With the municipality facing a 32 per cent hike in local taxes, councillors here have some tough choices ahead to pare down costs to something more acceptable to local residents.
On Dec. 4 councillors held the second in a series of draft operating and capital budget discussions. Presentations were made to council by director of finance Sharon Marshall and CAO/town manager Frank Miele.
Marshall said “the bottom line is that last year we raised $4.6 million in taxes, the first draft of [this year’s] budget would raise $6.1 million – for almost a 33 per cent increase.”
The proposed operating budget included a $256,000 (34%) increase to the CAO budget, followed by a $17,000 (13%) increase to the council budget.
Under protection of persons and property, significant increases were proposed for both the fire department ($119,500 or 29%) and animal control ($8,940 or 3,720%).
In comparison, the public works department (covering roads, water and environmental services) was only projected to have an increase of $168,000 (7.6%), and recreation and culture was only anticipated to have a $42,000 (6%) increase.
Meanwhile, funds set aside for planning/economic development are proposed to actually drop by $21,000, setting the stage for a 7% decrease in operating costs.
Marshall noted a proposed overall budget of $15,477,940 ($9,643,500 operating and $5,834,440 (capital), was indicated at the Nov. 29 meeting, with the overall amount to be raised through taxation at $6,138,655.
Marshall said “what we are looking for is the process council would like to take to bring the process to completion.” She explained prior to the Dec. 4 meeting, she and Miele cut that amount to $6,068,136 – a difference of about $70,500.
Marshall provided illustrations of the work sheets that she will go through with various department heads and council to look at items which can be cut, changed, deferred “… or added to.”
She noted a council microphone system ($8,000) or laptop computers ($4,400) were not included in the first draft of the budget.
Marshall explained non-discretionary costs within the proposed budget have gone up $646,188, which represents a 14.05% increase to the budget.
Some of that is attributed to the town not having a $230,000 surplus to bring forward combined with reduced Ontario Municipal Partnership Fund grant, and additional costs attributed to Hillsburgh fire hall overruns of $190,000.
Mayor Lou Maieron asked if there was any estimate of a 2012 operating surplus. The answer was ‘no.’
Marshall was leery of using current figures to estimate tax impacts, because changes to the CVA will also see tax shifts among property classes, not just whether the value of a particular property goes up or down. She used the example of farm assessments “which have gone way up, about 50% value compared to 14% for residential.”
However, Marshall added that while farm assessments had increased, the property owners would only be paying 25% of that amount. Therefore some of the tax dollars which would have been raised through farm taxation, would shift to residential, she said.
She noted one area where Erin suffers is the result of decreased property assessments on conservation and wetlands – which are exempt from taxation.
“In Erin, some of our most beautiful properties are 50% to 60% exempt from taxation. Even though they might be worth a million dollars, they might be 50% tax exempt.”
Councillor John Brennan commented, “We’ve gone through this and we’re between a rock and a hard place.”
To Brennan, the budget as it stood “will be awfully hard to swallow (for the taxpayer).” He added if the county comes in with an increase as well it would make things worse.
Councillor Barb Tocher requested additional budget meetings before a final decision is made. Tocher’s first request to staff was to provide a breakdown of the voluntary capital items deferred.
On viewing the amount of roadwork proposed, she said, “I think we are going in the wrong direction.” She asked if Erin’s priorities and policies shifted regarding infrastructure renewal – especially roads.
“If council recalls from the past year, we heard more about roads than any other item of infrastructure in the municipality,” she said. “I’m really concerned we’re only spending $59,000 in capital on road reconstruction … I’ve never seen a budget only spend $59,000 on roads.”
Tocher added that at some point she would like to discuss specific line items, such as the CAO budget, which has gone up $256,000.
“I think we need to look at that far more carefully,” she said, adding a sober look is needed to determine if they are initiatives council wishes to move forward with this year.
Tocher referred to the economic development initiative in particular. Her argument was that since Wellington County has only begun its own economic initiatives, it might be wise for Erin to wait a year to see what happens with the county initiative.
Maieron said the county initiative is geared towards the regional level rather than what individual municipalities are working on. “They are designed to work on the bigger quest.”
Tocher said council also needs to have a serious discussion on the future of the cinema, before putting in the capital outlay for a digital projector.
Councillor Deb Callaghan agreed with Tocher’s points and said she too was concerned with the administration cost increases.
“I too have some questions on the CAO’s budget,” said Callaghan. She further believed the proposed roads capital neglects some of the work needed.
Maieron said he is concerned that one of the major impacts to the coming budget is projected work on Station Road in Hillsburgh – with a potential purchase and dam/bridge construction.
“It is a very large capital item,” he said.
Tocher said her understanding was that work had no impact at all. Marshall confirmed that would have no direct tax impact because the plan was to borrow those funds. However, Marshall agreed there would be a future impact on taxation to service that debt.
Maieron said this year debt serving costs went up almost 3%, noting, “If you borrow money, you have to pay it back – with interest.”
While Maieron agreed that work remains contingent on whether Erin received a grant to proceed with the work, he questioned how the additional work was advanced one to two years, when he believed other solutions were available.
He believed there needs to be a process to clearly identify how items get on the five-year-capital plan.
“The cinema is a $17,000 loss a year,” Maieron said. He considered recreation as a whole to be a million dollar investment by taxpayers.
“If the cinema is not being used and there is no benefactor and there is no interest, then I’m okay with closing it,” he said.
But, if cuts are made, Maieron said he wants to ensure they are fair. The goal, he said, is to bring the budget down to a reasonable number.
Maieron said he’s lobbied at the county level for the upper tier to keep its increase at 2%. He pointed out the county levy represents 55% of the residential tax bill.
“Times are difficult. You can gauge that by the use of the food bank.” He said “to come in during difficult times with a 10 to 12% overall increase (local, county and education taxation), is not going to receive much favour.”
He suggested an overall increase of 3% would be more acceptable.
Last year, the local increase was 8.4%, which rounded out with the county and education tax levies to an overall increase of less than three per cent.
Brennan said “we can sit here and say 10% should be the target for the town, but the reality is that we’re currently at 32%.”
He asked how realistic it was to expect two-thirds of the budget to be cut. Brennan said he’d rather take a hard look at what is absolutely essential “… and see where that gets us.”
Maieron said he did not say cuts recommended by staff would reach the 10% goal, but that it could be set out as a target.
Brennan commented “we are not the experts on what is needed to be cut – that is what we have staff for.” He said “in the end, (any cuts) are going to be determined by the absolute needs (of the municipality).”
Maieron added changes may not be simply deferring projects, but possible refinancing them or taking money from reserves.
“I don’t think we are going to come in at 10%, I think it’s more likely to be in the 20s,” said Maieron.
Callaghan said it might be easy for council to direct staff to target a specific number, but that doesn’t mean it can be reached.
Tocher contended the approach of just prioritizing was “too wishy-washy.” She advocated directing “staff to come back with an increase of 10% – no more,” which would force prioritization and looking at alternate sources of funding.
Councillor Josie Wintersinger said she believed staff have the ability to look at the priorities – and do the best they could.
While a public meeting for input on the budget was slated for Dec. 12, it is not anticipated council will discuss the budget further until January.
BUDGET UPDATE
At the Dec. 12, staff offered a second draft of the 2013 budget which cut the proposed increase roughly in half – from a 32% proposed increase to something in the range of 17%.
For addition information on that draft – see the town website at www.erin.ca
