Budget reporting for dummies

Jeff Green | May 11, 2016

Over the past few months I have been asked a couple of times to make sure that I let our readers know either that the average ratepayer will pay $34 more per $150,000 in assessment in one township; or that the tax rate increase is 0.03% in another township; or that the increase in another budget, when weighed against growth, is only 2%.

As the dummy in this scenario I have decided to maintain my practice of recent years, to focus on numbers that I understand, on the thinking that if I at least understand something, maybe the readers will be able to understand what I am writing. That presupposes that I will make myself understood - not always a likely possibility, I know.

What I do understand is that municipalities deliver services, and once a year they get each of their department heads to submit a budget, an estimate of what it will cost to run their own operation for the year. Municipalities also collect money for services that they do not deliver directly but must pay for, such as policing. They also receive money from other levels of government under ongoing and one-time granting programs. This all comes together in a number, the “levy to ratepayers”, which is the total amount that will be collected from all of the property owners in a given jurisdiction.

When you compare the 2016 “levy” with the 2015 “levy” you come up with the tax increase. In South Frontenac, whose budget was completed back in December, the increase was $1 million, or 6.66%. In Central Frontenac, the increase was $600,000, or 9.3%. In North Frontenac, the increase was $163,000, or 2.98%, and in Addington Highlands it was $138,000, or 5.58%.

While those numbers are real, they do not compare well with each other, because each township faces different sets of circumstances, and also each township has different amounts of money in reserve funds for future needs.

Translating those global numbers into individual tax bills is not straightforward. We pay taxes based on the assessed value of our properties, and those assessments are done by the Municipal Property Assessment Corporation (MPAC). Assessments go up when properties are improved, and they also tend to go up just about every year as MPAC accounts for the gradual increase in property values over time. As assessments go up, the township receives more money from the ratepayers even if they apply the same tax rate.

Therefore, while the levy to ratepayers may go up 6% or more, the tax rate may stay the same. Some municipal officials and politicians have been targeting the tax rate in budgeting, instead of just looking at spending from year to year, telling themselves and the ratepayers that the “tax rate is flat” or the “tax rate is up by the rate of inflation”.

The problem is that ratepayers pay cash, not tax rates, and if more cash is needed, one way or another more tax is paid.

Also, when assessments are brought into the equation, each property goes up at its own rate, so while I might be impacted in a minimal way for my residential property on a back road, my neighbour who lives on a lake might face a major increase.

There is no way to realistically talk about the impacts of tax increases on individuals, and even taking an average does little good.

Municipal politicians do not want to increase taxes. However, they also need to make sure the township they serve has enough money to take care of its responsibilities each year and over the long term.

That means tax increases in most years. All we ask is for them to be honest with themselves and with us as they work on their budgets. Being honest requires that they make sure that when they talk about spending, they talk only about spending, and they compare spending with the only thing they can compare it with, spending in the previous year.

There is no other way around it. If it costs $1 million to clear snow one year and a $1.1 million the next year, $100,000 more needs to be collected, and one way or another the taxpayers are going to have to pay that extra money.

We pay municipal politicians, rather poorly, to make decisions about how to spend our money. We ask that they be careful, and that they be honest about that spending. If we don't like how they spend it, we can vote them out. But if we do that, we need to find others in our midst to take their place.