The 2% Budget

Dec 02, 2015

This week South Frontenac passed their 2016 budget with a 2.00% increase in taxes.

That sounds pretty reasonable. But when you look at the budget summary you see some other numbers.

The first number that I look at with these budgets is the “levy to ratepayers”. That is the total amount of money that will be collected from the ratepayers

In South Frontenac the number is about $16.5 million, up from about $15.5 million in 2015, an increase of 6.66%.

How then, do we get 2.00% A 2.00 increase in the levy to ratepayers would mean a budget of $15.5 million, $700,000 less than the one that was approved on Tuesday night.

That extra money is going to come from growth. South Frontenac's finance department calculates that there has been about 4.4% assessment growth between 2015 and 2016.

The finance department is cashing in on new assessment, either from brand new construction that is being assessed for the first time, or re-assessments due to renovations and expansions of existing properties.

On the surface it is legitimate to take these things into account. New homes and new people moving into a township lead to increased demand for services, and ultimately more costs for the township.

However the cost don't necessarily hit right away, or ever in some cases.

The increase in assessment does not lead to an increase in the cost of running the township office, the road budget does not have to go up, and waste management is paid for by a separate levy by household. When new subdivisions are built the roads that are turned over are in prefect shape, they don't need maintenance other than snow clearing, for 10 or more years.

While it is basically legitimate to cash in on growth when calculating taxation, the fact is that the increased assessment does not result directly in added costs this year. What these increases do, however, is create budgetary space for staff.

Instead of living with a cost of living increase and little more, they are able to do more; fix more roads, buy more vehicles, improve ball-fields, build fire halls, while still saying they have kept to the budgetary goal set for them by Council.

If Council, however, had indicated they want staff to budget directly to the levy and keep to 2%, South Frontenac staff would have had to keep their budget ask to $15.8 million.

They would have had $700,000 less to spend.

It is worth noting that smaller, slower growing township's such as North and Central Frontenac, who will not complete their budgets until the new year, will not have the same kind of luxury that South Frotenac enjoys.

Particularly in the case of North Frontenac, they are faced with debilitating cost increases in policing this year and for three more years, have much less assessment growth to use as a buffer, and do not have the kinds of economy of scale that South Frontenac enjoys.

It would be unfair to say, if and when they bring in increases that are well above 2%, that they should take some lessons in management from the tough, frugal South Frontenac politicians.

At that time, we should all remember that in South Frontenac, 6.66% ($1 million) more was taken in through taxation in 2016 than it was in 2015.