It’s All About the Money


Tax cartoonAlmost every council decision comes with the subtext question, “Can we afford it?” Everything not procedural or administrative is usually about the cost. Who pays, whose budget does it come from, is the money in reserves, can we get funding, can we use development charges, will it raise taxes, are there other options, are there partnerships – all these questions run through most discussions.

Will it raise taxes? That’s crucial. No one wants to pay more.

The economic path is simple: property owners pay taxes, municipalities spend them. Almost all of the money a municipality gets comes from the taxpayers; a small amount comes from service users (people use facilities, rent venues, pay parking fees, dog licences, etc.) and some comes from grants from higher-tier governments.

It’s council’s responsibility to ensure that the money is spent wisely.

On June 10, council made a decision on how to spend the dividend from the sale of 50% of our electrical utility – Collus. That June 10 agenda was accompanied by a report by the treasurer that had been presented previously, on Feb. 25. It documented the responses from the public on the uses of these funds, and included comment on some of them.

The total amount of money available from that sale was approximately $14.45 million. The  town has on hand $12.28 million in cash and $1.71 in a promissory note ($13.99M total).

Council voted 8-1 to use the funds to pay for the new recreational facilities (approx. $9.8 M) and put the rest into a reserve to upgrade Hume Street (the latter vote was unanimous).

Any other decision would have meant raising taxes in 2014 to cover the costs of the rec facilities. It really was all about the taxes.

One of the public suggestions was to decrease the existing debt. The treasurer pointed out that, like a mortgage, there are high penalties with paying off a debenture early, so there are no real savings from doing so. And not all debts can be paid down sooner; some are locked in.

Only $10.76M of our outstanding debt is applicable for retirement, but the cost to pay it off early was 20% – $12.63M total.

That would not achieve anything, because then the town would then have to borrow at least another $10M to pay for the new rec facilities, basically just trading one debt for another. Any tax savings ($418K per year) would just go back into paying for the new debt.

That didn’t make economic sense.

Of the $41 million debt this council inherited at the start of its term, we have reduced it to $37 million without raising taxes or accumulating significant new debt. The debt is being managed by close oversight of costs, a fiscally conservative approach to new projects, and staff’s support in keeping budgets in line. I, and I believe most of my colleagues at the table, believe we have been fiscally very responsible this term.

Another recommendation was for harbour enhancements. This was actually several related but distinct ideas, not a single project. Our waterfront is important, and improvement should not be dependent on a single funding opportunity. It should be an ongoing part of our economic development strategy, not simply a recreational directive.

Council has already approved several upgrades and enhancements, and is working towards a comprehensive master plan to help it develop. We have approved spending to move the docks and do other improvements.

The suggestion we could purchase a couple of the waterfront lots ($2.9m) is interesting, but as I understand, the undeveloped property is not being sold piecemeal. It is being offered as a single entity. We could consider expropriation, but that also involves legal costs. But at present we have no plan, even a proposal, of what we would do with that property.

Buying or expropriating it should, I believe, wait until we have a comprehensive plan to develop those parcels should they become public space. However, while I am not opposed to debating either option (if we can afford them), once we decide what to do with it, I think it would be better for the town if it were privately developed and a source of tax revenue.

Repairing and enhancing the terminal building – another suggestion – is, as the treasurer noted, “moot” depending on the potential sale of that building.

Other suggestions were all good or interesting ideas. However, many of them are already in progress or being studied, such as upgrading Sunset Point Park and refurbishing the Eddie Bush Arena. Supporting arts and culture we already do (although I wish we could support events more). Constructing a theatre is interesting, but should it be a public space? Or should we look at opportunities to support a private proposal?

The largest number of requests came in a petition to upgrade Hume Street. While that is actually underway (the engineering design work will be completed this year, the utilities will be moved in 2014, and repaving will be done in 2015), council recognized the importance of the Hume Street corridors. We needed to move this ahead and mitigate the eventual costs, which we chose to do by using approximately a third of the dividend funds.

So council did listen to the public. Clearly not every request could be accommodated. So we chose the options we considered best. Making those decisions is why we are elected.

But we also listened to a larger public which voted us into office. Most of this council was elected on a promise to control costs and keep taxes from escalating. And this decision was keeping that promise.

For myself, and I believe the majority of council, the decision to approve the new recreational facilities (the arena in Central Park and centennial Pool) was made because we were assured that, using the Collus funds, it would be a tax-neutral project. I  doubt I would have voted for those facilities without having that option.

The only other alternative being proposed was a $35M multi-use facility.*

Even had we used all of the Collus funds for that project (and there was, I believe from discussions we had, significant opposition to using it all for any single project), it would still have left more than $20M to borrow. And, of course, that would mean raising taxes. There was simply no support at the table for that.

So the recent decision to approve using the funds to pay for the new rec facilities and keep them tax-neutral should not have surprised anyone. After all, the majority of council has been saying they favoured that option since the decision to build the facilities was made in August, 2012. And we’ve been saying the past three budgets that we didn’t want to raise taxes.

In the end, it was all about the taxes. Everyone at the table understood that. The decision was made by the majority of council NOT to raise them.

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* $35,251,965.11 according to the final report for the Central Park Redevelopment Project, page  37. On page 36, it notes in the conclusions, “The use of taxes to pay for the development of this project is considered by most to be reasonable provided that there is perceived value for the money.”