Friday, February 14, 2014

Springwater 2014 Budget - Disaster is Looming with this "Vote Seeking Budget"

The township held a public meeting Feb 10th to discuss and recommend passing its 2014 operating and capital budget on Feb 25th at a special public meeting of council. It appears that this council, especially the senior members, have become a little less committed to the importance of tight fiscal management than they were when first elected. The mayor will tell you the delay in tabling the budget was caused by the departure of the former CFO and the new CFO only came on board recently. God forbid if we lose the director of public works. Does that mean we won’t get our roads plowed until a new director is hired?

The progressive vision shown in the budget of 2011, the first fiscal year of this council’s mandate, disappeared in 2012 and 2013 and has fallen back into the old ways of doing things in the 2014 budget. They took last year’s budget, fiddled some numbers, threw in the odd bone that appears like a saving and added a small tax increase so no one will really notice and get upset. Creative thinking like giving the lower wage employees higher percentage (but not more actual dollars) than higher paid senior staff was abandoned after the first year. The argument was that to keep senior staff we must pay more money doesn’t seem to work as those are the people that actually left when they got raises and re-slotted to premium pay levels. It certainly helped pump up their resumes. Even things like the way they did road maintenance budgeting and reducing some vehicles and routes in the 2011 budget disappeared in 2012 and 2013 and is not even on the radar in the 2014 budget. When you dig a little deeper this budget will saddle the next council with some disturbing trends. There are no new ideas or attempts to provide more service for less. The good news in the next tax year is that overall taxes will only increase 1.5%. If you plan to leave the township in the next couple of years you are in good shape. If you plan to stay like I do, we are in big trouble. The best analogy I heard was comparing it to our landscape in Springwater this winter. After a snowfall, everything looks beautiful even the manure piles are covered with snow. The budgeting and fiscal approach with this council is definitely a very large manure pile waiting for a spring thaw to expose it.

There was a good showing of the ratepayers at this meeting and they focused on a number of areas that should be of concern. Most people are worried about two key factors. The debt will grow to $11M ($1300 for every household) from the existing $4.5M ($520 for every household) today in the next 3years, obligatory reserves of about $5M will disappear and we will be at around 90% of our debt capacity. That is a negative dollar swing of $11.5M by 2016. Doesn’t sound too rosy to me.

Those on full municipal services will see their water rates increase about 3.4% next year and I believe will be accelerated as about 15% of operating costs are actually coming from reserves that are supposed to be set aside for future repairs. In the case of wastewater the rate will increase 3% but again may be short term as 25% of the operating budget is coming from reserves.

During the public comment section I suggested that if I were running the corporation I would be looking at carving at least $2M out of the budget by focusing on the three large expenditure areas, capital, contracting services and salaries and benefits. If done with the skill of a surgeon the budget could be brought into control. Councillor Webster in his usual fashion did a little rant to suggest that if we don’t have confidence in the staff we might as well send them all home and come in and run the corporation. Someone from the gallery said that might not be a bad idea. That’s not the point and don’t agree as for the most part we have good staff at Springwater. The question should be “what incentive has this council given to the senior staff to actually reduce budgets”? This council gave the direction last July to keep increases to less than 2.5%. Staff did that. I am sure if they had been told we want to see an overall reduction of 2% they would have come back with a solution. I don’t hold staff responsible for this budget I hold council responsible. The council thinks in the old way, so of course direction is given the way it has been for the last 20 years.

Deputy Mayor McLean and I have two opposing opinions of the actual operating budget. I told him at the end of the meeting that the operating budget is in a deficit position. In other words we are spending more money than actually comes in each year. The budget has expenditures of $25.9M. My calculations are that we have real income from Taxes, user fees and investment income of about $17M when you exclude long term debt and transfers from reserves. I see debt and reserves as using our credit card and drawing down our savings to pay the regular bills which means at some point we will have no savings and tap out our credit cards. So I believe the 2014 budget has an operating deficit of $8.8M. It’s all in the way you read the numbers. I am concerned.

The CFO commented that debt is a way of building infrastructure and spreading it out over a period of time to the benefit of future residents. Being 67, I remember when you had to have a 25% down payment to buy a house; you saved up for your first car, TV, etc. We should be building reserves to buy future infrastructure, not debt.

My closing comment last night was that I wish our staff and council would look at what is happening in Windsor. It is a depressed area with high unemployment but guess what? By taking a surgical approach to all aspects of its budget, it has had no tax increases in 6 years, it has reduced its debt by 50%, it has doubled its reserves and also built new infrastructure. In business we call that benchmarking.

It’s your budget and if you don’t put pressure on your council to make a dramatic change, this will be the start of a big hole we are digging fiscally.

It was apparent that Hanna, McConkey and Ritchie were concerned about the public comments and asked for another full discussion on the matter at a meeting before passing the budget on Feb 25th which is the scheduled date for approval. Collins, McLean, Webster and Clement want to keep the 25th as the approval date so they can carry the budget as it is. If that date is delayed and it happens in March, one member of the council that will support it will be in Florida and because it would be a tied vote, the motion would be defeated. There is no reason to rush this important budget except for political motivation. McConkey’s motion to have another meeting was passed but I believe it will be rushed and made as inconvenient as possible since, like many of us, she has a job to go to and getting time off is not as easy as it used to be.

Read the budget information on the township website or pick up a copy at the township office and see what you think. You and I are the ones paying.

In closing this is an election year budget with a low tax increase to avoid an unfavourable impression on those members of this council that will run again.