Top 10 Takeaways from Budget 2020
2020 is a challenging financial year for the Town of Fort Frances.
Yesterday Council approved an increase to the overall tax rates of 3.24% in order to balance our operating budget. A capital budget was passed on February 18.
While a public briefing and report from Administration on the budget will take place during an upcoming meeting of Council, here are my 'top 10' observations about this year's operating budget, and the factors the rates we set take into account:
1. Many of the Town's costs are mandated and/or uncontrollable.
The Town is legally required to foot the bill for a number of costs which are outside of our control. Here are 3 examples:
Courthouse security is paid for through our contract with the Ontario Provincial Police. While recent changes have been made to bring certainty to this cost centre, over the past number of years we have had no control over this price tag, because it fluctuates with the schedule of the court and the length of its dockets. The cost estimates for this line item spiked from $126,000 in 2015 to $341,000 in 2019.
We are also required to have an asset management plan which sets out an evidence-based sequence for investment in our capital assets (roads, sewer, etc.) and that puts away a portion of funds annually to cover those future costs. Not doing this would burden future generations with the full cost of aging infrastructure. Approximately 1.4% of this year’s increase was to be attributed to our asset management obligations.
The municipality is required to comply with pay equity laws. This year, Administration completed a comprehensive pay equity exercise for the first time in over 25 years. Pay equity ensures that across our organizational chart, work of equal value receives equal pay. The pay equity process resulted in a modest increase to our budget which helps ensure that our compensation structure is equitable, fair, and competitive. This allows us to attract and retain the talented staff we need to move our municipality forward. (For more information see the current salary administration policy. Note that Council's pay was set by a bylaw enacted by our predecessors, and is not subject to this policy.)
2. Fort Frances covers several costs which benefit the entire district.
The Town continues to pay for the entirety (or a large portion) of a number of costs which benefit the entire district. In other regions of Ontario, some of these costs might fall to an upper-tier municipality, but we do not have that level of government in Northwestern Ontario, aside from the limited mandate of district social service administration boards. As such, the largest municipality often gets stuck with the tab for services that benefit everyone. For example:
Fort Frances contributes the lion’s share of municipal funding for physician recruitment in our district;
Fort Frances is the only community that pays for security at the courthouse, despite the fact that the court serves every municipality and First Nation from Rainy River to Atikokan;
Fort Frances foots the bills for the airport, which is the only airport with passenger service in the Rainy River District; and
Fort Frances has been paying to operate the Tourist Information Centre, which benefits the entire region at its busiest border crossing, while arguably few of its visitors have Fort Frances as a final or only destination on their journey.
3. Inflation needs to be part of the equation.
It is bad policy for revenues not to keep pace with inflation, which is estimated at 2%. Assuming stable property assessments, if we do not increase taxes by at least a percentage equivalent to inflation, we are essentially expected to do more with less money in each subsequent year. This is a challenge at a time when other levels of government continue to download costs and services to municipalities.
It is concerning to me that over the past two decades, our predecessor Councils only increased taxes by an average of 0.87%. There was not a single year over that time period when taxes were increased by at least inflation – including in the years after the mill closed and there was a real risk that our financial circumstances may change.
While frugality can be a virtue, in excess it becomes short-termism. It has left today's taxpayers on the hook to make up the difference. We cannot afford to continue to shift cost burdens to future generations.
4. The budget has to account for growth factors.
The total of our asset management percentage (around 1.4%) plus inflation (around 2%) is still greater than the tax increase of 3.24%, meaning that the overall tax increase is not as high as it could be. This is a result of a significant effort by Administration and Council to identify areas where acceptable and reasonable cost savings could be attained. Understood another way, it means that the actual tax increase, net of these growth factors, is actually negative (i.e., a decrease of around 0.3%).
5. Significant property assessments are under appeal.
Resolute Forest Products and the Riversedge Developments have challenged the assessment value of the mill properties. Those appeals are before the Assessment Review Board. The outcome of that process could result in lower property tax revenue from those properties.
Importantly, the tax ratio between residential and industrial rates is approximately 1 to 7. That means that the tax revenue resulting from an industrial property is much higher than that from a residential one of equivalent assessment. By example, the Town would need to gain $49 million in residential assessment to make up for the loss in revenue from $7 million in industrial assessment.
As residents know, significant efforts were made by Administration and Council over the past 15 months to secure an operational future for the mill. As I have written elsewhere, those measures were met with aggressive actions by the previous owner to ensure that we did not get the outcome we deserved.
While there continues to be a mix of uncertainty and optimism surrounding these properties, it is our responsibility to plan for a future where local taxpayers may have to make up the difference while our community adjusts and nurtures new opportunities.
6. New relationships and fresh perspective has resulted in cost savings.
Since Day 1 of this Council's term, we have been working together to find opportunities to take a fresh approach to issues that will return value to our community. This has not only been beneficial for community-building, but realized significant cost savings even before this budget year.
For instance, in 2019, we inherited a budget from the previous Council which had earmarked $490,000 for legal costs related to the Point Park. A large expense was on the books in years prior as well. We now enjoy a much more positive and collaborative relationship with the Agency One First Nations, which was publicly celebrated during a signing ceremony last May. As a result, just $65,000 was charged to this budget item in 2019, and we have now significantly reduced this budget for the second time in 2020.
7. We took a deep-dive to identify cost savings.
Council and Administration went to great lengths to make reasonable cuts and service reductions and achieve efficiencies in order to reduce the financial impact on taxpayers. At the special Council meeting on February 18, we directed Administration to identify $150,000 in potential cost savings for our consideration at our next meeting on March 2.
Councillors felt strongly that this was an exercise that the community would expect us to undertake before we enacted any tax increase. From the list of options produced by Administration, over $108,000 in savings was identified by Council. We did not feel that the proposed cuts beyond that point would be acceptable to the community. These were all tough decisions, made in recognition of the fact that there is very little fat to trim in our municipal government.
8. Structural and strategic change is underway.
As this is the second budget year of this Council’s mandate, it makes sense that if a larger tax increase is required, that it occur at this point in order to give ample runway to Council to make further structural changes. Our future budgets will thus be aligned and grounded in the vision articulated in our forthcoming strategic plan and the realities of the changing economic circumstances and opportunities facing our community.
9. We have to modernize to changing trends and consumer practices.
Our Council has repeatedly recognized the need to modernize local government and its services. This isn't just about reforming our internal procedures, but also our service interface with the public.
One example is the Tourist Information Centre. While some may be unhappy with the potential loss of this service, in reality the conversion of stops to sales or spending does not occur the same way it did in years past. Few visitors to our border don't know where they're going before they arrive, or what they're going to do when they get there. Moreover, the future role for tourist information may be one that is integrated with our gateway to Rainy Lake Square, in order to drive traffic to our downtown and be more integrated with local cultural assets, such as the museum.
These are the opportunities I will be looking for as we move forward on some of these exciting projects and the studies underway on the former wood yard and nursing station properties.
10. Our budget decisions respect civic engagement and volunteerism.
Around the Council table, I believe that there is a general recognition that our community is built on the hard work, sweat equity, and capacity of volunteers that we simply cannot replace. That's why:
We rejected a proposed reduction to the library budget, recognizing that the library's volunteer library board already oversees a high-value, lean operation, and had already gone through their books to painstaking detail;
We refused to cheap-out on recognizing volunteers, and will maintain our annual volunteer recognition event; and
We will be looking to our various advisory committees to provide input on further structural change, modernization, and transformation efforts related to their portfolios.
The views expressed are my own. Should you have any questions, please email me at firstname.lastname@example.org. Technical questions about the budget or the Town's budgeting process should be directed to Administration at (807) 274-5323.