A better problem

Council urged to put more aside in reserves as it considers a 1% increase in the tax levy

County council sat down this week to begin haggling over its 2013 budget. Taxpayers, meanwhile, await the impact on their pocketbooks. As the horsetrading began, council was looking at just a one per cent increase in the tax levy—the smallest increase proposed in the amount the local government extracts from property owners, since the County amalgamated 10 wards, villages and town.

Specifically municipal administrators are looking for $26.7 million to be raised from taxpayers in 2013—$259,850 more than levied last year. County administrators are urging bylawmakers to set aside an additional $890,000 for reserves, that when netted against revenue from new assessment, would push tax levy to a two per cent increase.

It was not clear at press time whether the comparatively meagre increase would be celebrated by council or seized upon as an opportunity to spend more. County council has struggled mightily to rein in wild budget increases in previous years. The temptation to fund long repressed causes and improvements may prove too great for some.

Lying beneath the modest increase to the tax levy is a turbulent reworking of the municipality’s operations. One measure of this tumult is borne by the fact the proposed budget projects a $3.8 million drop in revenue it expects to receive. Meanwhile, administrators foresee a commensurate $3.5 million drop in expenditures.

Very nearly one million dollars has been shorn from the 2013 budget compared with 2012 resulting from to lower employment costs. The County underwent a painful but necessary restructuring last year—realigning its human resources to the requirements of the streamlined organization. The net impact of that action delivered savings of $970,000 to this year’s budget.

Another prominent factor driving the decrease in revenue and expenses was a change in how the municipality accounts for gas tax revenue it receives from the federal government and the projects that are funded with this money. Under the new presentation, gas tax revenues now reside in a reserve account until drawn—and don’t get recorded as revenue (and expenses charged) until the funds are actually used and spent.

The aggregate of these changes makes reviewing and understanding the County’s performance trends along business lines an ongoing challenge.

While the reporting of its financial position is better and clearer than it ever has been—consitency of presentation remains an elusive goal.

Revenue and costs once accounted for in one department have been reallocated into others or distributed to better reflect the actual costs of the County’s services and programs. The Recreation, Parks and Culture Department has been dismantled for example— its costs and revenue have been dispersed to appropriate accounts across the organization.

In the short run, the realignment of business lines makes it an added challenge for council and residents to compare performance year to year as significant changes in the revenue or expenses of the organization may be due to reorganization rather than a signal a department has missed its targets, which might prompt questions.

On the other hand—this is work that had to be done—more properly should have been done at amalgamation. It is only in recent years that council was able to see what it spent last year side by side with what it proposes to spend in the current year. Only recently council has been putting away money to fund future capital (buildings, roads, bridges, etc.) needs.

SAVING FOR A RAINY DAY
One of the more prominent themes in this year’s budget presentation by County administrators was its emphasis on building up the municipality’s hitherto reserves. County administrators paid particular emphasis to its progress in building up fragile reserves.

Scraping together less than a half a million dollar for reserves was mostly a symbolic gesture in 2011, meant to signal to council and ratepayers that it was wandering down a dangerous path. With more than 80 aging buildings and infrastructure at varying levels of decay, Finance Chief Susan Turnbull warned of looming disaster if money wasn’t put away for a rainy day.

Since then, her argument has been bolstered by Treasury Chief James Hepburn and Chief Administrator Merlin Dewing. Last year they were able to put away nearly $2 million. This year they hope to stash $3.45 million into reserves—including $890,000 they want to add to the 2013 budget. The impact of this recommendation will be softened considerably by the fresh new revenue ($438,000) from an increased tax base in 2013.

County administrators are proposing a new reserve account designed to dampen wild variations in the tax levy. The tax rate stabilization reserve is intended to avoid a massive tax hit on ratepayers in the event the municipality encounters extraordinary expenses or revenue shrinks unexpectedly.

PLANNING DEPARTMENT SHRINKS
The steady multiyear decline in building and development in Prince Edward County has prompted a sharp cut in the County’s planning budget. Last year the department expected to spend about $1.1 million. But with declining volumes— exiting staff weren’t replaced. The department spent just $734,720 last year and will spend even less in 2013. Most of the savings are the result of fewer heads—both contract and staff. Despite the decline in volumes—County administrators are bulking up reserves in this department as elsewhere. They intend to add $202,500 to planning reserves this year.

Meanwhile the County is thickening its newly formed Community Development Department, formerly Economic Development. After spending much of 2012 defining the new department’s role, function, staffing and resources 2013 will likely be the benchmark year by which to measure performance.

The department expects to spend just over half a million dollars, while the commission (the overseeing body composed of community and business associations, guiding strategy, and providing insight) expects to spend about $180,000—the bulk of which will be used to fund the County’s portion of tourism and attraction grants.

THE RARE TAXPAYER
If it is able to maintain its one per cent increase to a final budget—there will be some County property taxpayers who will see a modest decrease in their tax bill. This year is a reassessment year for MPAC— sloshing the share of the tax bill payable from one County resident to another. As the burden rises for some, it recedes for others; though these folks don’t typically appeal MPAC’s methods. For some the burden will recede enough to enable these fortunate ratepayers a bit of a break in their property tax bill in 2013—likely to be paid for by some folks with an attractive view of Lake Ontario.