The challenges of budget reporting

Jeff Green | Apr 08, 2010

Editorial by Jeff Green

Note on budget reporting – Local councils will be finalizing their 2010 budgets over the next month.

Covering budget debates presents a challenge because the different townships have different ways of calculating their budgets. From the point of view of the public the main concern is, how much will we have to pay, and what are we getting for our money?

One of the things we can look at is the total amount a given township is planning to spend in 2010 as compared to 2009.

But total spending will alter if that township has received major grants from the province in one year and not in another year, so comparing total expenditures from one year to the next can be misleading, and it doesn't tell us how much we will have to pay in municipal taxes.

We could look at changes to the municipal tax rate, which is the amount that is charged to us for every $100,000 that our properties are assessed for. However this does not account for property assessment increases. The average property has had its assessment raised by 10% per year by the Municipal Property Assessment Corporation (MPAC).

While some properties have greater increases than that and some less, on a global level if the local councils bring in budgets with a 0% assessment increase, they will actually be raising 10% more money from local taxes, and on average each taxpayer will be facing a 10% increase.

So, in our reporting of local budgets, the News has and will continue to focus on the “levy to ratepayers”, which is the total amount of money to be raised by taxation, as compared to 2009. So, if South Frontenac raised $10 million in 2009 for their own use, and will be levying $10.5 million in 2010, we can say that municipal taxes are up by 5%.

While this information, on its own, won't tell an individual reader exactly how much more they will have to pay, it will indicate if the individual townships are able to maintain an equilibrium between services delivered and the cost to deliver them.

So, if a given township requires an extra 2%, or 5%, or 10% in taxpayers` money, the council of that township should be able to show why that is the case.

It could be that labour costs or material costs have gone up; it could be that costs related to satisfying provincial regulations have gone up; it could be that a piece of equipment needs to be purchased and the cost is higher than expected; it could be that the council of the township would like to extend their services in a certain direction, or improve the roads and bridges. There are many reasons why municipal budgets go up. As taxpayers it is probably not reasonable for us to demand that taxes never go up. But it is reasonable for the public to expect that their elected council can explain why this is happening.

A further complication for local municipalities is that the bill that we receive from them includes county taxes and education taxes as well as their own municipal levy.

The local municipalities use a little more than half of the money they collect from us; the rest is transferred on.

This year the education and county levels are pretty flat, and it is the local municipal levies that will determine whether taxes are going up.

It is worth noting that urban municipalities congratulate themselves when they keep tax increases to 5%, whereas the goal for our municipalities is closer to 0% or 2%.

However, urban municipalities deliver services rural municipalities could not afford to deliver, and they can do that partly because of economies of scale, and partly because they have significant levels of commercial taxation to draw upon, whereas our rural municipalities have very little in the way of commercial real estate.