Council begins budget planning, and not a moment too soon
CAO Cecile Arnott brought her preliminary budget presentation to council’s committee-of-the-whole (COW) on Tuesday afternoon, offering councillors a first taste of what the 2013 financial plan might look like when it gets passed before the May 15 filing deadline.
The next budget COW meeting has been scheduled for May 1 at 5:30 p.m., to discuss in more depth the half million dollars Rossland pays each year into community groups and social programs.
Arnott said the first meeting’s purpose was “high level strategic planning.” “We’ve been working away as management trying to keep cost down,” she said, “knowing the city is facing a lot of issues.”
After plugging the numbers into a new database Arnott and her administration team have put together, she concluded, “It’s not a bad news story.”
In a nutshell, the preliminary budget balances without major cuts under the following assumptions: 1) taxes are raised by two per cent, increasing city revenue by about $70,000, 2) water and sewer fees are increased by two per cent, raising approximately $20,000, 3) external sources of revenue, such as grants, are not included for now, 4) debt financing for the Columbia-Washington project is not included for now, and 5) other pending projects, such as downtown broadband internet, are not included for now.
CAO Arnott’s assessment
“For the end of this year, 2013, staff’s recommendation is that we fix the outstanding issues we’ve been working on, and then review goals and objectives in June to prepare for next year,” Arnott said.
In other words, given the extreme time constraints council faces, with the filing deadline now less than three weeks away, there is no room for broader strategic planning. Several councillors have consistently called for a process of “big picture” budget planning for more than a year, but the departure of the CFO and CAO last year, the need for new CAO/CFO Arnott to have time to learn the city’s systems, and Arnott’s absence from the city for January and February this year at a critical time for municipal budget planning, together eliminated the possibility for such a process.
“We need to regroup and optimize the software, little things like that,” she said, and more importantly to “replenish reserves, and borrow for Columbia-Washington.” The city’s reserves have been depleted to pay for the Columbia-Washington downtown renovation project, which has a price tag for the city of roughly $4 million.
Although the city ran an “Alternative Approval Process” prior to the project to allow for up to $6 million in long term borrowing, the AAP was not administered correctly and the province annulled the resulting permission. An AAP requires a polling station at City Hall to be open for at least 30 days to allow citizens to come to vote against the borrowing. Permission is denied if more than 10 per cent of the population votes against the proposal. Although very few people voted against the AAP, the polling booth was shut down too early—city staff have reported it was too early by one day, but other reports suggest the booth was shut down four days too soon.
Looking beyond May 15, Arnott recommended the city do a thorough “Asset Management Investment Plan,” a detailed planning tool that she recently completed in the capacity of CFO for the City of Grand Forks. “We need council policy on how to move forward, to start a preventative maintenance program, to establish a debt policy for the right mix of debt-to-reserves, and to ask, what kind of strategic funding does the city need?”
Within this broader framework, for example, the public works manager plans to do an audit on the city’s retaining walls. “It’s important to know when you’re going to fix them before they crumble,” Arnott said.
She also pointed to “high level for social planning” to have policies on recreation, interest groups, community supports, permissive tax exemptions, and so forth.
“Between now and the end of the year, that’s a lot to do,” Arnott said. “If we can accomplish this and have a really sustainable plan going forward, then we can feel really good about doing the right thing.”
Water and sewer fees will likely go up
Arnott recommended that water and sewer user fees increase by two per cent over all, as will be reflected by a four per cent increase halfway through this year.
“Operating costs have gone up, and a maintenance program needs to start,” Arnott explained. She also alluded to “legal issues that we have to deal with.”
Manager Darrin Albo of public works said that hydrants technically need to be torn down and rebuilt annually, according to manufacturer recommendations, but “in reality” most municipalities do the job every three to seven years. “I want to introduce a plan that we do a complete breakdown of hydrants every 5 years.”
Several projects are imminent, in particular some pipes that should be replaced, Albo said, in conjunction with the Ministry of Transportation repaving certain sections of highway. “It makes sense to do the pipe if you’re doing the road,” Arnott said, but noted that the financial plan has yet to determine how these projects will be funded.
Nevertheless, with a fee increase, and without adding additional funding for capital projects, Arnott said the water fund already almost balances with only a $35,000 deficit for 2013.
Part of the problem is that water revenues decreased dramatically, from $600,000 in 2011 to $530,000 in 2012, due to water metering and water conservation measures that residents took as a consequence. “People have reduced their water useage,” Arnott reported. Nevertheless, she suggested council “wait to bump rates until the whole asset management plan is in place.”
Major sewer projects include the replacement of “old clay tile lines” in the Black Bear area and others, Albo said, which cause “constant problems” and require cleaning three to four times per year.
Without including external sources of funding, and without any transfers from reserves, the sewer fund is in the black by $108,000.
“Kudos to the previous CFO [Deb Timm],” Arnott said, commending her “good plan of transferring funding to reserves.” But, Arnott said, “this year I suggest we not do that,” using the time instead to “regroup and replan.”
“We need a whole plan moving forward that will address how much to put into reserves,” she said.
The General Fund is where the debate will reign
Looking into the general fund, Arnott expressed confusion that the city “didn’t collect as much taxation for 2012 as planned,” but could not offer an explanation as yet.
Drawing out a preliminary plan, Arnott pointed to an increase in “general government expenditures” this year of one per cent over 2012. “But we were short staffed last year and didn’t have a CFO since May.
She noted that “community support” requests are up five per cent this year over last, totalling $381,000—the majority of the increase in a near doubling of the Rossland Museum request from $29,000 to $52,000, and a $10,000 increase in the library request, up to $136,000 total. City “operating support” for community groups sits at about $116,000 projected for 2013.
Public works—a.k.a. “transportation” on the books—has budgeted a one per cent increase. Arnott complimented Albo, “He’s been tough on himself there,” pointing out that the largest expense is wages, which went up by two per cent in the collective agreement signed last year.
Arnott noted that Albo had come to the table with an equipment wish-list totalling $277,000, but whittled that down “to $80,000 in about five minutes in my office,” she said. The major focus this year will be to sell the current excavator and replace it with a “mini-excavator” that Albo says will cure the current difficulties his crews encounter on hills and back alleys.
The planning department budget is down 16 per cent, largely due to $40,000 in studies that were eschewed. The facilities and parks budget is also down.
The “special projects” items are back down to roughly $162,000, as is typical except for a $419,000 anomaly in 2012.
Looking at the overall General Fund balance, Arnott said, “We end up, without putting in for funding, with $60,000 for 2013.”
She suspects a two per cent tax increase will incur an additional cost of $35 per year for the “average family home,” valued at about $250,000.
But some major holes need to be filled
Although the assumptions made by staff above balance the books, the total expenditures in the General Fund of around $4.6 million do not account for some $4 million in borrowing to finance Columbia-Washington, or about $350,000 in borrowing “to replenish reserves.”
The preliminary plan Arnott presented is far from final, with the community funding included “as requested,” and costs for an asset management process, a feasibility study to turn the Star Gulch reservoir into a swimming hole—$15,000—fire prevention studies, and several other items besides Columbia-Washington borrowing on the order of $4 million, and broadband internet—$180,000—that are not yet accounted.
Arnott explained that a new AAP will soon be run to try to gain residents’ approval for 30 year borrowing for the Columbia-Washington project, that will amount to an annual expenditure of $230,000 to fund the renovations.
If the AAP fails, the city could drain reserves to fund the project, and finance the project over 5 years at an annual cost of about $900,000.
Mayor Greg Granstrom said, “There’s lots of doom and gloom out there in the community about how our budget is going to be. This is not rosy, but it’s certainly not doom and gloom.”
He added, “There are certainly some adjustments council can make, and that will reflect on that two per cent [tax hike.]”
Coun. Cary Fisher, however, was not happy about the process. “I’d like to suggest we should actually be taking a step back to the planning stage,” he said. “There’s no public policy in Rossland for how much we fund per area, per group. We can fund a whole lot of things that just ‘meet the OCP’ [Official Community Plan], but what’s council’s policy on the overall percentage of tax dollars to fund community things?”
Fisher said he also wanted to discuss public works policies, such as the “cost-benefit” of leasing vehicles. “Do we need all this equipment we currently have?” he asked. “Of course in past we’ve looked at sharing with other communities, but have we done that lately?”
He concluded, “I’m certainly not prepared to say let’s move on, it’s okay at two per cent. I just saw this, it took 30 minutes—no, there’s not a chance.”
Granstrom clarified, “The intent was not to approve the budget based on this [presentation today.] This is our first chance to look at the numbers.”
Fisher expressed concerns about “the possibility of being roped into a new sewer system” and other factors to consider “down the road” such as education planning with the NOL (Neighbourhoods of Learning.)
Arnott replied, “This is what we talked about: we need to plan, plan, plan. But it doesn’t happen overnight, it takes time. If we’re going to plan to that level for this five year plan, we’re not going to get it in on time [by May 15.] I agree it needs doing, but if you want to do it and do it well, it takes months of planning.”
In the absence of lengthy social planning, public input, and so forth, Arnott said, “if you try to do it quickly, you’ll be more like a judge and jury deciding who gets what.”
Coun. Jill Spearn echoed Fisher’s frustration: “I agree, we’re running out of time as usual. Once again we’re caught between a rock and a hard place when it comes to budget time.”
Spearn emphasized that this was “not a criticism” of staff, but rather the result of “a series of unfortunate events.” “We always plan to plan, but then something happens, whether that’s a CAO change or a CFO change.”
Spearn supported dedicating resources to do an asset management plan, so council can “do this less piecemeal and rather look at it overall.”
In the meantime, Spearn said, “We have to get down to it quick and hard and fast,” and suggested council consider an across-the-board cut of one or two percent to all the service groups. “If we cut them all one percent, that’s $50,000,” she said. “I’m not looking to cut anybody, but at least then people can afford to live here. Do we have the guts to do it right across the board?”
Looking to the asset management plan
Council discussion inevitably gravitated towards the long term plan. Staff’s two per cent tax hike was questioned again, and the CAO responded that it is “smoother” in the long term to plan for a “two percent increase year over year,” rather than zero per cent followed by “a big increase next year,” when unforeseen issues rear up, such as a failure to secure debt financing.
Coun. Kathy Wallace asked about Washington Street renovation plans that were originally drawn up in conjunction with the Columbia Ave. renovation: “How do we manage the next phase?”
“When we do the asset management plan,” Arnott replied, “we aim for almost a 70 year look ahead plan. We will take on a debt, and go incrementally over the years, keeping debt servicing fairly small, and also improving reserves.”
Moore asked whether the facilities plan completed two years ago was a form of asset management plan, but Arnott explained that the report will be one of several other important inputs that will go into the bigger plan.
The big question, she said, is “What is sustainable for this little city? How much do we put in reserves, how much do we put in debt, how much will we get from grants?”
Speaking to grants, Arnott added, “The government has said, if you have a good asset management plan, they’re going to be way more inclined to give money when you go looking for grants.”
Granstrom said, “The asset management plan, social plan, and human resources planning are goals we should all strive for in the next year, but we can’t plan for all that before May 15. Let’s get it done for now, and start [long term] planning on May 16, form select committees where we each take a section, a responsibility, and then fly at it.”
“Where we’re at right now is to just get a budget together for May 15,” he said, adding, “I think we can make it a very effectual budget.”
Council agreed to a motion to reconvene the budget COW on May 1 at 5:30 p.m. to discuss community support budget issues in particular.
This year’s budget—will it include broadband, asset management, and swimming holes?
Moore asked for all the extras to be included in the draft financial plan “to see the broader picture,” just as long as “it’s not much work for you [the CAO],” she qualified.
Arnott replied, “the biggest work was setting up the database. Now it’s set up, it’s going to be way more fun,” in the sense of easy to make changes on the fly.
Fisher’s alarms went off at the idea of including extras: “There’s this notion that Rossland is perfect, the way we’re doing things is perfect, that we’re happy with this level of taxation. But the idea that we could be increasing at two per cent, then adding other things at three, four, or five per cent—We can’t afford it, we really can’t afford it.”
“There are some groups in this community that get money from us that I think are a luxury, not a necessity,” he said. “In the times that we’re in, we need to start seriously looking at them. Every government in the world is tightening their budget. It’s irresponsible [to do otherwise.]”
He gave broadband internet as an example: “I’m not convinced the return on investment for the community is as great as we’ve been sold. So why stick it in there? I’m going to vote against that.”
Moore clarified that she only wanted “to see how things play out” in terms of tax implications.
Fisher agreed it could be instructive, but said, “Taxes are insidious, they just creep up on you. Someone falls asleep at the wheel, and boom, there’s a tax increase.” He gave the tax increase coming from RDKB as an example.
Spearn said the topic was “depressing,” and agreed with Fisher that “we all feel that way, and feel tremendously responsible to the community.”
Nevertheless, she argued, “You may think somethings are extravagant or luxurious while others of us feel it’s important and an essential part of the social fabric.” Spearn again returned to her desire to come together as a council to make clear policies on these issues “instead of going through line-by-line.”
Moore raised her opinion that volunteers conduct important work for the city, “leveraging” city funds to give “terrific value to the city.” I’d like to broaden the view beyond community support and look at the whole picture,” she said.
Fisher gave public works as another example: “Is this city willing to take a little bit less of the 4:30 a.m. call outs when it snows? Maybe there’s a little bit we can tweak.”
This did not sit well with the mayor: “In my opinion,” he said, “core services are what makes the community. Perhaps there’s a way we can plow less, but one day the ambulance might have to get to my house. If it’s the third day the road hasn’t been plowed and the ambulance can’t get here, I’m a little upset about that.”
Turning his attention to community cuts, the mayor asked rhetorically, “Does that affect my flushing of the toilet?”
He continued, “The whole country’s in an infrastructure deficit. Why? Because it’s not the most politically adept thing to improve infrastructure, it’s way better to get votes by increasing community services. But the implications of decreasing core service funding are very, very long term. There’s been zero percent increase in public works’ budget for a very long time, but that’s without considering increased fuel costs and wages.”
Fisher flipped through the stack of papers in the preliminary budget, looked up, and snapped his fingers: “We can take the red pen out right now and cut $250,000 just like that.”