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Alice

Adventures in Budgetland – Why Is Our Rate So High?

As a ratepayer and new member of the CCHT, I offered to record a video and take notes at the 2017 budget meeting for Hamilton Township on December 15. Having no experience with any meetings such as this, it felt like I was dropped into a rabbit hole and the only way out was to figure out the right questions to ask. Unfortunately these questions just lead to more questions, and I still find myself spinning in the hole.  I would like to share, however, what I have learned with anyone who is interested so others might be spared this same ordeal in the future.

Question #1 – Where are we in the 2017 budget process now?

The first opportunity for citizen input was on November 30. I had expected to see the mayor and the councilors there to hear our concerns, but this did not happen. Instead notes were taken which were to be passed on to our elected officials afterwards. At the draft budget meeting that followed on December 15, little discussion of these notes took place and instead salaries and money for capital and operating expenses were announced and projects to be paid for out of reserves were given the green light. The budget, as expected, was passed on December 20.

Is there any other opportunity for input from the ratepayers? Why is there such a rush to pass the budget for Hamilton Township when other municipalities appear to take much longer to complete the process?

 

Question #2 – How did everyone involved in the process seem to know how much should be set aside for each expense?

The figures being used in the calculations for 2017 were projected from the current budget as of June 30, 2016. As there were no specific figures from the last full year (2015) to compare to, it was difficult for ratepayers like me to figure out where the numbers were coming from. Often a figure of 2%, added to the projected amount for 2016, was conveniently used for the increase for 2017, but this did not hold true in the area of salaries. They ranged from a 2.1 % increase for councilors through to 4.2% for administration and up to a 7.6% increase for firefighters. The rationale for the last one escaped me, but I believe there was one provided. The salaries for policing showed little change as did those for the Roads Department while the Parks and Rec department increased 97.6% due primarily to the addition of a full-time manager instead of a part-time one.

Why were the 2015 figures not provided? How are these percentage increases determined, particularly salaries, and are these increases in line with other municipalities?

Question #3 – Is there a better way to prepare a draft budget that takes into consideration what each department actually spends in the previous year and needs for the upcoming year?

Every department has a budget for operating and capital expenses. Some departments, such as Roads and Parks and Rec, applied for additional money from reserves at the end of the draft budget meeting. This year various departments got approval for new trucks, tractors, storage facilities and other equipment. It would certainly help ratepayers understand the process if, prior to the draft budget meeting, every department provided their actual expenses from the previous year, a list of the main projects for the upcoming year, such as road work and the upgrading of facilities, and an itemized list of their upcoming requests from reserves as well.

Is this too much to ask? Should we wait until more information is provided from the current year or use the figures from the year before or both? What is done in other municipalities?

Question #4 – What is the purpose of a budget?

Apparently the budget is a “living document” which only serves as a guideline for the upcoming year. Here is where the fun starts. With most budgets, if you don’t spend all that you are allotted in the current year, you are unlikely to receive the same amount the following year. (December is likely a big shopping month.) If any department’s projection for the upcoming year falls short of what is needed, it can always apply for funding from reserves later in the year, although the criteria for getting additional money out of reserves is not clear.

With a system like this, where are the incentives to hold the line or serve competing needs equitably?  

Question #5 – How much money is in reserves and what can it be used for?

The target amount to have in reserves for Hamilton Township was stated at the 2017 budget meeting to be around $6.9 million, just shy of one year’s operating budget – a large amount in comparison to the town of Cobourg whose website shows just $2 million in reserves and an operating budget of close to $28 million. The amount in reserves for Hamilton Township was $3,387,273 in 2015, down from $4,095,321 in 2014. The 2016 financial statement is not ready yet, so I don’t know exactly how much money is currently in reserves. What I do know is that for capital expenses in the 2017 budget, $1,189,600 came from reserves and $327,474 was added into the calculation that determined the taxpayers’ levy. For operating expenses, the transfer of $648,830 to reserves also resulted in an increase to the levy.

Couldn’t more of the taxpayers’ money that is currently in reserves have been used to reduce the levy increase and also allocated to additional items that would benefit citizens of the community? Without putting too much of a dent in reserves or raising the levy, couldn’t we have afforded to budget more for counseling services, playgrounds for children in all areas of the township, waterfront improvement and other economic incentives that showcase and protect the environment and attract tourism to the area? Is the difference in how the reserves are used due mainly to a difference in philosophy or transparency or both?

Question #6 – How does this budget affect me as a taxpayer?

The final outcome of the budget determines the levy used to calculate our property tax bill. The budget requirements are divided by the assessed property values to get the levy. This levy figure can range from as low as 1.6% in Cobourg in 2016, for example, to a rate of 2.27% for Hamilton Township in 2017. Taxpayers in Hamilton Township had little time this year to review and respond to this rate generated by the budget, unlike in the town of Cobourg where the budget isn’t passed until April. The final copy of the budget is now posted on the Hamilton Township website. A search will reveal it under Financial Reporting/Budget Presentations. A lower levy would have meant lower taxes. For many in Hamilton Township this would have been a welcome relief due to MPAC recently reassessing the value of many homes at a higher rate than they were originally notified of in May. Mine, for example, went from an increase of 6.5% to 11% spread out over the next four years. Knowing that we are getting an increase in property taxes at a time when we are also seeing soaring hydro prices combined with the effects of the carbon tax on gas and propane, makes this higher levy a difficult pill to swallow for many ratepayers.

With so much in reserves and more thought given to projected increases for the upcoming year, could a more well-rounded budget with a lower levy been possible from our elected officials?

Despite posing all of the above questions and coming to understand the issues a little better as I look for answers, I am still left down in the rabbit hole scratching my head and asking… WHY IS OUR RATE SO HIGH?

FOLLOW UP TO THIS ADVENTURE

My search for an understanding of the budget process didn’t end here. I subsequently found Treasurer Paul Dowber to be very accessible by email. He informed me that “more than three thousand properties were reassessed in Hamilton Township last fall. The change was less than 1% on average…and will be used in the levy calculation as the distribution of the levy requirement will be split among the assessed values of all properties across Hamilton Township and will include the assessed values as of the date that MPAC provided us with the 2017 values (which was in the beginning of December).”

I also found the following website which outlines the 2017 budget for the Town of Cobourg to be very helpful in understanding the budget process. 

http://www.cobourg.ca/en/resources/Finance/2017-Budget-Presentation---Final.pdf

Upon further research I discovered that the Town of Cobourg made some changes to their budget process for 2017 and an outline of this can be found at:

https://cobourginternet.ca/cobourg-news/news-2016/1046-budget-for-2017

The 2017 budget process for the Town of Cobourg was moved forward two months. The draft budget was ready on January 16, 2017 and was made available to the public for input which was considered at a Special Council Budget Session on January 24, 2017. It was then submitted for final approval on January 30, 2017.

By directing “municipal staff to not exceed 2.5% for all service delivery components within all Town departments”, and by including an “extra 1% coming from new assessments”, the proposed levy increase for the Town of Cobourg once again came in at 1.6% for 2017. The above website reported that “if your MPAC property valuation increased by the average amount, then the Cobourg tax bill will increase by about 1.5% which is in line with inflation.

Have the new assessments already been factored into our budget?

Bottom line - How much of an increase can we expect in our tax bill for 2017?

 

 

Alice cat