MAPLETON – The township’s infrastructure is beginning to show its age and finance director John Morrison warned council during a review of long-term financial planning strategies to look to the tax rate before time runs out to pad reserves.
Mapleton’s long-term budgeting strategies are what Morrison credits with stabilizing past tax rate spikes, calling it a “work in progress” showing some signs of success.
After spiking to 9.7% in 2016, the tax burden has averaged 2.4% over the last five years—less than one percentage point above the consumer price index (a measure of price change over time for a fixed set of goods and services).
But cracks are beginning to show.
In Morrison’s report, the township’s capital program, used to fund assets like roads, sewer services and playground equipment, was the big-ticket item.
“The biggest issue here is the asset consumption ratio,” Morrison told councillors.
“(That’s) accounting speak for: ‘Have you almost depreciated all your assets?’” he explained.
In 2020, that ratio was 63. The Ministry of Municipal Affairs and Housing pegs a ratio of 75 as high risk.
“It means that our assets are coming to the end of their useful life and will need to be replaced,” Morrison emphasized.
“That is a warning sign that is on the horizon for us, and we should pay attention to that.”
Morrison also drew attention to decreasing grant dollars from the province and feds used to help fund the program.
“The senior levels of government aren’t helping to restore the infrastructure that we need to replace and that is a financial vulnerability,” he explained of having to rely on external funding.
Although the township is receiving more money from the Ontario Municipal Partnership Fund than it did five years ago, municipal expenses have risen some $2.3 million, meaning the percentage of provincial funding covering expenses dropped from 9.2% in 2015 to 7.2% as of last year.
Funding from other grant sources, like the federal government, is also running the same trend—unable to keep pace with growing need.
In 2018, 7.1% of the $28.7 million capital budget was made up from grants. In contrast, grants represented 3.9% of 2020’s $51.2 million capital budget.
Morrison told council short- and long-term financial planning has been effective in the early stages of collecting money to replace weary infrastructure, but he cautioned reserves may be too squeezed to sustain the pressure of replacement.
Reserves need to be built sufficiently enough ahead of when they’re needed to avoid tax rate spikes that result from a panicked need to pay for things.
Currently in reserves are 30% of the funds needed to pay for capital improvements in the next decade.
But the township’s financial strategy is to use reserves to “provide greater funding flexibility and reduce the township’s financial vulnerability,” according to Morrison’s report.
And as reserves deplete, tax burdens need to rise to compensate.
Mayor Gregg Davidson said the numbers illustrating financial vulnerability were “quite alarming” and showed there’s planning to be done.
Davidson voiced his gratitude to Morrison for moving the township into a “much better position” to absorb future financial pressures but said the township would still be asking the province and feds to share.
“We can’t do this by ourselves—they have deeper pockets than we do,” Davidson remarked.
Councillor Dennis Craven asked Morrison about fast-tracking infrastructure upgrades.
“We have to pay attention to the fact that we have a funding issue,” Morrison responded.
“We should be thinking ahead about what that might potentially mean to the next term of council; what it would mean within the next five years in terms of what the tax rates would be in order to fund it.”
Morrison continued, “So do we put off collecting that money now because your term of office is coming to a close and you want to keep the tax rates relative to the CPI, or are we going to look ahead and properly fund it so that we’re not creating a bigger problem five years from now?
“(That’s) something you have to decide.”
The township is in the process of determining the lifecycle of its assets using management software called Citywide, Morrison told council.
“[To] determine what [are] the replacement values, when we should be repairing something, when we should not repair it,” he said, adding those plans will likely materialize next year with funding strategies.
“That’s when you will start seeing what is the cost of some of the plans that we’re putting in place.”
The Citywide software, Morrison later explained, plots a municipality’s assets across a map and financial staff work with those in engineering to determine lifecycles of those assets to help inventory and forecast how much will need to be spent on upkeep and replacement.
Morrison’s report concluded by stating the understanding of infrastructure replacement costs is critical to providing long-term tax rate stability.
