Thursday, June 25, 2009

A Budget Only Works if You Follow It

We received two pieces of disturbing financial news at last week’s executive meeting.

The first was that the construction of the soccer centre is over budget. Those who suggested last summer that funds donated over the initial target amount should be kept in reserve for such an eventuality now have "I told you so" rights over those who decided that it was far better to add more features to this facility. And, of course, we don’t know yet how much it will cost to run the place. The result of this – an additional two years of tax payers’ contributions just to pay for construction, until 2015 rather than the original 2013 end date.

Another interesting question about the soccer centre levy: I had a look at my tax notice to see what my donation to the centre will be this year. It went up, I assumed because of reassessment, but then I noticed that the mill rate for that part of my taxes was higher than it was last year; the other mill rates for Municipal Residential and Public School Residential went down. I asked administration why this was, and was told that they decided to round it off – I’m not sure why, or why they rounded it up, rather than down. It’s another example of how this council seems to want to do things secretly, rather than letting people know up front what is happening.

The second piece of bad news, which is potentially more serious, is that last year’s operating costs were more than $400,000 over budget, and administration didn’t bring this to our attention until now. This occurred after a 6% tax increase. This year we have a 0% increase and are now, because of this, effectively in the hole already. Who knows where we’ll be if we continue to spend according to past patterns, including unnecessary items such as gifts for the mayor to give visitors to his office (most recent addition to the gift selection – golf shirts with a $26.95 price tag).

In my opinion, when following a budget, whether for a large entity, such as the city, or a small entity, such as your household, you need to constantly track where the money is going, and when expenditures start to exceed the budget, some adjustment of priorities and reduction of spending needs to happen. If you’re hit with a big increase in your power bill, you’ll likely reduce the money you spend on eating out, for example.

If council had known about this during the year, might we have cut back on everything from new banners to meals for council and committee meetings? If we had known about this shortfall during the budgeting process, would we have given $48,000 to the Golf and Curling Club for their 100th Anniversary? You may remember that, during the final budget meeting, I suggested that we were rushing the process too much, and I was criticized by other members of council for holding things up unnecessarily. In fact, one council member even said that for him, budgeting happened 365 days a year. I’m not sure what goes on in his year-round budgeting, because he appeared to be as surprised as the rest of us.

Instead of taking preventative action, we will deal with this shortfall from last year by depleting our stabilization reserves (after making a first token effort in this year’s budget to replace a small portion of what this council has taken out of these reserves during its term), and we will borrow from an employees’ vested sick leave fund. I have seen no plans for how we will pay that money back, but that will certainly add to future tax burdens.

I’m often asked if I’ve heard of any new contenders for council, and my response is usually "Who would want to take on the job?" Managing a city which has blithely mortgaged a hefty chunk of its future, while increasing its obligations to pay for various facilities that require ever-increasing subsidies, means that whoever ends up on the next city council has inherited one ugly financial mess. To fix that, sadly, will take a lot more than a catchy slogan.

"Let us all be happy and live within our means, even if we have to borrow the money to do it with." – Charles Farrar Browne


paeveryday said...

Lee, how much does the city spend on the new Arts Centre and communiplex every year?

Brent said...

Lee, I have to say i'm concerned as well. I had a look at the financial report and it troubled me to see comments such as..."poor budgeting" next to certain items. These are big oops'