A deliberate budget

County cuts expenses, begins restoring reserves

In a surprise move council last week approved its 2013 budget after just three days of deliberation. The tax levy—the amount collected from property ratepayers— will rise to $27.7 million in 2013, a seven per cent rise over the actual tax levy spent last year, and five per cent more than was collected in 2012.

This rise in the tax levy comes despite the fact that the municipality managed to shed $970,000 in wages and benefits costs in 2012 and will spend very little on roads and bridges in 2013.

In fact, in contrast to past years, operating expenditures will fall by nearly $2.3 million dollars in 2013 compared to actual expenditures, the first major drop in the cost of local government since it was formed in 1998.

So how does declining expenses and capital works spending translate into an increase in the tax levy?

Unlike past years in which costs spiraled seemingly beyond control or explanation, and in which reserves were plundered to mask the effect of prior mistakes, there is a more prosaic explanation for the rise in the tax levy in 2013.

County managers have made a conscious decision in 2013 to contribute significantly to reserves. In fact, the municipality is socking away about $2.45 million this year. If it had not made this investment the County’s tax levy would have decreased, albeit marginally, compared with 2012 and property taxes would have fallen with it.

But CAO Merlin Dewing has sounded the alarm since arriving to the County’s top job a little more than a year ago, that the municipality was in a precarious financial position with hundreds of millions in assets—each in various levels of decay—but less than $10 million set aside to fix or replace them. The County was sleepwalking toward a cliff.

“We have begun taking the first steps toward a financially sustainable organization,” said Dewing.

He added that while understands many ratepayers may be looking for break after years of rising taxes, “the steps we are taking now help ensure taxpayers aren’t hit with big increases in the future when something needs to be fixed or replaced.”

Dewing, along with the mayor and council, agreed to use the improved financial position they established in 2012 to begin shoring up the County’s reserves in a significant way. In this way they hope to avoid living hand to mouth—unprepared for the future—or dependent on senior levels of government to bail them out.

BAD DEBT
The County’s debt, at nearly $14 million (not including waterworks, which is funded by the users of the system) is well within the standards set by the province. The troubling bit is that much of this debt was accumulated as part of schemes that eventually collapsed and were subsequently abandoned.

Fully half of the County’s outstanding debt— $7.7 million—is what remains to be paid from an ill-fated roads improvement program between 2005 and 2009. The plan, in part, imagined that by aggressively investing in paving gravel roads the County would reap maintenance savings in future years. It would, according to the poorly considered plan, then use theoretical savings to fund debt payments. It would be three years before the administrators of the day conceded that there were in fact no cost savings to be had and the plan was abandoned. But not before $11 million had been borrowed and squandered on this scheme.

The municipality will also spend $157,610 in debt payments in 2013 for a quarry it purchased a few years ago on Ridge Road—a quarry that has since been determined to be uneconomical. The County has since returned to acquiring the material it hoped to scoop out of this quarry from other suppliers. Meanwhile taxpayers continue to fund the outstanding debt, currently at $2.5 million, borrowed at an interest rate of 5.32 per cent to purchase the pit.