This week Council began the lengthy process of establishing the 2016 Operating and Capital Budgets as they plowed through the preliminary draft provided by Director of Finance Kimberley Pope. This report is a starting point only, and assumes no changes to service levels currently provided by the Township.
After three years of substantial increases in the residential tax levy to eliminate the township’s dependency on OLG Revenues, 2016 is the first budget where the township is self-funding. This has been achieved in three phases. In 2013, a 10% rate increase removed the OLG funds from the operating budget, which had been supplementing tax revenues and prior to 2011 had been the single source of savings for future asset replacement. In 2014, another 10% tax increase replaced the majority of OLG revenue from the capital budget. Last year a further 5% increase allowed the township to fund both capital and operating expenses independent of this revenue, which was redirected to the capital asset replacement reserves. According to Ms. Pope, this reserve fund will reach approximately ___ at the end of 2015, which are earmarked to replace our aging infrastructure.
With an Operating Budget of $6.8 million, up marginally from last year’s $6.7 million, and a Capital Budget of $4.1 million, this preliminary draft proposes a 2.25% increase in the municipal tax levy for 2016. Broadly speaking, this increase can be explained by a 1% rate of inflation and the loss of $73,000 in funding from the Ontario Municipal Partnership Fund (OMPF). Ms. Pope explained that each 1% increase in the municipal tax rate generates an additional $63,000 in revenue.
Township staff has worked diligently to find economies in their operations with some success in order to offset rising costs such as hydro which are beyond their control. Efforts include reliance on qualified internal staff across departmental lines to reduce contracted expenses, replacing light fixtures with LED ones and balancing user fees with expenses.
The draft Capital budget was presented in two parts: the prioritized needed items and a “wish list”. Ms. Pope indicated to Council members that in order to reach the proposed 2.25% rate increase, a further $60,000 reduction in capital expenditures will be required. This portion of the budget includes the initial payment of $100,770 for the Township’s portion of the Millbrook Dam expense. This payment will be followed in years 2, 3 and 4 by annual installments of $251,880 with the final payment of $151,016 occurring in 2020. The $4.1 million capital budget is funded by a roll-over of unspent budgeted capital expenses from 2015, 38% from Casino-funded reserves, 19% from municipal reserves and 36% from the 2016 tax levy.
At the moment, the Township owes $4.9 million in 10 year debentures to Ontario Infrastructure Land Corporation (OILC), an amount that is expected to peak at ___, debt which has been incurred to fund capital expenditures for municipal water and waste water services, representing 65% of the Township’s debt capacity.
While no increase is welcome, due to prudent financial management the Township’s finances are now in a healthy position. The City of Kawartha Lakes are at the early stages of addressing their own financial pressures, and have approved a rate increase of 8.15% for their residents after their staff recommended a 12.33% increase, to address years of relying on reserves and debt to achieve artificially low rate increases. They are also reducing the number of arenas and municipal halls in the municipality.
The public will have the opportunity to provide input to Council at a Public Budget Meeting to be held the evening of February 1st. Budget approval is scheduled for the February 15 Council Meeting. Full budget documents are available on line or at the Township office.