Council ponders capital spending ‘holiday’ to keep tax levy stable

WELLINGTON NORTH – While “a short holiday” from some capital spending “makes sense” to hold the line for taxpayers struggling through pandemic, Mayor Andy Lennox wants to ensure necessary projects move forward next year.

“If there’s projects that we need to do then we need to find a way to do them,” said the mayor during a discussion on the 2021 budget during the Oct. 26 council meeting.

“Scaling back a little bit on capital right now I think is appropriate, but that doesn’t mean we’ve lost track of where we’re going in terms of capital renewal, planning for growth.”

The mayor was responding to a budget planning overview from finance director Adam McNabb, who explained cutting forecasted capital spending is among the ways council could reduce a potential levy increase for the coming year.

“Staff is currently seeking direction from council in what it would feel would be a palatable levy for 2021,” said McNabb.

“In order to facilitate a zero per cent increase on the existing taxpayer, we would effectively have to drop contributions to capital from the $2.3 million mark to about the $1.7 million mark.”

To put that in context, McNabb explained maintaining capital contributions at 2020 levels would require an increase of around 7.7 per cent in the levy.

McNabb said major pressures on the 2021 budget are an anticipated loss of about $300,000 in recreation revenue due to pandemic-related closures/restrictions and an anticipated reduction about 15% in provincial grant money through the Ontario Municipal Partnership Fund (OMPF).

Wellington North received $1,283,700 through the program in 2020.

Overall 2021 operating pressures are expected to push up the levy by just over $700,000, said McNabb.

That means either capital spending cuts must be made or additional contributions from reserves and reserve funds will have to be considered.

“The elephant in the room is the COVID-19 global pandemic remaining a fluid issue,” McNabb told council.

He added “certain assumptions,” which have already been made in the draft budget to account for pandemic impacts are subject to change as the situation develops.

CAO Mike Givens told council staff is anticipating direction to cut capital spending in response to the pandemic.

“From a staff perspective we anticipate that council will be supportive of scaling back the capital program this year to alleviate some of the impacts as it relates to the overall levy,” he stated.

“We’re prepared for that, we’ve had those conversations internally.”

However, Givens pointed out, “I also think that we’ve heard a lot of conversation in the last little while, the last six months, about projects that council is also encouraged about and looking forward to discussing.”

Givens cited work on the Queen Street East Connecting Link in Mount Forest and refurbishment of the Arthur Community Centre as significant capital projects under discussion.

“Rural broadband … is there an expectation that we are contributing toward addressing that issue? And when I say contributing, I mean financially,” the CAO noted.

Councillors Sherry Buke and Steven McCabe both suggested paving of Concession 4 North in former Arthur Township should be considered a priority.

McCabe added upgrades to Wells Street in Arthur should also be considered to facilitate plans for a potential shared public works yard with Wellington County.

“We’ve had a lot of talks about service club signage at gateway entrances here in Mount Forest,” noted Burke.

“It’s not going to be a BIA project because of the location, but I think something needs to be done with those service club signs now that the other gateway signage is updated.”

Burke called for staff to aim for a moderate levy increase.

She said she doesn’t think 7.8% “is palatable.”

She added, “We’ve often talked about what could we do for our residents to help them cope with impacts of COVID-19 and I think being reasonable and rational with a moderate levy increase would be one of those things we could do for our community as a whole.”

Councillor Lisa Hern said, “Like councillor Burke, I’m very leery of any large increases at this point in time.

“I feel so many people are under unemployed, let alone unemployed.”

Hern asked McNabb if he could provide “some sort of snapshot” to illustrate how local taxpayers are doing financially compared to recent years.

“Surprisingly, or maybe not so surprisingly, our collections remain quite strong,” McNabb replied.

“In terms of our levy, that’s really our outward facing message to the public,” added Lennox.

“We have a lot of levers at our disposal within our organization to decide where we spend the dollars, but in terms of the outward facing piece I think this year we have to maintain a pretty modest 2021 tax impact.”

Lennox added, “I’d like to see it, I think, certainly less than we’ve had in previous years. I’m not sure that zero is a smart idea, but something … in that lower end would be something I would be supportive of.”

The mayor pointed out a significant portion of the anticipated impact on the township’s operational budget is revenue loss due to the ongoing pandemic.

“A big part of it is revenue reduction that we hope is short lived … this is a one-year … one-and-a-half-year, aberration,” he said.

“So we would expect that revenue to come back over the longer term. So I think to take a short holiday from maybe some of our capital expenditures to address that short term need makes sense.”

Noting the projected cuts to OMPF represent “another big change,” Lennox stated, “I’m very hopeful that our provincial counterparts will not pass on a 15% reduction to us at this particular moment because I’m sure we’re not the only recipient of OMPF funds that are going to face that same challenge.”

Lennox told council, “I would like to see us continue to plow as much as we can into those capital expenditures.

“There’s another lever that we have if there are really important capital expenditures that we feel we have to do in 2021 and that is the lever of debt.”

Lennox noted the municipality is in a good position to borrow, if needed, because it has not taken on substantial debt in the past.

“I’m happy for staff to continue with keeping the tax levy low and then let’s have an honest discussion about what we think is the highest priority and then figure out a way to do it,” said the mayor.

McNabb said council’s comments “provide a roadmap” for further staff work on the 2021 budget and an update will be presented at the next council meeting on Nov. 9.