"Cowardice asks the question...is it safe? Expediency asks the question...is it politic? Vanity asks the question...is it popular? But conscience asks the question...is it right? And there comes a time when one must take a position that is neither safe, nor politic, nor popular but one must take it because it is right." ~Dr. Martin Luther King

Thursday 10 December 2009

A Question from a Reader

Elizabeth Bishenden said:

"I am no financial wizard, but I have to question why is the treasurer putting those potential developments on the books? If developments don't happen and the payments don't appear from the developers, what happens to the budget?It seems that this is a change in process for the Town's budget, which used to be based on known income. So who developed the change in process and who approved it? And what the heck do we do if the estimates of potential income are wrong?"


It is a change in Aurora's process. Provincial law prohibits deficit or surplus budgeting.

The principle is property owners who live in the town during a given year will not be taxed more or less than required to meet forecast needs. Population shifts. If a property owner living in the town in 2010 pays more than should have been collected and moves, he can't get his money back. If he paid less and leaves town, his share of the deficit passes to those who remain.

Surpluses and deficits in municipal budgets represent inequity for new and former property owners and that's why they are prohibited.

In the last twenty years Aurora has enjoyed surpluses from supplementary assessment. This year it 's a million dollars.

Sometimes a surplus has saved our skins. If the budget was too tight or something unexpected happened during the year. Some years there were no supplementaries. They were the same years when inflation was running at eighteen per cent and retailers were paying more in interest on overdrafts than they were taking in over the counter.

Many of the nine hundred odd municipalities in Ontario have never enjoyed supplementaries.
Currently there are municipalities like Windsor losing assessment and having to consider cut backs on police and fire services

I have argued surpluses created by new assessment should be applied to the following year's budget to be fair to taxpayers of the previous year and not to be using them to artificially deflate the tax increase.

At the beginning of the term,Councillor Wilson argued successfully, we should use anticipated surplus to reduce the current year's budget. Our philosophy was not much different. Mine was to use it after we had it. His was to use it before.

We are doing it Councillor Wilson's way but not completely.

Treasurer Elliott tells me Richmond Hill has been doing it for years. I'm not surprised. Once the tax increase is deflated with assessment not on the books at the time of the budget, you have to keep doing it to stabilise taxes. Otherwise a deficit is created which is precisely what regulations prohibit.

It was that risk Mr.Elliott cautioned when Councillor Mac Eachern proposed adding an
additional $100Ks over and above the $350Ks already showing on the revenue side of this year's budget from assessment not yet on the books.

Treasurers are statutory officers. They are required to work in accordance with provincial regulations which substantially circumscribe municipal finances.

They are also subject to the authority of the local council. Municipal treasurers must be conservative. The regulations do not allow risk-taking.

If a Municipality falls afoul of regulations, the Treasurer is the person accountable.

The second half of the Smart Centre according to the Chief Building Official is expected to go forward in 2010. Permit applications are being processed. It seems not to be much of a risk. We've done it every budget this term.

Still, it's not my way.

I am of a generation that accepted instruction and direction from professional staff who knew their stuff. Some might not recognise me in that statement but when it comes to abiding by the rules,my choice is to do so.

I opt to keep expenses tight to keep the tax rate manageable rather than spending wildly and inflating revenue to create an illusion.

The $100Ks. took part of a percentage off to decrease the increase below 3%.

Optics are the new deal.




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