Newly minted politicians will face a different workplace that’s characterized by higher interest rates - more interest rates hikes are predicted - when they take their seat around the table at the region’s 13 municipalities.
While congratulations to the 36 new mayors and councilors and the re-election of 55 incumbents is in order, they face greater challenges in this new higher interest rate environment. Those budget challenges will also be faced by the 24 directors at the Capital Regional District that include nine new members.
A 40 per cent churn in politicians brings a risk there will be egregious tax hikes to pay for pet projects, instead of a focus on core essentials particularly infrastructure renewal. It’s worrisome that now there’s more of a left-leaning City of Victoria council, which includes its major influence at the CRD board and its sizeable operating and capital budgets.
The capital region - while prospering now - does not function outside the influence of a broader economy and world. Interest rate increases for example translate into more money needed to finance capital project and to satisfy union wage demands. Ratepayers will be paying more in consumer and mortgage loans.
One of many recent cautionary tales come from The Economist, in a special feature edition – The next recession: How bad will it be?
The Economist report concludes that following the severe downtown a decade ago that, “the rich world in particular is ill-prepared to deal with even a mild recession. That is partly because the policy arsenal is still depleted from fighting the last downturn.”
The major stock market downturn this month is only one early sign that the longest bull market in history, with its low interest environment, will end sooner rather than later. In this country, the Bank of Canada has hiked the key interest rate charged for consumer loans and mortgages five times since July 2017. The market expects more rate hikes and some economists predict three rate hikes in 2019.
New councils should be mindful that this region has one of the highest cost of living in the country - where renters and homeowners pay a very large portion of their income on housing - and even more Victoria residents will be under considerable stress to pay their bills. For background, read “Homeowners worried about paying down debt as interest rate go up” and the rest of the five-part series Debt Nation by CBC.
Grumpy Taxpayer$ urges mayors and councillors to avoid rubbing their hands together when reviewing 2019 budgets, and instead spend very cautiously.
To that end, taxpayers will also need to remind representatives about their various financial fiduciary duties.
Stan Bartlett
Grumpy Taxpayers of Greater Victoria
