Township Watch - Special Budget Report


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As we reported in the December 2013 Township Watch, four special meetings were held in January to discuss the 2014 budget.  A draft budget was presented at each meeting for discussion, starting with version 4 for the January 10 meeting.    In the discussion below, a summary of the budget presented to the meeting is included..

January 10, 2014 – Committee of the Whole:

In the following tables, the

  • "Tax Levy Requirement" - is the net amount of money that needs to be raised from the taxpayers of Muskoka Lakes for the 2014 Operating Budget. The actual Township budget is higher (over $11,000,000) but they have other sources of revenue including `non-tax revenue (user fees, permits, variances, site plans, etc.).
  • The "% Levy Requirement Change" - is the overall increase over what tax revenue was budgeted in 2013,
  • The "Tax Rate Implication" - is the change in tax (mill) rate if your assessment does not change from last year (most do with phased-in assessment increases), but also allows for the fact that the assessment base in the Township is growing through new development or renovations
  • The "Capital Budget" - is the total budget for `big things` that we buy (fire trucks, generators, software systems, etc.) and things that we fix or maintain (road resurfacing, bridge re-building, etc.)
  • "Reduction in Reserves" - is the net amount that we take out of our savings accounts (reserves); reserves are required to pay for replacement of big things (fire trucks), fund periodic events (election), or for emergencies. Continual reduction in reserves can lead to future problems.
Budget Version No 4  
Tax Levy Requirement $8,438,989
% Levy Requirement Change 2.9%
Tax Rate Implication (changes in assessment factored in) 1.7%
Capital Budget $2,860,750
Reduction in Reserves $447,580

 

This meeting discussed version 4 of the budget.  Both the operating and capital budgets were reviewed section by section. There are many fixed costs, such as wages and benefits, utilities, building, maintenance and elections.  These are the day to day expenses necessary for Township business and are not easy to reduce. Other items are more discretionary, and under control of Council. In the Operating Budget, this might include legal and consulting fees, grants to organizations, etc. In the Capital Budget, this could include deferring purchase of a generator, eliminating a new flag pole, etc.

In his comments, Township Treasurer, Stephen Rettie, stated that this council has not been replenishing reserves at the rate that they have been spending them and that it is essential to start to reverse this.

Finance Chair Furniss expressed a serious concern as “eating into reserves this term of council is becoming acute”.

During discussions, it became apparent in the Capital Budget review that monies necessary for infrastructure repairs were not available.   According to the Director of Public Works there are bridges and culverts throughout the Township that need to be repaired.

January 21, 2014 – Committee of the Whole:

This meeting used version 5 of the budget as a basis for discussion.

Budget Version No 5   Change from Version 4
Tax Levy Requirement $8,399,539 Down $39,450
% Levy Requirement Change 2.5% Down 0.4%
Tax Rate Implication 1.3% Down 0.4%
Capital Budget $2,880,250 Up $19,500
Reduction in Reserves $447,080 Down $500

 

One of the major items discussed was the identified need for infrastructure repairs (e.g. bridges) previously identified.  Several alternatives were presented to address the costs of upgrading the infrastructure shortfall:

Alternative 1 – Debenture (20 year at 4%):

  • Issue a 20 year debenture for $3,400,000.
  • 2014 levy impact – 0% (assuming first payment occurs in 2015).
  • Future levy impact – Approximately $250,000 or 3% for 20 years.
  • Reserve impact – there will likely be a short-term requirement to fund construction until debenture proceeds are received.
  • Projects addressed – all seven projects would be scheduled in the short term.

Alternative 2 – Phase-In with capital deferrals and levy / reserve impact:

  • Increase Roads Reserve by an estimated $150,000 from the sale of road allowance and license agreements, currently not prescribed under Township By-Law 83-81.
  • Remove or defer $320,000 worth of budgeted capital transfers:
    • Nursing Station – $50,000
    • Milford Bay Pumper 9 – $50,000
    • Parkland purchase – $100,000
    • Maintenance vehicle – $40,000
    • Bridge rehabilitation – $80,000
  • 2014 levy and/or reserve impact - $210,000.
  • Projects addressed – Beatrice Townline Bridge #2
  • Budgets for 2015, 2016, and 2017 will need to address the remaining $2,880,000 of estimated bridge structure remediation.

January 21, 2014 – Council – Public Input:

At the public budget meeting held at 7 PM on Tuesday, January 21st “Version 5” of the budget was circulated and the following issues were raised:

  • Reduction in reserves
  • The heritage budget
  • Legal and consulting fees
  • The township removing their $50 000.00 commitment to the Nursing Station
  • Income taxes are collected for health care, which is a provincial responsibility.  Property taxes are not.  This refers to a $18 000.00 budgeted donation to the hospital
  • It will get to the point where people cannot afford property taxes in Muskoka.

January 30, 2014 – Special Committee of the Whole – Budget Deliberations

Version 6 of the budget was the basis for discussion at this meeting.

Budget Version No 6   Change from Version 5
Tax Levy Requirement $8,668,284 Up $268,745
% Levy Requirement Change 5.7% Up 3.2%
Tax Rate Implication 4.5% Up 3.2%
Capital Budget $3,190.250 Up $310,000
Reduction in Reserves $624,580 Up $177,500

 

The meeting was scheduled to start at 8:30 am, with a `Closed Session` scheduled at the start to address `personal matters about identifiable individuals, including municipal or local board employees`. The closed session meeting did not finish until almost 11:00 AM. At this time, members of the public who had waited almost two hours were invited into the meeting, and discussion returned to the budget, the advertised purpose of the meeting.  That discussion (including a short lunch break) finally ended at around 4:30 pm (almost five hours). 

There was much debate, and many suggestions for deletions and additions to both budgets.  Requests were made of several departments to see if they could raise their no-tax revenues, cuts to fire department education and the heritage committee were requested, a grant to Muskoka Algonquin Healthcare was removed, and an increase to the Planning department legal budget was sought.  On the Capital side, the new flag pole is out, as are some planned purchases for the library and fire department, and the deferral of the purchase of a new backhoe.

Councillor Furniss repeated his concern that this Council has taken more than $1,000,000 from the reserves since taking office (actually $1,240,000).  He stated that this may turn out to be this Council`s `legacy`.

February 14, 2014 – Council – Budget Adoption:

After a number of meetings starting late last year, the "final" version of the budget was tabled for approval at the Valentine's Day meeting of the Council.  The MRA had many concerns about the budget presented at the last Committee of the Whole which projected a 5.7% change on the tax levy, and a further depletion of the reserves by over $600,000.  Council and staff have obviously had the same concerns, and the budget presented for approval included cuts in both operating and capital expenses, and increases in "non-tax" revenues (e.g. user fees, etc.).  If this budget is passed as is, the Treasurer calculates that township taxpayers will see an increase of $1,58 per $100,000 of 2013 property assessment  

 

Budget - for Approval   Change from Version 6
Tax Levy Requirement $8,401,394 Down $266,890
% Levy Requirement Change 2.5% Down 3.2%
Tax Rate Implication 1.6% Down 2.9%
Capital Budget $2,643,750 Down $546,500
Reduction in Reserves $243,180 Better by $381,400

Early reports from the Council meeting suggest that this budget was approved with several changes.  $3,000 was added back to the grant to the Chamber of Commerce, up to $9,000 was added back to the grant to the South Muskoka Hospital depending on donations by Muskoka residents, and a further $10,000 transfer to reserves. A quick calculation put the tax levy change at 2.75%. These will be confirmed once the approved version of the budget is published.

Muskoka Ratepayers’ Association Comments:

As of the final version of the budget, the MRA notes that when this Council took office in late 2010, the reserves stood at $6,082,702. As this Council’s term finishes at the end of 2014, our reserves are forecasted to be $5,105,320 or $977,382 less – this is approximately 16% less than when they came to office. 

In reviewing the budgets, we note that there are several areas of concern for spending in the past year (2013), including:

  • “Consultant fees” in the Planning department in 2013 were budgeted for $13,000 and are now estimated to be $89,600 (excludes consulting for zoning by-law); this is about seven times what was budgeted
  • “Legal” costs in the Clerk’s department were budgeted for $170,000 and are estimated to be $259,300 in 2013 (about 52% over budget for 2013)
  • In 2011 the Heritage Committee had a budget of $1,000 and in 2014 are being allocated $41,000 plus an almost equal amount in "consulting fees". 

The MRA will continue to look over the approved version of the budget when available and make further comment at that time.

Finally, it should be noted that the Township portion of our property tax is normally about 15% of our total tax bill.  The District normally accounts for about half, and education makes up the rest.  The Distract budget is going to District Council on February 18 for approval, and currently looks like a 1.8% increase (compared to the 2.75% increase at the township level)..

 

Happy Valentine’s Day

 

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