No headway as council works to trim fat from 2012 budget

By Andrew Bennett

Council grappled with the question of appropriate levels of reserves for future projects at Monday evening's committee-of-the-whole meeting, but no decisions were made except to "approve" staff's report on the 2012 financial plan. Further discussion and decisions are deferred until a subsequent committee meeting.

 

Last year, roughly $1.87 million in Rosslanders' taxes were needed to operate the city. This does not reflect the total revenues and expenses, however, just taxes. Furthermore, some $1.23 million of tax money was put aside for projects, financing, and reserves.

 

Some councillors were concerned that 2011 tax revenue is almost double what it was in 2002, with an average increase of 9.7 per cent each year over the last 9 years, most of which is due to an increasing tax burden on the average taxpayer, although some is also due to development.

 

Coun. Cary Fisher, in an attempt to cut fat in the upcoming budget, doggedly pursued an answer to his question: "What is the number that we choose, or the town chooses, to be putting into reserves to have available for projects in the future, to make us viable as a community?"

 

"I think there's a level of complacency that people have with regards to understanding the financial plan," Fisher said. "It's complicated, so people don't come out and look at it. It's important for us to explain in some amount of detail what kind of reserves we're putting away and why we're putting it away.”

 

Fisher said he doesn’t think the public “really understands what those monies are,” over and above “general expenses,” for example operations, planning, or administration.

 

"I understand we have $40 million in projects that are part of this report," he continued. "I'm sure that reserve number is accurate, but I think it's too high. On every $100,000 in assessed value, $215 is going to some reserve for future projects. Does that line up with what the plan is for the next 40 to 50 years? I'd suggest we probably have a number that's a bit too high."

 

CAO Victor Kumar said that "not all the $1.2 million goes into reserves." Much of it is used to finance previously-incurred debts, for example. When Fisher pressed for an exact figure on what a community Rossland's size should put into reserves, Kumar responded with some rules of thumb.

 

"Each $1 million in infrastructure improvement requires an annual reserve for the payment plan of $100,000 per year for 15 years," he said. Fifteen years is a rough estimate for the average expected lifespan of infrastructure, pavement for example. Furthermore, he estimated that having the ability to finance $7 million in upgrades—$700,000 in reserves per year—is important for roads ($300,000), walls, sidewalks, and stairs ($200,000) and buildings ($200,000). 

 

This figure of $700,000 in reserves per year also exceeds certain minimums Kumar recommended, such as $500,000 in available cash flow at any one time and $400,000 on hand for snow plow problems.

 

For Fisher and others on council, the question remained: why $1.2 million if $700,000 is enough? 

 

Fisher said, "Now we have to make some really prudent decisions. How much do we continue to tax and put in projects in reserves? And whether we accelerate projects or decelerate them? To me that's not clear. All the numbers are clear, but the plan is not clear."

 

Kumar asserted that, if anything, the number may be too low. "We're committing most of the $1.2 million to do projects right away," he said, "and now we're committing to more projects to be done."

 

For example, those following the recent swimming pool controversy should note that $2.5 million in taxes is currently in the draft 2012 financial plan for “swimming pool upgrades.” This amount is required to be there ever since council decided to apply for a grant for between $2.5 and $4 million for a $5 million four season pool.

 

Later Coun. Jill Spearn said, "If costs keep increasing by 2 per cent generally, doesn't it make sense to raise taxes? It makes me nervous if we don't have enough money. I would prefer to have enough money in reserves and be in a savvy position for infrastructure improvements in the future."

 

Fisher countered, "We've increased taxes here over 9 per cent on average every year for 9 years. The nominal tax rate has gone up. It doesn't matter about mill rates or any of that garbage: it's what comes out of your wallet that matters."

 

Later a different approach to cutting the fat was taken, with Fisher and Coun. Kathy Moore noting that the city has come in consistently under budget, for example $3.27 million was spent in 2011 when $3.52 million was collected. But still the plan for 2012 is to tax $3.65 million.

 

"Can we tighten up that 'fudge factor' so we don't have to tax so much, since were consistently performing better than the plan?" Moore asked. 

 

Kumar said there are “still some things we haven't done," and argued that the extra money was necessary as a safety net. He also said the excess "does not go into the $1.2 million" for future projects and reserves.

 

This did not sit well with Fisher. "Where does the difference [between $3.2 and $3.6 million] go?" he asked.

 

Finance manager Deb Timm later explained that much of the difference has been going towards building up an equipment reserve.

 

"I don't feel comfortable calling this a plan at the moment," Fisher said. "With the amount of additional taxation that goes to projects and financing or reserves, that should be a fixed number at the outset of the year that we're targeting, specifically for things within the context of a plan. Not, 'it goes to projects and eventually we'll do them.'”

 

“I was going to use the term 'coming clean,' but I don't think it's coming clean, since it's all audited, it's all there and everyone can see it,” Fisher continued. “But we seem to be putting money away, and we need to be targeting what we're putting it away for."

 

"But we are," Timm objected, referring to "all the details" towards the end of the financial plan where Timm has laid out an exhaustive list of future projects in a long term plan.

 

Fisher acknowledged this section, but reiterated, "Are we specifically saying that $1.2 million is the level that is required? Or is it $1.8 million, or is it $700,000?" 

 

If this is targeted correctly, he asked, why also tax seven per cent above actual expenses? Can the city be managed properly with only an additional two or three per cent built in? 

 

"Or does it need to be six or seven per cent over?” he asked. “If we move the money to the future, to some kind of reserves, I'm okay with it either way, so long as it's a policy that [council] can endorse."

 

"We budget for what we think it's going to cost us," Timm said, "and all through the year we try and save money. But we don't have a target."

 

"We did the jobs, we simply came under," Kumar said.

 

"I'm not questioning anybody's integrity," Fisher clarified. "In the planning process, if you have seven years of data, and each year you're coming in consistently under budget, there's something that needs to be adjusted there. We're the ones who have to explain it out on the street."

 

"I think [the level of taxation] is more accurate now to what [expenses] will actually be in 2012," Timm concluded.

 

Council approved the report from city staff, but have yet to make any recommendations for the 2012 budget besides granting funding requests to community groups.