, are responsible and accountable for the outcome of the budgeting process.
The property tax bylaw is the final step in the building of a budget. Property taxes produce the revenue required to close the gap between the total of all expenditures less the total of all non-tax revenues such as grants, rents, fees, fines, etc. Responsible budgeting requires that consideration of taxes not lead, but conclude the process. The objective of a property tax bylaw is not reasonable taxation; it is to balance a reasonable budget. The property tax bylaw does not determine which properties should be taxed, that is a Yukon Government responsibility. The rules governing the assessment of property values, including appeal provisions, are established in the Taxation and Assessment Act. The property tax bylaw merely determines the tax rate to be applied to the assessed values of properties.
The exemption of budget and property tax bylaws from the referendum does not preclude citizen from engaging in their municipality’s budget or taxation decisions. Citizens concerned about the amount of property taxes levied do have the means to bring about change. If their objective is to reduce taxes, the place to start is at the policy level. There are two approaches in this regard. Citizens may petition council for a referendum on a policy resolution to establish taxation parameters. A referendum to provide policy directive to council, in advance of budget and tax rate deliberations, is not in conflict with the Municipal Act’s exemption of budget and property tax bylaws. The exemption applies only to bylaws, not to resolutions or to bylaws concerned with policies and objectives with which to establish a framework for the development of budgets and tax rates.
The problem with a focus on taxes is that it leaves the decision of how to budget within the constraints of such a policy to council’s discretion. A taxation policy referendum may well achieve the voters’ objectives as it concerns taxes, but the consequence of the vote on the expenditure side of the budget may not be what the community had anticipated. Obviously, if taxes are to be limited, so will expenditures. This public engagement approach is problematic because it tells council to “do whatever you want to do, just as long as it does not cost me more than xyz.” The more responsible approach is for the public to provide council with direction to add, modify, or delete specific programs or projects. In Dawson City an example of such engagement was the sewage lagoon location referendum of March 2008. Voters gave council a clear directive; they did not want to see a sewage lagoon constructed at the proposed site. Council was compelled to develop an alternative, and that alternative had, and will continue to have, an impact on Dawson City’s budget and property taxation bylaws. The Dawson City sewage lagoon referendum is another example of a situation wherein council could have developed a counter-proposal for a two-option referendum of the kind examined in my last column. Option A would have been the citizens’ initiative and option B the council’s alternative. We can only speculate about the outcome of the referendum had Dawson voters been given a choice between the lagoon and treatment plant solutions to their sewage disposal problem rather than a yes/no choice to one solution.
While the referendum exemption for budget and property taxation bylaws is reasonable and consistent with the Act’s principles, these exemptions need to be tightened to protect citizens from being abused by councils. Measures are needed to prevent the possibility of including unrelated matters in a budget or taxation bylaw, of combining two issues such as we have seen in California’s Proposition 13 example referred to in my last column. The Municipal Act states that a referendum bylaw “shall not group together two or more purposes” and, where two or more bylaws are submitted simultaneously, “each shall be voted on separately.” This provision protects communities from referendum abuse. Communities also need to be protected from referendum exemption abuse.
The Municipal Act’s referendum exemption provisions leave communities exposed to the kind of legislative abuse we see at the federal and some provincial levels: the omnibus bill. An omnibus bill is legislation in which several unrelated subjects are consolidated within a single law. The first omnibus bill of note in Canada was Bill C-150, the Criminal Law Amendment Act, 1968-69. This was a cluster of 120 amendments to the Criminal Code ranging from gun control to homosexuality. More recently, Bill C-45, the infamous budget omnibus Bill ( Jobs and Growth Act, 2012) included 516 sections to amend thousands of provisions to laws governing banks, insurance companies, judges, hazardous materials, the environment, First Nations, and a host of other statutes with little or nothing in common.
The Municipal Act directs that a council shall adopt operating and capital budget and property tax bylaws. This does not prevent a determined council from emulating the federal government’s strategy with an omnibus budget or general property tax bylaw. For example, a municipal council could include measures concerning traffic, access to parks, or any other matter within council’s powers in an operating or capital budget or in a property tax bylaw. Forming part of a bylaw that is exempt from a referendum, the unrelated measure would be untouchable, as citizens could not petition council to have the bylaw submitted to referendum for approval. The likelihood of a council pursuing the omnibus bylaw route to avoid the possibility of a referendum may be slim. However, the principle of accountable and responsible government requires that where there is a possibility for abuse of power, such as a conflict of interest, measures must be included in legislation to prevent such abuse. The Municipal Act’s budget and property tax bylaw provisions should therefore be amended to specify that these bylaws shall be restricted to matters directly linked to their purposes, in the language of the referendum abuse protection regulations, that council “shall not group together any other purpose” in a budget or property tax bylaw.
This concludes the review of matters relating to bylaws. My next column will focus on matters relating to citizen representation.
Andre Carrel is a retired City Administrator, journalist, author, and full-time grandpal.
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