Council agrees to 6.5% tax increase, spending cuts for 2010

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News

By Kristen Shane

 

Facing a ‘perfect financial storm’ of almost $1.5 million in predicted budget shortfalls for 2010, Kincardine council has agreed to a five-point plan that includes increasing the tax rate by a target of about 6.6 per cent.

 

The municipality would also spend 6.5 per cent less than in 2009 on day-to-day costs and $500,000 less on new projects usually funded by about $1.78 million in taxes. That means fewer big-ticket items, such as the Davidson Centre addition or the Huron Terrace bridge replacement.

 

“It’s a year of consolidation and ‘let’s get all the projects finished that we started,’” said the municipality’s chief administrative officer John deRosenroll, the plan’s architect.

 

He also proposed stopping all carry-overs from the 2009 budget in order to develop some surplus from this year going into 2010. And he suggested council pass a policy that would require it to put whatever money was leftover at the end of a year into a reserve fund to draw upon to balance the budget at the end of deficit years.

 

“So in other words, we start each year at neutral.”

 

Because otherwise, the municipality may start one year with the prior year’s surplus, therefore making it less dependent on raising taxes to pay for programs. But that means it is especially hard-hit in years where there is no surplus to carry into the future.

 

Council okayed the five-point plan at a special budget meeting Thursday, about two months before it would normally break out the charts and bar graphs involved in budget discussions.

 

Why? Because 2010 is set to be different. DeRosenroll wrote in a report to council that next year’s predicted money troubles “are unprecedented and truly reflect a perfect financial storm.”

 

Red-flag issues

 

He outlined six ‘red-flag’ issues, including losses of:

 

* $621,100 in regular yearly provincial funding, set to kick in in 2010

 

* $224,908, as the first of three equal yearly installments to repay reserve funds that council dipped into to try to shore up last year’s budget

 

* $150,000, in an expected shrinking in the yearly profits of Bruce Telecom, paid out to its owner, the municipality

 

* $373,000, the first in a 10-year schedule to pay back money owed to the bank for the Kincardine Community Medical Centre addition currently under construction

 

* $100,000 in money lost from municipal investments, as a result of the recession.

 

And whatever surplus or deficit is left from the 2009 budget, which is still unknown at this point.

 

Council members, municipal staff agree

 

Faced with a sea of red, council members said they could stomach the medicine, although they knew it would taste awful.

 

“I think it’s good. To look at a tax increase, hopefully it’ll be less, but at least it gives us a starting point,” said councillor Randy Roppel.

 

Councillor Guy Anderson noted that Saugeen Shores’ tax rate per household is more that Kincardine’s.

 

“I would like to see us get as low a tax (rate) as possible for the citizens, however, you’ve got to be realistic,” said Anderson. “We can’t expect (Saugeen Shores residents) to pay much higher tax than we do here, and yet we’re offering as good or better services.”

 

Kincardine’s department heads said they could live with the cuts.

 

Public works manager Jim O’Rourke said his department has done a lot of capital projects, such as fixing roads and bridges, during the last five to 10 years.

 

“Can we back away from the table and relax our capital program if that’s council’s wishes? I think we can,” he said.

 

Recreation director Karen Kieffer and administrative fire chief Jamie MacKinnon said they would try to recover costs by charging more user fees or creating new ones.

 

Reserve and reserve funds update

 

Council also used the budget meeting as an opportunity to look at how much money it has set aside in cash, investments and debentures.

 

Pointing to a colourful bar graph, treasurer Brenda French explained that the municipality should end 2009 with slightly more than $20 million in reserves and reserve funds.

 

“If we have large sums of money on reserve, how can we justify going to the taxpayer and asking for money?” asked councillor Randy Roppel.

 

It’s not that simple, French explained. Of that $20 million, only about $12 million is sitting in more readily-available cash, as reserve funds, she said.

 

Even with that, the municipality only draws from certain funds for certain things.

 

“I’ve had to manage cash flow this year more than I have had to do in the last 10 years because we drew down significantly in one year our reserves positions,” said French. “We’ve had a number of unfunded capital projects, and that has put pressure on our cash balance in the General Fund that we’ve never had before.”

 

In fact, this year she had to borrow $2.6 million from reserves to pay for day-to-day operating costs.

Kincardine may have a multimillion-dollar nest egg, but French’s bar graph shows it has shrunk in recent years from a high of almost $32 million three years ago.

 

In the end, council’s approach to dealing with reserves and reserve funds is a choice, said French:

“(If) you  (council) say there’s a line in the sand and we (the municipality) don’t need anything more than that, then it means we will have to develop an appetite for staying very close to within our budget year to year to year. And if new projects come over or new ideas come along, then they have to be deferred at that point.”

 

Lately, though, council has tended to sometimes spend money on unbudgeted expenses or accept cost overruns on certain items. That behaviour should prompt it to want to keep more money in reserves and reserve funds so that it can stay flexible, said French.

 

Council members didn’t agree to a concrete policy on reserves and reserve funds. But

they did acknowledge one thing, as Anderson noted: “I think in the last few years, we’ve spent a tremendous amount of money. We’re going to have to slow down a little bit.”