Rhino's Ramblings: Budget Blues
Robert Thomas
For those of you paying attention, something seemingly incredible happened at the last meeting of Moose Jaw City Council. The proposed budget, that had been worked out over weeks during Budget Committee, failed to pass.
In what has to be, in my own opinion, frustrating to some in Administration, an easy vote for a 5.01 percent property tax increase has now been tabled, as a 15 percent hike in water rates and a six percent increase in sewer rates was defeated.
Despite what the naysayers out there are saying, that "the budget and utility rate increases were all a done deal and their opinions and voice didn't matter", well you've just been proven wrong.
And also, according to what some other media sources might try to tell you, the entire budget could be in for a total overhaul. It's all up to the seven people making up Council to decide on what to do. But I will also, at the same time, admit that it's highly unlikely they would re-open things like the Police, Library and Downtown Facility and Fieldhouse (DFFH) budgets or the City’s entire Operating and Capital budgets, but given the perfect storm of financial pressures facing the City, you never know.
So what has happened here? Well what Council defeated were the increases of 15 percent to your water bill and six percent to your sanitary sewer rates. Council has rejected their own Budget Committee’s recommendations on these two utilities and like the old saying saying goes "all a plumber needs to know is that $&!? runs downhill" and you can gather it made a mess.
To understand what has happened here you need to understand the reasons for last year’s 15 percent water rate hike, the 15 percent increase Council just flushed, plus the proposed annual 15 percent increases over the next few years.
It all has to deal with the shape of the water utility infrastructure, which in my opinion has been neglected for, let's face it, decades. Or, as Finance Director Brian Acker said more than once throughout the budget process, "the projects are not going away, it's infrastructure that's worn out. We saw work deferred in the past in Moose Jaw and it's the reason why we are in such a dire financial situation now". We are going to have to replace it and find the money. It is as simple as that.
To find at least some of the finances to pay for the needed upgrades is going to include borrowing, tax increases and yes, utility rate increases. And why I say "some of the finances" is because of years of reports to Council from Administration stating that we cannot finance this all on our own and we desperately need help from the Provincial and Federal government.
Now I am not an accountant, so if I get this wrong I hope people write in and set me straight, for years Moose Jaw budgeted through an incremental approach.
An incremental approach is basing your budget on the preceding year’s expenditures. It's a continuum of what you have been doing and with predictable income you continue on doing, year after year, as usual.
The City had a very good idea what to expect in financial resources, from year to year, and with that they could more easily budget. It was a scenario in which they knew there would be so much money coming in, at an ever-increasing rate and all they had to do was decide where to spend the money.
The approach worked fine, as you had revenue sharing, grants in lieu, some interest off of reserves, plus property taxes; which seemingly brought in a fairly predictable and increasing cash flow.
Well that all ended in 2017, as the Province finally succumbed to economic realities and moved on to an austerity budget. One which hit Moose Jaw like a 10 pound sledgehammer. In the blink of an eye, in 2017, Moose Jaw was looking at reductions in Provincial funding totalling a massive 18 percent on it's civic budget.
On top of that, the years of neglect in the water utility finally hit, as we saw a record number of water main breaks. The years of turning our backs on replacing and just simply repairing as necessary finally caught up to us. The patch on a patch approach is coming to an end and it's time to buy some new jeans.
Worse yet, we are on course with 2017’s record number of water main breaks.
We are now in a perfect storm and we need to do something before we sink; and let me tell you, it isn't going to be cheap. Plus, if you believe her, we need to change course, as something is going to break, people and businesses can no longer afford continual increases, to paraphrase Councillor Dawn Luhning.
During his initial presentation of the 2018-2019 status quo budget, former City Manager Matt Noble put up a residential property tax comparison chart which showed Moose Jaw near the bottom, compared to other centres. As someone paying property taxes I will admit, it brought a lump to my throat. An ominous grim reaper seemed looming there, getting ready to devour some major tax, utility rate or fee increases.
Your wallet getting a lot lighter seems a foregone eventuality.
Throughout the budget discussions – which were open to the public but few chose to attend – numerous things continued to resurface in comments from Council. One of the major ones was why the budget wasn't given to Council sooner, as they had requested last year?
Council apparently wanted the budget in October 2017 so they could study it more carefully but it never happened.
So why did Council want the budget in October and not December? It has to deal with a move in how the budget is prepared. The City is set to move from incremental budgeting – using last year’s expenditures – to more of a priority based budgeting scenario.
Once again, I fully expect and hope to be corrected on this, but priority based budgeting is where you start; and you start with defining how much money you have, then you establish priorities and fund things based upon a priority basis. It can be all or just a portion of the budget.
Priority based budgeting is looking at everything within a department and then prioritizing services based upon the value of each offer. Depending on funding availability, lower value services may receive reduced funding or even be eliminated all together.
The need to make changes to the entire budgeting process was something mentioned by Councillor Scott McMann, who said he could support the 15 percent water rate increase this year, as it was too late in the budget process to make drastic changes. But McMann said he couldn't next year and priority based budgeting would help achieve that goal.
So here is the budget mid-stream and there is a call by the majority of Council to change the budget and, seemingly, the entire budget approach. It's not going to be easy and let's face it, by the words and tone taken so far by the majority of Council, there is a move towards at least some cuts.
The big question now is: what will Administration come back to Council with?
During Budget Committee discussions,' Administration did provide Council with a last minute list of cuts which could be made without harming overall City operations. The list was never made public, but I do know from their discussions, the $30,000 annual grant to the Moose Jaw Airport Authority was on that list.
It does give one indication of something which could be cut as its not a priority for the City’s operations to continue unabated.
But beyond this cut what else was on that list that was handed out, at the last minute, only to Council members?
Given what was told to Council throughout departmental reports, about the shape of this City’s infrastructure, it leaves me truly wondering what isn't a priority? What piece of infrastructure or should I re-phrase that, what core infrastructure can we ignore replacing to help avoid catastrophe? What infrastructure does the City take a gamble on and put off replacing for another year or even years?
It was something said by City Engineer Josh Mickleborough, regarding his 2018 capital budget. There really is nothing in the proposed capital expenditures he is comfortable with cutting. Yes it really is that bad.
With it now highly obvious that a large portion of ratepayers are close to breaking out the pitchforks and torches, what does Administration come back to Council with? How do we replace needed core infrastructure, maintain existing programs and services, plus keep taxes, utility rates and fees from unacceptable increases? It's not going to be easy – especially when the Province’s cuts now equal 22 percent of former revenues - and no I don't see the end result pleasing everyone.
The only way it's going to work has to be through finding efficiencies, or cuts if you like, or hope for a massive upswing in photo radar tickets to cover some of the monetary needs. And that's not a joke either. The once hefty photo radar road safety reserve will be empty unless that measure of the budget fails, as it was used to balance the capital budget.
In retrospect though, the rejection of the water and sewer rate increases – although only by a 4 – 3 margin – shows Council is likely feeling some heat as we reach the breaking point in what residents can afford to pay. The big thing now though is whether or not the Province, running a $595 million deficit according to recently released third quarter projections, will hit us with another round of unexpected cuts if they do get ready for the real ugly stuff.
The next few weeks are going to be really interesting for Council watchers and taxpayers alike.