By Michael Warren

There's one overarching issue facing the city of Owen Sound in the years ahead. Every candidate for council should be required to answer this question:

"How will you help stop the debilitating cycle of higher taxes and fees, followed by cuts in service, followed by higher taxes and fees?"

This is the first of two columns. It lays out the city's daunting financial picture and identifies opportunities for future cost containment. Next week, the focus will be on ways the next council can grow the city's assessment base; the long-term answer to financial self- sufficiency.

Owen Sound, like many other municipalities, faces a serious financial challenge. Some of our fiscal issues are shared by other cities. Some are uniquely ours.

Here are some financial facts that the next council has to deal with:

• The city's net expenses are increasing by about five per cent a year.
• That means annual residential tax increases of at least three per cent. That's 50 per cent higher than the current rate of inflation (Consumer Price Index) of two per cent.
• Most of the city's revenues come from property taxes. The assessment base for these taxes is only growing at about one per cent a year.
• The annual grant (OMPF) from the province was $1.5 million a few years ago. This year it's down to $960,000. It's scheduled to continue dropping at an alarming rate.
• The city has a long list of critical infrastructure upgrades (e.g. new sewage treatment plant) and reconstruction projects (e.g. road, sewer and water). Infrastructure reserves are low. And the city's capital borrowing limit is loomingIf the city were a business with a market base growing at only one per cent, net expenses of five per cent, resulting in less and less customer service and regular price increases of three per cent, that business wouldn't survive for long. Instead of choosing a cycle of higher prices followed by less service, most companies would do two things. They would drive their expenses down and grow their market base.

Of these two strategies, growing the city's assessment is the most promising. However, there is potential for the next council to do more with less.

While it will be politically challenging, the cost of police and fire services has to be contained. They take up 45 per cent of the operating budget. They are growing and will eventually crowd out other vital services if not reined in.

Police and fire compensation is difficult to control, particularly when expensive awards are made by Ontario's dysfunctional contract arbitration system. Arbitrators are supposed to take into account the ability of a city to pay and the impact of awards on local taxes and services. But they don't.

Awards are often based on the highest collective bargaining contracts won in big cities. This sets off a "domino effect" with other forces demanding and receiving comparable increases. Over the last 15 years, police and fire wage increases have outstripped the increase in the cost of living, inflation, the GDP and the average of all other public and private sector workers.

But the city isn't helpless. It needs to determine what's really needed from these services. Then: implement a systematic restructuring of how to deliver them.

The number of criminal code offences in Owen Sound is trending down. But last year the cost of police services (bylaw enforcement, officers, civilians, and court security) grew by 4.5 per cent.

Revenue from the newly expanded dispatch services has helped to temporarily reduce this net increase to the city. If the force wins the Meaford policing contract there may be some efficiencies of scale. But this level of expenditure growth is not sustainable.

Some of the work currently being performed by our highly trained and well paid uniformed officers is only marginally related to law enforcement. It could be done as well, or better, and at lower cost by trained civilians. Administrative functions, prisoner transport, court security, background checks and interview transcripts are a few examples.

The debate at the Police Services Board for the next few years should be focused on "what kind" of police services, rather than "how much" service.

Incidents responded to by our fire department annually have fallen by nearly 50 per cent since 2009. Yet the cost of fire services continues to climb. From 2011 to 2012 it jumped from $3.7 million to $4.2 million in 2012. That's a staggering 14-per-cent increase in one year.

It's hard to believe, but the existing collective agreement prevents the city from determining the level of fire services. The city must regain this management right or controlling future costs will be impossible.

Owen Sound has a full-time fire department. It's one of only 31 Ontario municipalities out of 444 that don't use volunteer firefighters.

Orangeville, about our size, spent $1.8-million on firefighter salaries in 2012. They had 10 full-time and 32 volunteer firefighters. Owen Sound had 26 full time fire fighters, no volunteers, and spent $2.6-million on wages in the same year.

This city's fire service model is not financially sustainable.

City costs in areas like waste management, landfill and the airport are stable or trending down. The outsourcing of parking enforcement and crossing guards should help minimize these expenditures.

Council has backtracked in its efforts to control transit costs. Last summer they voted to close the bus terminal, hike bus fares by 10 per cent a year, and save $150,000 annually by going to a three-route system.

This April they reversed themselves. The four-route system remains as does the operation of the terminal until a "further review of route options has been completed." So, this year's anticipated transit savings won't be realized.

Meanwhile, ratepayers have to endure 10 per cent annual hikes in their bills for water and water treatment to help finance the secondary treatment plant. Again, this increase outpaces the growth in local incomes, inflation, and every other comparable index.

Hefty annual service fee and tax increases aren't helping Owen Sound to be "Where you want to live." They are compelling some people and businesses to settle in lower cost municipalities around the city. It's not a promising long-term fiscal strategy.

Reducing expenditures will take political will and a determined staff. So, make a point of asking council candidates what they plan to do about the city's financial challenge.

Expanding the assessment base by adopting a multiyear growth plan is the way to achieve a financially healthy city. More on that in next week's column.

R. Michael Warren is a former corporate director, chair of Owen Sound's Economic Development Committee, Ontario deputy minister, TTC chief general manager and Canada Post CEO. r.michael.warren@gmail.com