Rhino's Ramblings - A Stay Within Your Means Budget By Another Name
Robert Thomas - Opinion/Commentary
Monday night is a big night in Council’s schedule as Budget Committee meets for the first time. It’s a first to have the budget so early as well as the first time the budget has been developed as a priority based budget.
Under a priority based budget you start with a certain amount of dollars then assign funding within that set amount by prioritizing expenditures. Quite simply it is suppose to be a process of living within your means.
From the outset though it’s obvious from this proposed status quo budget that for many Council watchers living within your means is about to expand beyond what you can already rely upon from the available kitty.
The proposed status quo Operating Budget will require a 3.82 municipal tax increase.
The Operating Budget predicts revenues totaling $47,313,047 with expenditures of $48,402,701 or a shortfall of $1,089,654. Budgeted revenues are up while expenditures are up 2.49 percent.
PROPOSED OPERATING BUDGET
Expenditures $48,402,701
Revenue $47,313,047
Shortfall $1,089,654
Municipal Tax Increase Required 3.82%
Expenditure Increase From 2018 2.49%
Budget Committee or later Council can still decide to make cuts or alternatively charge higher user fees or find efficiencies by such things as contracting out services or parts of its operations or adopt new spending in an effort to increase services. It’s all up to the seven people making the final decisions.
As Budget Committee sits down to hammer out how the City is going to spend tax dollars there are three things which hang over top of them and it's all tied to the local economy which is no longer booming. The days of high commodity prices and Saskaboom are now over and it’s impacting both residential and commercial property taxpayers alike.
There are three main factors which should weigh heavily on Council:
1. At the present time the City has record high property tax arrears as well as tax liens taken out against properties. To put into better perspective almost 1 out of every 20 dollars the City was set to take in on property taxes last year was in arrears as of October 30th.
2. Housing prices have decreased over the last 12 months as the weaker economy has impacted not only new housing starts but also seen a large number of homes enter the market at the same time.
3. Although it’s unofficial, a local banking official who spoke under a condition of anomynity, told me October saw a record number of home foreclosures. He pegged the number at 25 although the local Court of Queen’s Bench lists only 18 going through various states of foreclosure in the last month.
Given the underlying local economic conditions how much, if any amount, can Council safely raise taxes is something which needs to be asked. Given Councillor Brian Swanson’s previous statements that tax arrears are a “canary in a coal mine” and an indicator the economy can no longer sustain tax increases but cuts need to be made and funds diverted to infrastructure renewal, I’m expecting him to ask it.
Three local economic realities Council's Budget Committee will face are:
record high Property Tax Arrears and Tax Liens
a poorer economy leading to a drop in demand and reduction in local house values
the number of foreclosures, according to a banking source, just hit a one month record high
The issue of Tax Fairness is mentioned heavily throughout the report introducing the proposed Budget. Tax Fairness is a phrase used by the small business lobby group the Canadian Federation of Independent Business (CFIB) to describe a perceived need to lower the property tax burden placed on commercial or business properties when compared to residential properties assessed at the same value.
Presently that ratio in Moose Jaw is 2.14 or for every dollar a residential property is taxed on a $250,000 assessment a business/commercial property with the same assessment pays the equivalent of 2.14 times that amount in property taxes
Tax Fairness is likely a phrase often repeated throughout Budget Committee deliberations.
Since 2013 Moose Jaw has experienced a large number of successful commercial property assessment appeals leaving the remaining commercial properties to make up those losses. Losses which were distributed to all commercial property owners in that class of property.
It’s something Councillor Scott McMann made mention of last Spring when he asked at an Executive Committee meeting how fair was it that commercial B property owners got higher property taxes when commercial A property owners won large tax assessment appeals.
At the same time Councillor Dawn Luhning, who sits on a board with the Saskatchewan Assessment Management Agency (SAMA) blamed the problem on large corporations with deep pockets and hired guns as taking advantage of the situation. SAMA is contracted by the City to do all tax assessments.
SAMA in turn would partially attribute the problem on the entire appeals process and how it accompanied by untrained Boards of Revision and an inexperienced Saskatchewan Municipal Board was leading to successful appeals. SAMA never in my opinion took any personal responsibility for the situation despite the fact the courts was often ruling against them. A Board of Revision is the local appointed independent body which hears property tax assessment appeals.
In an effort to ease the burden on commercial property tax owners Council adopted a policy of Tax Sharing. Tax Sharing for Moose Jaw is adjusting the mill rate factors commercial and property owners pay. It means different percentage tax increases for commercial and residential property owners as the ratio is slowly reduced. It’s likely something we will see at the end if this budget.
Conventional wisdom and my opinion as well sees Mayor Frasier Tolmie and Councillor Crystal Froese playing it safe and following Administration’s lead on this budget. I am also expecting to see both of them to speak heavily about the Downtown and supporting the business core Downtown if possible. This is especially true in my opinion of Councillor Froese who courted Downtown business support when first elected. They may very well want something now for their investment or should I say support.
But the issue of tax fairness took on another meaning for at least one former city councillor. For former Councillor Don Mitchell the term also meant being fair based upon property owner's financial ability to pay.
For Mitchell there was an underlying issue of the tax shift where things considered services in the past and paid for by property taxes were now shifted to poorer home owners through increased utility rates or new fees such as garbage and recycling.
A big question which needs to be asked is with Don Mitchell no longer on Council will any Council member step forward to voice his concerns about lower and fixed income home owners difficulty in paying higher taxes, fees and utility rates?
In the past Mitchell had attempted to stop the new charges for solid waste collection and a proposed 15 percent water rate increases as unfair to lower income property owners.
His argument was home owners in less affluent areas had to spend a much larger portion of their incomes to the City when things like water rate increases were projected to be 15 percent and solid waste collection had a direct charge attached to it.
Both in the past were subsidized by taxes meaning higher assessed and wealthy neighbourhoods helped less affluent residents make ends meet.
With Mitchell now off of Council it leaves an apparent gaping hole and the real question is will any member of Budget Committee step up and fight to protect less affluent homeowners?
Another new dynamic is the recently elected Councillor Heather Eby. The big question is, if all Council members vote the same way as they did in last year’s budget, Eby could turn out to be a swing vote in all of this.
Although she has seven years previous Council and budget experience the big questions are will she follow the lead? Or since she was not in nor privy to the Strategic Planning Sessions (the in-camera or behind closed doors discussions) leading up to the Budget will she vote in ways many may not predict? Will her vote be the swing vote if there is a lot of four to three voting? Will she keep her campaign promise and not eliminate any City employees?
Remember this column deals with the proposed Operating Budget only and Budget Committee also needs to deal with the Five Year Capital as well as the 10 Year Unfunded Capital Budget all based upon a priority based budgeting methodology.
It all leads up to Monday night as Budget Committee gets underway and given the evening short meeting format, the potential of all Budget Committee deliberations being broadcast it might well be entertaining television in a 1000 channel universe where there is nothing going on anyhow. Please stand by it might prove to be entertaining.