Ever upward

Council approves budget spending four times the rate of inflation

Property taxpayers and waterworks users will be paying more next year—in some cases a lot more.

County council approved its budget last week that will see property tax revenue rise at least 4.1 per cent in 2016 —four times the rate of inflation. The fiscal year is not yet complete, so the increase is based on budgeted figures and subject to over- or underspending.

To understand the real increase, one must go back to hard numbers. In 2014, the municipality raised $29.6 million in property taxes. Last week, council approved a $32.3 million property tax levy for 2016—a 9.1 per cent increase over two years. Or put another way, it means an average increase of 4.5 per cent in each of this term of council’s two budgets.

Meanwhile, the cost of living in Canada rose by an average 1.05 per cent this year. For the last decade it has averaged 1.7 per cent. Each year the budget rises more than the rate of inflation, and the municipality digs deeper into ratepayer’s pockets.

Since amalgamation, Prince Edward County property taxpayers have endured steep increases outpacing inflation. But the population hasn’t budged materially from 25,000 residents. For each individual who moves here—one leaves.

Shire Hall highlights additions to the tax base to soften the appearance of the tax levy. This year, about $486,000 in new taxes have been added to the base—enabling the municipality to claim the increase to the existing tax base is 2.5 per cent. Yet if the population hasn’t actually grown, the real increase to property taxpayers in Prince Edward County will be 4.1 per cent.

WATERWORKS IS WORSE
Water users must ready themselves for an 8.8 per cent increase to their bills—beginning on January 1. Those on wastewater services will pay 2.4 per cent more starting in January.

This is just the first of at least five steep annual increases deemed necessary to return the waterworks utility to a point where revenue from waterworks rates balance expenses. Five years ago, the County established a committee to set rates to do just this—but the assumptions and variables in that model proved faulty.

The County, as manager of the waterworks utility, has been forced for the past couple of years to pay its waterworks bills by dipping dip reserves meant for capital projects—an unsustainable practice.

Its consultant says rates must rise by about 50 per cent in order to catch up and return to sustainability.

One of the problems with planning waterworks rates is that when the bills go up, water customers use less. This means less revenue for the utility.

So council hopes to fix this problem by hiking the base (or fixed) portion of the bill again. Currently 60 per cent of County water bills are fixed, with the remainder based on how much water consumers use each month.

Council decided to increase the base portion of the water and wastewater bill by 10 per cent— transferring more of the cost of the system onto the fixed portion of the bill. Part of council’s reasoning is those who can afford to travel each winter will pay a greater share of the cost of the running the waterworks utility—even when they don’t use it for months at a time.

WHAT TO DO?
Councillor Kevin Gale said that while he isn’t a consumer of municipal water, his mother is.

“Her bill is higher than her hydro,” said Gale. “This is a fine mess we’ve gotten into. We have to deal with this.”

Mayor Robert Quaiff proposed that council form a committee early in the new year to examine the waterworks business.

Engineering and works commissioner Robert McAuley had to remind council that this examination was supposed to have been undertaken this past year by former CAO Merlin Dewing— but when council sacked him in the spring, this initiative went with him.

McAuley also wanted to understand from council what kind of review it would to undertake— either a forensic review of costs or a broader examination of whether the municipality should be in the waterworks business, outsource the service or some variation in between.

He suggested that a forensic review would likely be done in-house, but cautioned that undetected savings and efficiencies were likely to be small. A larger service delivery review would likely require the participation of a consultant.

Inevitably, rising rates causes some council members to ask whether the department operates with too many staff.

To which McAuley responded that, “we take every opportunity to reduce costs. We have found savings. Fixing leaking pipes in Picton this year will save us $50,000 annually.”

Councillor Brad Nieman worries the waterworks utility may be broken.

“Do staff have the tools to do the job? Is the structure broken? Is it a personnel issue?” asked Nieman. “We are at a crossroads. Either we fix it or we continue to bury our heads in the sand. We can’t continue throw more money at the problem. Constantly pushing rates up is not the answer. We need an overall review.”

Nieman suggested council ought not approve 2016 rates until the review was done.

CAO James Hepburn felt Nieman was looking at the problem too narrowly.

“You inherited a bad balance sheet,” said Hepburn. “with a lot of debt. Nearly 50 per cent of waterworks revenue is spent on debt servicing alone.

“Yes, you may find some operational efficiency, but not enough to make a meaningful impact on rates. We have an aged infrastructure.”

Hepburn said the leaving rates unchanged would simply make matters worse. Unless rates rise, reserves will run out, leaving only debt financing or the general taxpayer to bail out the waterworks utility.

OTHER IDEAS
Mayor Quaiff suggested looking at potential efficiencies of a regional water utility, encompassing Brighton, Quinte West and Belleville.

“We are becoming debt-riddled across the region,” said Quaiff. “Perhaps it something we looked at.”

McAuley said he had been involved in such an amalgamation earlier in his career and while the boundaries would disappear, easing some of the turf issues that arise, reducing overall costs proved elusive.

Councillor Gale said a review was necessary and that council should look at capital expenditures.

But an hour later, when Councillor Lenny Epstein proposed a five per cent reduction to 2016 waterworks capital expenditures of $5.4 million—all of which would require new debt—he got almost no support from his colleagues around the table.

“Let them find the savings,” said Epstein. “I want the department to squirm a little.”

But Epstein got little support.

“I don’t want to make these guys squirm,” said Councillor Gord Fox, voting against Epstein’s modest motion.

Council approved the full capital expenditure budget and rate hike.