On Oct. 20, Ottawa Business Journal reporter Kate Chappell sat down with Ottawa Mayor Bob Chiarelli to discuss his election campaign. The following is an edited transcript of that conversation. Next week, the Ottawa Business Journal will run an extensive look at specific issues affecting the local business community in light of the Nov. 10 election.

OBJ: What do you feel you achieved in 2003 in relation to economic development issues?

CHIARELLI: First of all, I've said often, as often as I possibly can find an audience, that all the significant successes in our community, come from community partnerships.

I don't believe that it is the role of municipal government to directly generate the economic activity.

I think we need to play a facilitative role, we need to play a leadership role, in some respects, to bring people together to create the right climate for economic development. To ensure that there's proper infrastructure.

The tremendous success in our economy over the last three to six years has come from everybody working together.

In terms of OCRI, I've focused very directly with their partnering with other clusters in North America.

I've given more leadership from a municipal point of view to assist them in having a presence in other communities.

But the leadership comes from OCRI, the leadership comes from the high tech community.

But I play an important supporting role in that particular instance.

In the instance of creating the Ottawa Partnership, which is a very, very significant factor in coordinating economic activity in the region, perhaps we took more of a leadership role in that.

But having taking a leadership role and having facilitated that organization, it is now generating its own leadership to assist the area.

The global marketing component is coordinated by OCRI through TOP, that's been tremendously successful.

OBJ: You have said that having Dalton McGuinty in power as premier and Paul Martin as Prime Minister is a good scenario for Ottawa. How so?

CHIARELLI: First of all, the major initiative on the part of mayors from across Canada is to try to get Ottawa and the provinces onto the urban agenda.

If you speak to the mayors of Vancouver, Calgary, Halifax, Toronto, Edmonton, Montreal, they all say the same thing.

And that is that we in the cities generate a lot of incremental economic development.

The federal and provincial governments receive 93 per cent of the incremental tax revenues.

The cities receive seven per cent of the tax revenues, yet we have 90 per cent of the obligation to build the infrastructure to generate that economic activity.

So Paul Martin has an agenda for cities. He stated it quite clearly...he's going to move forward with an agenda for cities and I've had access to Mr. Martin.

I helped evolve that agenda working with his advisers.

Certainly, there were two parties in the recent provincial election that supported part of the gas tax going to transit, and one of those parties-the Liberal party-happens to have won the election.

I take it at face value that they're going to work towards returning that two cents a litre per litre of gas to the cities.

I think it's extremely promising. It was pie in the sky two years ago, and through the work of the mayors, we're bringing it very close to reality.

But it's extremely important to assist the phenomenal growth that we're going to experience over the next 20 years.

OBJ: In your election campaign in 2000, you said you were expecting $200 million in infrastructure funding from upper levels of government. Has this happened?

CHIARELLI: We have a long term financial plan that encourages a solution to the capital funding gap that all major cities in Canada face.

We believe that we cannot achieve the minimum level of capital that we need to maintain our quality of life and our economy without provincial and federal government assistance on the capital side.

There are very, very positive signs that that is evolving in a timely manner...I don't think it's on an annual basis that it's important (in terms of how much money is flowed to the city.)

You want to look at five year capital programs, and they could be fairly unequal, but would be the equivalent of a significant amount over that time period.

OBJ: You are calling on the province to reform the property tax system. Can you expand on how you would reform the system? What exactly would a small business sub class tax mean?

CHIARELLI: It's a bad property tax system, and it's a bad law that cannot be understood by the overwhelming majority of property owners.

The system is so complex that it is not comprehensible to most people. There's no predictability or equity in the outcome...We have very graphically showed examples of businesses that have the same evaluation and yet one is paying ten times more tax than the other.

When you have a provincially mandated tax cut-$23 million as occurred last time-in shifting that onto the residential, even within the business property tax, they don't benefit.

There's only about 30 or 40 per cent of the businesses that benefit from that imposed tax cut. Others, because of capping, they don't benefit.

So you have great inequalities between businesses within the property tax class. Total unpredictability in terms of residential assessment and there's no transparency.

That is among the basic primary reason that the system needs to be reformed. We need capping legislation to be more specific so there is equity and fairness within the small business tax class.

We need to have multiple year averaging, so that there's not a cataclysmic result for any one group of taxpayers.

We saw that last year where there was a so-called tax cut that the provincial rules imposed on business owners and that resulted in a 6.5 per cent increase in residential tax increases without one dollar of new revenue coming to the city of Ottawa...That is not good law.

If that were averaged out over three or four years, the impact would be less severe in any one year. In the medium long term, it might have the same effect.

OBJ: Will you commit to no more tax increases?

CHIARELLI: It's important to look at my record. Through three years of regional government and two years at the city, we've had two tax cuts and four tax freezes.

In 1997, when I was campaigning for regional chair, the then regional chair and the administration of the region predicted for eight months until the very eve of the election, that we would have to sustain a $250 tax increase.

I say we'd hold the line and we held the line in 1998 and 1999 with huge challenges.

An equivalent of $80 million in challengeswhich is bigger than the challenges we have now...Then we got into the amalgamation debate. Many people said taxes would skyrocket.

We cut taxes the first year of the new city and we froze taxes in year two and year three.

I have asked our administration to bring forward to the new council a no tax increase scenario.

That certainly would be my wish and my hope to do that. But we're going to have anywhere from seven to nine new councilors.

We're going to have a one third turnover on city council. I can't predict how they're going to vote.

I can't predict which candidates are going to win.

OBJ: In your 2000 campaign, you promised, at the end of this term, to deliver $75 million in amalgamation savings to taxpayers. Can you affirm that that has happened?

CHIARELLI: We not only achieved it, but it has been audited by the provincial government.

You may recall that the province agreed to pay 50 per cent of the designated costs of amalgamation.

They indicated that money would be paid for in installments upon being provided with, and then having the opportunity to audit the designated savings.

We've met that challenge...But there's been a lot of misinformation and a lot of misunderstanding on this issue.

A lot of people assume that that means we should have fewer employees and a smaller budget in the new city.

That's absolutely incorrect and unattainable. Nor should that be a goal of a city that's growing by leaps and bounds.

When we talk about achieving savings, we talk about identifying functions and activities that existed before amalgamation and seeing whether after amalgamation we've generated those savings...The bottom line on this is the Moody's report.

It says we have good financial management, we have high fund balances, we have a low level of debt and we have a triple A rating...We have an objective report of our financial analysis which is as high as you're going to get.

OBJ: A laid off tech worker called me and in a conversation said "the ship is sinking" in reference to the high tech economy. In addition, many firms have been taken over by multinationals or have gone bankrupt with more expected. How would you respond to that, and what do you intend to address the problems in the local high tech community?

CHIARELLI: It's important that the community try to do whatever it can to try to retain those tech workers that are out of work. I personally empathize with them.

There is a policy and an action plan underway involving OCRI and high tech companies to try to address the need to ameliorate the situation for high tech workers.

The dynamics in our community are very, very positive. On a comparitive basis, we're doing better than San Jose and Raleigh-Durham in terms of jobs and the economy of the area.

Secondly, we've had close to 500 new startups in high tech.

The high tech and government economies and the academic infrastructure has absorbed probably about 70 per cent of laid-off workers.

So there's a remnant of 30 per cent that are still having challenges.

The jobs created in Ottawa in March, April and May has been spectacular.

It's the best in Canada, and we can be very proud of that. We should take comfort in the fact that we have a broad base in technology...What is very significant is that life sciences now employ the identical number of people as telecom.

They have 14,000 people. That's very significant and shows we have a strong base...

OBJ: The first policy in your economic development strategy is to improve communications with the business community. The Coalition for a Successful Ottawa Economy has claimed you never responded to a letter they sent to your office. (And) there has been acrimony with the Chamber and the home building industry. Is that a concern?

CHIARELLI: What I hear from the small business community is that I'm working collaboratively with them.

We had a meeting with the Ottawa Carleton Home Builders Association three weeks ago, and what I heard from them is that they're pleased with the progress and the level of communication that we have dealing with development approvals and the progress of the affordable housing discussions that we've had.

I was left with the distinct impression that they thought we were on the right track. I have not seen or heard any problems emanating from the Coalition...All I know is we had a meeting with the Coalition about a month ago.

It was a positive meeting...I certainly would look forward to discussing with Mr. Whyte. I know that there's been progress and that has been acknowledged.

OBJ: So you're saying that the communication (over the past few months) with the business community has been adequate?

CHIARELLI: The past few months we've made good progress. If there's a problem with communications with Mr. Whyte, I'm not aware of it.

My understanding is that his organization was reasonably happy.

OBJ: You mentioned the home building industry. Are you concerned about their plans to challenge the city's urban boundary (which has been enshrined in provincial legislation in the new official plan)?

CHIARELLI: Not at all. The debate was a full debate that was very inclusive.

We met on a significant number of occasions with them. They started with a list of 17 very significant concerns.

We worked through them, and some members of the development community had some problems with a couple of areas.

One was the urban boundary and one was affordable housing. We took that out of the process of the official plan and we're still working with them towards a solution.

I've met one on one with the principal owners of some of the major development corporations to talk about intensification, to talk about the urban boundary and there are a smaller number who are driving the appeal process.

There's never been an official plan where there haven't been elements within a development community which have appealed at the OMB.

There are honest disagreements after honest debates and that's the way the system should work...Some of the issues they're raising might very well be settled before they get to the appeal stage.

OBJ: In your 2000 campaign you proposed recapitalizing Hydro Ottawa to generate $350 million in revenue for the city. What happened to that plan?

CHIARELLI: It was never discussed as an option to increase revenue.

It was a matter that was discussed as one of those options...It was under another administrative regimen that was coming down and that's been totally turned around...It was an initiative to deregulate hydro and it was a scenario under way it made a lot more sense than it does now.

It wasn't a question of particularly recapitalizing hydro, it was a question of simply permitting Hydro Ottawa to repay and refinance the debt to the city which would be in the interest of Hydro Ottawa.

They now pay the city a higher interest rate than it could arrange on the open market. It would certainly help their bottom line to do that.

It's something that is there that could be considered at any time, but it's not something that's being actively pursued at this time.

OBJ: Are you banking on Paul Martin becoming prime minister and flowing infrastructure funds to the city?

CHIARELLI: We're absolutely saying that there's no affordable, reasonable rapid transit expansion without federal and provincial help. That has been acknowledged for decades and decades.

It's being acknowledged by the soon-to-be prime minister.

It's being acknowledged by the Liberals and there's a very strong commitment there to do it.

The Canadian constitution is the only one in the world that does not support transit initiatives...If the bottom falls out of the Canadian economy and we go into a very deep recession, there will probably be significant delays.

If we have a reasonable level of ups and downs that you normally expect in the economy, we will be able to meet our goals over a 20 to 25 year period, which is time frame for our project.

OBJ: You're referring to the scaled down version of the light rail expansion?

CHIARELLI: When you say scaled down, that's not to say that that's inadequate. It's probably more akin to the Cadillac version versus the Chev version.

Everybody likes to have the Cadillac version, but we have to do something that's affordable and still gets the job done.

OBJ: We had a poll on our web site that asked what spending the city should delay in order to avoid a tax increase. Transit was leading the pack. How would you respond to that? Is that a possibility?

CHIARELLI: First of all, I don't think it's reflective of the concensus.

I've spent time going door-to-door, canvassing shops up and down business districts, etc.

The number one issue is move forward with rapid transit as quickly as possible. I think there's a legitimate issue of how we handle our capital program.

The bulk of the money for rapid transit expansion cannot even be spent in the next two to three years.

We're doing environmental assessment, which has been budgeted, for east/west/north/south light rail.

Before we can spend huge dollars, we're looking three to six years out.

By saying you're going to delay rapid transit capital expenditures, there's nothing to delay. There's very little budget there for next year and the year after. We need the commitments in the medium to long term.

We're not talking about generating cash flow tomorrow or next year, and that's something that's probably not understood.

There's a very, very large capital program that we have, that includes elements of transit and transportation.

We can probably downsize our capital spending. But there's not a lot of money being spent on that right now.

OBJ: What do you want to achieve if you are re-elected related to economic development?

CHIARELLI: We have a growth plan that includes the official plan and for the first time in the history of any Canadian city, an economic development plan that was written by the business community.

We want to fulfill that plan, to facilitate, to be a partner, to take the leadership from the business community as to what we need.

They're telling us what we need for economic development and it's all there in the plan including high speed internet to every door in the city in less than five years.

The priority is to maintain the quality of life and to provide the kind of infrastructure that it needs to attract people and to actually logistically be able to perform their economic function in their community.

An absolute priority is a need to fix the broken property tax system.

OBJ: The business community seems to be less onside with that, and the new deal for cities such as Toronto. Why do you think that is?

CHIARELLI: I don't think that's the case. I don't think the business organizations like the Chamber of Commerce or other groups necessarily represent the hundreds and hundreds of participants in that area of the economy.

For example, the home builders vis a vis intensification and the official plan and the urban boundary.

There are a lot more people, in my estimation, who agree with it than disagree.

There is a legitimate mandate on the part of the organization that doesn't necessarily reflect the majority of individuals.

There are a lot of small business people who are very, very unhappy with the state of property taxes and they're unhappy even though we're freezing taxes...The most frustrating thing for me as a candidate and as mayor is when I go door-to-door and people say 'We're sick and tired of tax increases.'

We haven't increased our tax take from the public. We have the same dollars.

It's just that the assessment and the breakdown among different property tax classes changes.

We don't get one new dollar of revenue yet we get blamed for raising taxes. It's not an issue of blame, but it's an issue of fairness for people who are impacted.

OBJ: So will you rule out a tax increases then? Are you saying we will not have tax increases next year?

CHIARELLI: You better tell me what you mean by a tax increase. Because if you mean, will any one property tax class suffer tax increase?

The answer is absolutely yes. And we won't get one new dollar of tax revenue from it.

That's what's unfair about it.

There will be property owners who suffer tax increases. They did it last year and they did it for the previous five or six years even though we cut and froze taxes.

OBJ: Will the city increase the tax rate in order to increase its revenues?

CHIARELLI: My philosophy has been my record and that is two tax cuts-

OBJ: We've established your record-

CHIARELLI: I'm trying to set the scene for a new council to be able to freeze taxes.

We froze hiring and discretionary spending five months ago.

The work force is shrinking, the budget is shrinking, we've got a program review going.

We've got all that because I want a no property tax increase.

OBJ: So you're saying that it is possible?

CHIARELLI: I'm not saying whether it's possible or not possible.

We're going to have seven or eight new councilors.

Do you want me to try to predict who's going to win the election in those wards and how they're going to vote?

I can't tell you that.

I can only tell you where I stand and the type of leadership that I've demonstrated and hope to demonstrate again.