As demonstrated in a presentation at Monday evening’s public meeting on the 2004 budget, the town’s current budget shortfall of $2.7 million is based on a myriad of factors—some of which have been coming this way for some time.
According to the information provided at that meeting by Darryl Allan, manger of Information Technology, those reasons include:
•serious errors in previous years’ budgets;
•stagnant tax revenues because of no tax increases;
•tax structure changes that limit how increases can be applied;
•provincially-determined reductions to assessments;
•increased regulatory costs;
•increased controllable operating costs (including inflation of 19.9 percent over the past 10 years, increased labour and benefit costs, and new facilities);
•increased insurance premiums;
•long-term debt repayment;
•a new provincial grant structure that does not fully cover the costs of transferred services; and
•increased uncontrollable operating costs totalling $484,328 over the 2003 budget (this is split between the health unit, DSSAB, Rainycrest, and the OPP).
Basically, Allan explained Monday the town has four sources of revenue—taxation; user fees; permits, licences; and fines; and grants.
Due to changes in the relationship between the province and municipalities in Ontario over the past 10 years or so, the town has been forced to become more financially responsible and thus has had to look increasingly to taxes and fees for revenue as opposed to government grants.
Property tax rates are set by the town, but the assessed value of property and education rates that are part of the total taxes residents pay are determined by the Municipal Property Assessment Corp. and province, respectively.
The town also is restricted in setting property tax rates as certain property tax classes (commercial, industrial, and large industrial) can’t be increased if they exceed a certain threshold when compared to residential.
Currently, the difference between residential and business tax rates in Fort Frances is one of the highest in the province.
Another source of revenue is user fees which are charged on a variety of services, with some examples being ice rentals at the Memorial Sport Centre, tipping fees at the landfill site, child care fees at the day care, and zoning applications.
The amount that can be charged for many user fees are regulated by the province. These regulated user fees are set based on cost recovery and cannot be used to make a profit.
When setting user fees, consideration must be given to the impact on users. The province has mandated a process requiring notice and a public meeting before user fees can be changed
The town has one overall bylaw that sets out our user fees. Examples include business licences, building permits, and parking fines.
The province has a measure of control similar to user fees over the setting of the amounts for licences, permits, and fines.
The town also receives grants from both the provincial and federal governments. By far, the largest amount is from the province. Some of the grants are for general operations and others are for specific projects.
Up until 1997, the province provided what was called an “Unconditional Grant” to the town.
With the realignment of local services, this was changed to the “Community Reinvestment Fund.” The purpose of the fund was to make up the difference between what municipalities and the province used to pay for and what they now had to pay for.
In 1998, this grant was $4,348,000. By 2000, it had fallen to $3,208,000 and by 2002 was $3,004,000. The budgeted amount for the Community Reinvestment Fund was $3,084,000 in 2003.
The town receives a variety of conditional grants for services such as the library, museum, and Sister Kennedy Centre.
The town also gets grants for special projects such as studies, capital projects (such as the waterfront), improvements on the connecting link (highway through town), events such as the town’s 2003 centennial, and employment creation grants for summer students.
There are three types of municipal expenditures—operating (running things),
capital (buying things), and reserve contributions (saving for things). Operating expenditures fall into two categories: controllables and non-controllables.
Those activities that the Town of Fort Frances has the option of undertaking or not, or those mandated activities that the town has some measure of control over how they are provided, are defined as “controllable.”
These include administration, bylaw enforcement, fire and rescue, recreation, Public Works, library, museum, day care, parks and cemeteries, airport, and waste management.
Once any grants, user fees, and revenues have been taken into account, what is left is a net cost from taxation. Just a few examples of the 2003 budgeted costs from taxation for some services are: emergency services ($963,000); Memorial Sports Centre ($347,200); and library ($374,800).
To pay for a number of recent capital projects, including the Memorial Sports Centre, Townshend Theatre, and the waterfront, the town incurred long-term debt in the form of debentures.
Repayment of long-term debt is out of the current budget and, as such, impacts on financial resources available to operate the town.
The total debt for the Town of Fort Frances is $3,967,310 at the end of 2003. The budgeted debenture payments in 2004 will be $686,650—an increase of $277,362 over 2003.
This represents a 6.976 percent tax increase.
At the end of 2003, there were 11 condominium units owned by the Fort Frances Non-Profit Innovative Homes Inc. that still were for sale. If no units were sold in 2004, the town’s expenses would be $300,811.37 for the year.
But there have been sales in 2004 and at this time, there are seven units remaining to be sold. There has been an number of inquiries about the unsold units.
The condos have not been included in the long-term debt calculation as they are expected to be sold.
Those activities and expenditures the Town of Fort Frances has no option but to undertake, or are paid for by levies that the town has little or no direct influence in setting, are defined as “uncontrollables.”
These include police services, Rainycrest, the District Social Services Administrative Board, Northwestern Health Unit, and education costs.
As far as paying for uncontrollables, it goes like this: At one time, the town sent out two tax bills—one for municipal and one for education. The town was responsible for setting the rate for only the municipal portion.
If taxes went up because of education, so be it.
This approach does not work with the local services realignment. In an effort to maintain a zero tax increase, any increased costs from the transferred services was absorbed by reductions elsewhere in the town’s budget.
The Community Reinvestment Fund was supposed to make up the gap in the cost of providing these services, but this has not proven to be the case.