2022 Budget Preview
By John Swartz
Orillia Council begins the 2022 budget meetings Monday at 1 p.m. The deliberations are spread over 6 dates with today’s being an overview of the process and very little on the decision making front.
Annual budget decisions are the most important a council can make. While it may seem decisions like whether or not to put an all-way stop at the crest of the steepest hill in town are vitally important, being able to pay for all the things a municipality does arguably comes before others on the tree of decision making decisions. Financial planning and management of budgets are also the most important function of the bureaucracy. Ultimately these decisions affect the amount of your tax bill.
The core of the work happens with two full-day meetings November 17 and 18 for operating budget requests and again November 23 and 24 for capital budget requests. These are all committee meetings similar to other committee meetings any other time of the year where those involved with each department or council committee request are present so councillors can hear justifications and ask questions. December 6 is when council meets formally to ratify their committee decisions and as has happened occasionally in other years, second guess and change those decisions.
Budget Referrals
Today, there are 5 reports to dispose of. Three of those were referred to budget committee from council meetings earlier this year and will have dollar implications on the budget depending on how council votes. These are not the only requests council forwarded to budget, they were just late additions from October to the list and since the budget preparation process essentially starts the day after the last budget is approved, there was no time to include them into the formally established process.
The first of those reports is regarding Soldiers’ Memorial Hospital’s quest to rebuild. Part of the cost of funding new construction will come from the community and a part of that from the municipality. Today council may decide to commit some amount of the 2022 budget to a reserve account for a new hospital. Staff has not recommended an amount.
Mariposa House Hospice asked council to consider contributing $50,000 to their operating budget annually for two years. They argued, while most of their budget comes from provincial funding, the portion resulting from their own fundraising efforts was not adequate because of the pandemic. They anticipate they will be able to resume adequate fundraising at some point and believe they will only need help for two years. Staff made no recommendation, except to receive as information This usually means do nothing, but at budget it’s a case of leaving the decision to budget funds and how much up to council.
The third of the money implicating reports is about the Couchiching Golf and Country Club’s request for $5,000 annually for the use of the toboggan hill. The agreement with the City expires at the end of this month and includes a budget of $5,000 for installing fencing and signs, periodic inspections and garbage can placement and pickup.
Staff’s recommendation is to receive, and they have an option to renew with some changes to the core agreement for upgraded signs and inspections plus the $5,000 fee, all of which will increase the budget to $12,000 annually. A new agreement would also require the club to buy the fencing and install it, which the City has been responsible for previously. Staff estimate fencing will cost $2,000.
The other two reports are the budget overview and asset accounting. The latter includes information on the value of assets the City owns and obligations regarding retirement benefits and costs for closing scheduled closing of parts of the landfill. Provincial regulation requires councils are informed of changes of value of assets annually, but does not require funding decisions. This is because some expenditures won’t occur for many years.
On primary assets (not retirements and landfill) a depreciation value over the life of the asset is reported as a cost. In 2021 that amount was $18.6 million and estimated to be $19.9 million in 2022. This is balanced by spending on new and renewal projects like rebuilding Front Street. The City’s 2021 budget for capital projects was $28 million. Think of it as knowing the replacement costs of assets and at this time the City is spending more than devaluation of its assets to replace and upgrade.
The City covers retirement benefits on an annual basis as they are due, rather than setting money aside for future obligations. Staff estimate the 2022 amount will be $7.8 million. In reality, employee benefits are not a capital expense and come from the operating budget, but future obligations are noted here.
The eventual closing of the City’s landfill is estimated to be $6.6 million over time to the planned closing in 2064. The City has a reserve to cover this and it had a balance of $228,300 in 2020. This year the City put $467,000 into the reserve. Staff say the level of setting money aside has been short of what is required.
The report most useful to taxpayers is the overview. This is where details of what next year’s tax bill are revealed based on targets staff outlines to council. Most of the budget proposal will not change from what is presented; though staff always sets aside some specific budget requests (new services, increased services and new purchases) for council to decide. In reality dollar amounts of those decisions on the operating budget are small amounting to 1% of the budget.
Operating Budget
The bottom line is staff has calculated a 3.4% increase to the 2021 budget of $64,253,521, which will translate accordingly to individual tax bills. The operating budget includes a 2% increase overall – just to maintain service levels as they currently are. 1%, equal to $637,782, results from adding back in the amount taken in 2021 to keep the budget to a 0% increase because of the pandemic. In simple terms, the City took money from the tax rate stabilization reserve to pay for 1% of the budget approved last year. The increase is still there and part of the 2022 budget and Is now part of the regular funding process (i.e. it’s part of the tax levy). The remaining .5% of the increase is accounting for a reduction in interest income from the City’s investments because of falling interest rates.
The factors with the most effect on the budget are anticipated increases to insurance costs (+ 12%), energy costs (+3.7%) and wages (+1.85%). Wage increases are directly tied to the province raising the minimum wage and staff say this will amount to $85,000 additional expense.
Also affecting the increase are budgets submitted by the county ($543,000 more than 2021) and the OPP ($157,000 more).
Capital Budget
The total value of the 2022 capital budget is $41.2 million for 86 projects. Not all of that comes from the tax levy, most funding comes from other levels of government, or from reserves like development charges. The amount charged to the tax levy in 2022 is $2 million. Major projects to happen are the $17.8 million, phase 2 of the Centennial Drive reconstruction project (of which staff recommend council borrow $10.7 million through debentures); West Street Reconstruction ($5.8 million); Bayview pumping station upgrades ($3.5 million and almost $1 million for road resurfacing.
If council makes no change to the projected increase of 3.4%, the increase on tax bills will be $42 per $100,000 of assessed property value.
The good news is the province suspended application of re-assessments to property values until 2023. They valuations will be the same as assessed last year and are based on 2016 assessments – which, judging by the state of the real estate market, will be a rude awakening for property owners when new assessments are applied, unless the province establishes some mitigating measures.
This budget meeting is livestreamed on the City’s Youtube channel today at 1 p.m. Links to the balance of the budget meetings will be posted here on the days they are to occur.
(Photos by Swartz – SUNonline/Orillia)
