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After a preliminary look at the facts and figures, Kincardine council
is looking at a possible 6.5-per-cent increase in taxes next year.
At the pre-budget meeting Dec. 3, chaired by deputy mayor Laura Haight, chief
administrative officer John deRosenroll said the financial challenges
facing the municipality in 2010 "are unprecedented and truly reflect a
perfect financial storm as we approach our business plan and budget
exercise." The major problem is a shortfall of about $1.5 million.
To deal with that, deRosenroll suggested staff reduce operating budgets
by 6.5 per cent, saving $621,100; the capital budget will be reduced by
$500,000; and a draft tax rate increase of 6.5 per cent will provide
$344,500. Plus, all carry-overs will be eliminated from the 2009 budget.
He also recommended council consider a policy whereby year-end surpluses
are allocated to the capital reserve fund and year-end deficits are
funded from that fund - basically, putting the municipality at a neutral
starting point every year.
Mayor Larry Kraemer confirmed that the municipality will be losing
$621,100 from the Ontario Municipal Partnership Fund.
Haight asked what the province's annual grant is to the municipality.
"Our annual allowance from the province is about $2.1 million," said
deRosenroll. "It used to be $3 million to $4 million eight to 10 years
ago." He suspects the province is on the road to making municipalities
self-sustaining and eliminating the grants altogether.
When asked where the money came from for the tax mitigation fund,
deRosenroll said it was part of the lump-sum payment from Ontario Power
Generation for hosting the deep geologic repository. The health care
reserve was also set up from that money, he said.
Councillor Ron Hewitt noted that there are two other red flags to
consider: the Harmonized Sales Tax, and that the municipality is on the
hook for one-third funding on all the projects it received grants for
from the provincial and federal governments.
Treasurer Brenda French explained that there are reserves and reserve
funds. Reserves do not have actual money set aside, while reserve funds
(such as for sewer and water services) are supported with money in a
bank account or an investment. She suggested the departments develop a
policy on what amount they are comfortable with having in reserves and
reserve funds.
Councillor Randy Roppel said he realizes there are reserves that the
municipality must have in place and others for specific projects. "My
only concern is that if we have large amounts in reserve, how can we
justify going to the taxpayer with an increase in taxes? Because here we
are sitting on a giant pile of money."
Hewitt said the problem for council is that it has been drawing down its
reserves to pay for operating expenses as well as capital projects over
the past few years. "If we continue, we'll have no reserves."
Mayor Larry Kraemer said the operational funds must come from the cash
flow. "At some point, we need to build reserves, saving for something,
such as firetrucks, a community centre, etc."
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"That's the right thing to do," said councillor Kenneth Craig. "Build
up the reserves and then use them. Having $20 million to $25 million in
reserve funds is suitable. We have been drawing too much from reserves."
"I don't feel we need $17 million in reserves to run this place," argued
Roppel.
French said if you want nothing more than to run the place, then you
lose the flexibility to develop projects and new ideas. "You can keep
tax rates low by using up reserves," she said, "but then there will come
a time when tax rates are going to spike."
Councillor Guy Anderson agreed with having money in reserves to cover
project over-runs and emergencies, and he agreed with Kraemer that the
municipality build up reserves for specific projects. "We should not
have a lot of money in reserve; two years' worth of expenditures is
enough. The department heads can tell us what is needed to run this
municipality for two years."
Councillor Mike Leggett noted that the municipality has achieved a high
level of service, and taxpayers expect that level of service. "At what
point do we reduce the level of service to save money? It's tough to do
that."
Roppel suggested council look at finishing all the projects that are
under way and leave it at that, concentrating on the necessities of
life, such as clean, safe and affordable water.
"Maybe we need to do an exercise in priorities rather than finances,"
said Haight.
"We're living beyond our means," said Roppel. "If the province came here
tomorrow and said the hospital redevelopment was going to be $20
million, where would we get our share of that from?"
"At the beginning of this meeting, you said we had too much in reserves
and now you want to put away more?" asked Haight.
"We don't need that much in reserve to run the municipality," said
Roppel.
Hewitt said council has talked about everything but cutting services.
"Would people rather reduced services and not have a big tax increase?
Or do they want to maintain a high level of service and are they
prepared to pay for it with higher taxes?"
The department heads agreed that they have plenty of projects on the go
which need to be completed in 2010.
On a bright note, Hewitt told council that the Saugeen Valley
Conservation Authority levy increase for next year is going to be
1.5-2%, significantly lower than previous years.
Staff will now put together a draft document in preparation for budget
talks in the new year.
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