Spreading out the costs might not create overall savings

Sometimes it’s a case of pay for it now, or pay more for it later.

During Wellington County Council’s preliminary look at the five year capital plan Erin mayor Lou Maieron had a number of questions – most however were focussed on one objective – bringing down the county’s annual requirement on the levy by spreading out costs over a longer period of time.

“If we spread out the five year plan over a longer period of time, that could reduce the levy requirements which seem to be pretty high to fund a lot of the capital projects.”

He also asked if all members of council could be provided with balance sheet of the various county reserves, “to provide a better idea of what we have in the bank.”

Wellington County treasurer Craig Dyer had no problem providing the reserves information.

However, he also later cautioned that using up reserves to pay for projects now, could potentially increase costs in future years.

Later in his presentation, he walked councillors through various scenarios which involved various impacts such as altering service levels, changes to the timing of projects, or altering how projects are funded such as tax levies versus using reserves or long term debt.

He said councillors need to not only think about the impact to the 2011 budget, but the potential impact to the budgets of the following years.

Dyer contended that reducing one year’s budget by a set amount could create an even greater increase the following year to make up the difference.

Maieron again asked what the impact would be if the costs were spread over a longer period of time.

Dyer explained the danger of deferring money from one year into a future year not only increases the funds to be raised in a future year, but requires even more of an increase to cover that cost.

However, councillor Jeanne Innes asked what would happen if the cost was simply removed and not deferred.

Councillor John Green said that using a reverse philosophy, county council wanted to be kind to the taxpayers in the early 1990s by keeping tax increases to a minimum either zero or 1%.

“We were heroes in the eyes of the public for five or six years.”

What it led to were greater and greater requests, until the year 2000 when it had to bring in a 12% increase.

Dyer said when staff are putting a five-year plan together, “we are trying to manage all five years at once.”

He explained the introduction or deletion of a capital project can affect the following two or three years.

Warden Chris White said there are two things happening.

“One is a deferral – spend it now or spend it later. At the end of the day you’re still going to get hit.”

White said if the levy itself is reduced by a given amount, “You don’t recover that and the costs continue to go up.”

He said the money coming in has to keep pace with the costs.

“The decision would be to pull a capital project permanently to have a long term impact.”

“The minute you try for 0% budgeting, you’re going to get whacked by inflation.”

Maieron asked then how to move then to a 2% to 2.5% increase over the five years instead of the projected 3%.

“Do we have to absolutely cancel projects to come to that?”

White said if one was cutting the operations budget, council would have to consider cutting a service or level of service – or one cancels a capital project.

“Those are the decisions council has to make in a five year plan.”

“We just have to plan smart.”

Councillor Gord Tosh said he certainly agreed that the county should not consider a 0% increase, but should at least think about keeping it to the rate of inflation – about 2.2%.

Dyer noted that using reserves to offset levy increases has its own issues, because it would require more and more of those reserves to keep costs down.

“There’s a danger in using reserves to fund a one-time problem.”

“I’m not trying to discourage councillors from making adjustments to the budget.”

He said the intent is to show the ramifications of those decisions.

Maieron then asked if the treasurer could provide option of how council can cut the budget without impacting subsequent budgets.

“If we can get an idea of what pieces of the shell game can be manipulated, that would help us in our deliberations.”

Councillor Shawn Watters commented his understanding of what was presented is that the only way to bring the numbers down is by cutting services.


Based on expected capital costs, there is no way to make the cuts unless council reviews the whole system, Watters said.

“If that is what we want to do, then that is the discussion we need to have.”

White agreed that at the end of the day, the county operates on a committee system and each committee can have a laser focus to fine tune its portion of the budget.

He maintained that the budget is ‘organic’ and council can make decisions on where it wants to go.

While White agreed “there is a lot of money in here, it’s still fairly tight.”

He added that Wellington County has a AA rating, which it excellent for a municipality its size.

“It’s up to you folks to decide how this budget will look.”

Councillor Gary Williamson  added “It is fine to defer capital projects. But, having gone through it from the employee side, deferring capital is one of the easiest budget cuts. The problem is that the item deferred whether it is two, five or ten years always costs more money than what you have budgeted for originally.”

“You may be able to reduce your increase immediately, but you are still going to pay for it down the road.”