You're the chief executive of a public company and it's budget time. Three years ago, you completed an exhaustive merger that gave you a virtual monopoly but also created an unwieldy business with a large staff and widespread operations. Under pressure from customers, you haven't raised your prices, even though costs have been going up every year. A price increase would touch off a revolt and expose you to scrutiny about operating inefficiencies, so you've positioned your message to customers around price instead of value.

Last year, you managed to cover up a price increase by sending many of your clients a rebate. A few grumbled, but it slid through largely unnoticed and you were able to convince shareholders to renew your contract. This year, it's all catching up to you. Costs are so high that not only can you not afford the rebate, you might have to increase prices even further. Customers are furious, especially because you've been conditioning them to expect another price freeze. And you have to cut staff and expenses. Some of the cuts will slash core operations and damage long-term projects.

This kind of short-term thinking would spell doom for any company. Unfortunately, it's exactly the kind of approach that's been taken at the City of Ottawa. Just like a public company trapped in the classic mistake of trying to meet immediate expectations of shareholders, city politicians are stuck in a short-term dance with taxpayers. After competing on price instead of value, it can now offer neither.

The current budget process, of course, does have its benefits. It's forcing politicians and staff to make tough decisions about priorities and it showcases some easy places to make cuts. Eliminating underused OC Transpo routes and suspending the acquisition of public art are easy cuts to make. But drastic cuts to city investments in economic development, tourism, arts and recreation will be much more devastating to the community's long-term goals.

When Nortel went through its enormous cost-cutting exercise three years ago, it cut less from research and development than any other area. There were calls to slash even deeper, but Nortel resisted. In fact, as a percentage of revenue, research and development spending actually increased. Despite the pressure, Nortel didn't lose sight of long-term goals, and that's why its recent turnaround was possible.

The best public companies are focused on long-term goals such as building a great business and creating strong products. Our city has no such focus. Instead of addressing the looming crisis and solving inefficiencies years ago, politicians have watched problems mount and have tried to distract taxpayers by keeping taxes frozen. And instead of having a meaningful dialogue about the coming budget during the recent election campaign, the mayor and councillors simply told taxpayers what they wanted to hear, no matter how unrealistic it was.

The result is this week's draft budget, rife with drastic program cuts, and the coming public consultation, which will be an exercise in who can shout loudest: those who don't want program cuts or those who don't want tax increases. Unfortunately, not only has short-term thinking led to this crisis, short-term thinking is being offered as the solution.

The draft budget is being presented as an ultimatum. We are being told to choose between drastic cuts or an immediate and large tax increase (even a three-per-cent increase is really a 9.5-per-cent increase because of last year's rebate). But each option is just more short-term scrambling.

It's understandable that many taxpayers don't want to pay more in taxes. Frustrated by hints of financial mismanagement, such as the Bruce Thom buyout and the credit-card scandal, taxpayers figure a freeze is the only way to enforce financial discipline on the city. Why invest more money if you're not confident the money is being spent wisely?

But, like a good company, the city has a responsibility to invest in the future. Cutting investments in economic development and quality of life might help to keep taxes low this year, but it won't build a great city. Instead, it will create a downward spiral as the community loses investment, tourism revenue and good people and companies.

So what's the answer? City council will likely agree on a budget with a combination of program cuts and a tax increase, but no long-term solution. Politicians will make it sound like a reasonable compromise. But very little will be solved.

Ultimately, if the city were run like a good business, providing good value for money, it would be worth investing in it through a modest annual tax increase. But the city has none of the elements of a good company: a long-term strategic plan to focus on core operations and investments, a comprehensive multi-year solution to its escalating costs, or honest leadership that thinks ahead and doesn't shield the facts and then engineer a crisis that pits different parts of the community against each other. Until it does, the city will offer neither value nor a good price.

Mark Sutcliffe is an Ottawa entrepreneur, business journalist and broadcaster who can be heard weekdays on 580 CFRA. He can be reached at

marksutcliffe@sympatico.ca