Reserve Shortfall Drives Discussion
Funding shortfalls in the General Capital Reserve in 2018 and in the future created lively debate at Budget Committee.
Budget Committee discussed not only where to find $2,706,878 this year but next year, as well, when the projected deficit is $7,739,765.
Finance Director, Brian Acker said, "to balance it in this years budget would require a 10 percent tax increase."
“It would require a 10 percent municipal tax increase. It is a very significant tax increase,” he told Budget Committee.
Under the Cities Act, the Capital Budget Reserve must be balanced. The reserve funds pay for infrastructure and other needed capital purchases in all city departments.
Councillor Scott McMann suggested the City look at the Equipment Reserve to help fund future shortfalls. "With the shortfalls we have, we need to take five, six or eight million out of that. Maybe that is what we need to do,” he stated, adding, “many citizens are frustrated we have raised taxes when they see how much we have in the reserves. It's an option for us to investigate looking into 2019.”
Councillor Chris Warren echoed Coun McMann’s idea “the equipment reserve, why can't we allocate money from those reserves?”
Acker said taking money from the equipment reserves impacted elsewhere by destroying the structure of the reserves which earn interest, cutting costs of equipment replacement.
“At the end of the day you still need to replace the equipment; it’s a bit of a deferring thing,” he said, suggesting “an in-depth review and understanding some of the ramifications on that move. But certainly Council can move any way that they want.”
The reserve structure the City has was set up by the Province following Moose Jaw going bankrupt in the past. Some portion of reserve interest has been re-directed to the operating budget in the past, to keep taxes low.
Councillor Dawn Luhning appeared to show frustration with those “reiterating how tough it is (the budget), when you look at service cuts, the only other option is a tax increase.”
Coun Luhning questioned the logic of using reserves to fund budget shortfalls.
“I'm all for reviewing reserves but you spend those dollars and they’re gone,” she said, later adding “unless we dig deep in departments and have everyone share, I don't know how we are going to get there.”
Councillor Brian Swanson stated that the City, like the Province, never got ready for the leaner years. “The reason the Province is cutting is they don't have the money. They didn't put away anything in the fat years and then in the lean years they have to cut back…we need to get use to the new reality,” Coun Swanson said.
He said to take the reserve money from the equipment budget did not make sense unless the fleet size was reduced.
“To take that money without doing other things is just kicking the can down the road. It's not just there for the taking without doing any difficult work,” Coun Swanson said.
Coun Swanson went on to say he would like to see development deferred on developing West Heath Five and proposed a series of cuts. The proposed cuts were $70,000 to renovate the Kinsmen SportsPlex Change rooms, $30,000 from the municipal airport, $20,000 from Elgin Park, $108,000 from traffic control, $200,000 from storm sewers, $335,000 from the Library\Art Museum and $80,000 from energy management programs.
Although the proposed cuts were defeated 5 – 2, with only Councillors Swanson and Luhning in favour, it needs to be noted that Administration also suggested cutting the $32,000 Grant to the Airport Authority as something they could absorb without harming their operations.
In the end, the majority of Budget Committee decided to utilize the Accumulated Surplus of $1,613,791 and the Traffic Safety Initiative Reserve of $1,093,087 plus some funds from this reserve’s expected 2018 revenue to balance the general capital reserve.