Budget Direction 2026

In April 2025, Council instructed the CAO to prepare a “flat” 2026/27 budget scenario — holding spending at 2025/26 levels except for unavoidable cost increases like inflation, collective agreements, provincial contributions, and items already approved. Despite holding the line on spending wherever possible, HRM is facing significant built-in cost pressures (full report here).

New Expenses:

• $38M – Compensation (collective agreements, wages) - These collective agreements include some of our biggest unions, including fire and police services.
• $24M – Carryover impacts from the 2025/26 budget (loss of one-time funding from reserves spending on operations; full-year costs for approved initiatives) - For context on the carryover impacts and reserve spending, please read my blog post on The Budget Adjustment List for 2025 and how we got to a flat tax rate in 2025. Also read my blog post on Operations Budget for 2025, and the knock on effects of HRP body-worn cameras.
• $16M – In-year changes, especially major reserve replenishment requirements - For context on reserve replenishment, please read my blog post on Budget Reserves Update.
• $9M – Contractual increases.
• $9M – Inflation and other cost escalations.

New Sources of Revenue:

• $6M – Non-property tax revenue growth.
• $6.7M - Revenue from new growth - Despite the enormous growth HRM is experiencing, HRM is not getting financial benefit. Notable reasons include frozen development fees, infrastructure investments, and increasing service delivery. In short, growth does not pay for growth.

Future Sources of Revenue:

• The new Corporate User Fee Policy and Strategy (report here, and approved by Council) - Adopting a full cost-recovery for services HRM could see revenue increases of approximately $15 - $20 million. However, the exact accounting is not fully detailed, and it may extend over multiple years as business units complete costing analyses, engage stakeholders, and prepare recommendations for Council’s consideration. In short, this potential revenue source could take several years to fully realize.  
• Service Review (report here, and approved by Council) - A service review is a systematic review of municipal services and programs to identify optimal service levels and opportunities for improvement and cost savings. The estimated annual savings is $5.6 Million to be realized after the sixth year of the program. For every dollar invested in the program (both consulting costs and internal costs), it is estimated $1.70 will be returned to the municipality in annual savings. However, only considering the net new costs, the average savings are $2.7 for every dollar invested in the program.  Service review considerations will not impact the 2026 budget, but 2027 onward.

All told, staff found that maintaining current services will require an additional $88.9 million, or  an estimated 10.5% increase to the average property tax bill (that includes 4% from assessment increase, and 6.5% from rate increase).

Following nearly 2 days of deliberation, a motion was successfully passed at Council.

The Motion:

• THAT the Budget Committee direct the Chief Administrative Officer to continue to develop the 2026/27 Budget according to Council's approved priorities, and preliminary fiscal direction outlined on July 8, 2025, as amended:
• That the Budget Committee direct the Chief Administrative Officer to review capital renewal spending and capital spending funded by debt, as well as revisiting previous council decisions that have not yet been operationalized and have no contractual commitments. This could include decisions from the 2025/26 budget or within the current fiscal year that staff have not yet put into action.
• That the Budget Committee direct the Chief Administrative Officer to prepare options to reduce the 2026/27 budget by:

1. Proposing reductions to services;
2. Reducing Contribution Agreements and Grants funding;
3. Proposing fines and fee increases;
4. Analyzing staffing levels; and
5. Reviewing previous council decisions that have not yet been operationalized (including from 2025/26).

• That the Budget Committee direct the Chief Administrative Officer to provide a briefing note for an under-budget adjustment on the Budget Adjustment List, with options for Budget Committee:

1. A 10% cut to program grants;
2. Freezing contribution agreements to 2025/2026 contribution levels;
3. Reducing the Strategic Infrastructure and Climate Funding by one-third; and
4. The cost/benefit of a hiring freeze.

Service Level Enhancements were also considered, and will be included in the budget at the outset of deliberations, although they are still open for removal.

It's fair to say that these are very early days, and there will be many opportunities to make cuts. I voted in favor of everything in the motion, as when tax increases are this high, everything needs to be on the table for review. Having said that, I'm not confident that some of these proposed cuts will make financial sense. The proposed reduction of a one-third cut to the Strategic Infrastructure and Climate fund  (formerly the Climate Action Tax) was re-tooled in July to include the Strategic Infrastructure Reserve. From the outset, it seems that defunding this reserve would put us in future financial peril as there are over $2.6 billion in SI projects planned over 10 years. 

Staff reports will be coming forward, and the debate will continue. I'll be keeping my focus on the bottom line, priorities for District 13, and not jeopardizing our financial future. As always, your feedback is welcome and encouraged, and I would love to hear from you on the budget, or anything else.