Citizen Budget Requests – Part 2

Bryan Lambert gave a presentation at Monday’s Public Budget meeting that discussed “big picture” questions – he didn’t ask for anything specific to be included but instead asked questions about the budget overall.  He pointed out that the actual total budget was more than double the amount collected in taxes, he wanted reserves to be spelled out and staffing to be discussed.  He also pointed to a surplus and overspending – seemingly opposing items – and a trend in expense increases that are faster than inflation.  His information source was the publicly available Financial Information Report (FIR) from the Ontario Ministry of Municipal Affairs which covers all revenue and spending in municipalities – for example in Cobourg, that includes electricity, water and Northam Industrial Park which are reported separately.

Bryan Lambert
Bryan Lambert

Bryan’s full presentation can be downloaded from the link below but it’s worth looking at some of his data.

Total Revenue and Expenses

For 2017, taxation revenue was $22M but the Total Town revenue was $50M – the big additions were user fees $16.5M and rental income $4.5M.   Although not spelled out, user fees have to be Water and Electricity income (for Holdco) and rental income would be from Northam Industrial Park.  These are interesting numbers but not contributing to Town Expenses covered by Taxation.

Reserves

Reserves are not clearly explained in the budget process.  For example, Development Charges are used to replenish an account then amounts are withdrawn to pay for various department costs.  As of December 2017, the total reserve was $7.6M, mostly assigned to roads and wastewater.  But “recreation” had a deficit of $1.8M and growing.  Bryan commented: “There is cause for concern here! How and when will this be corrected? Does it affect the Property Tax Levy?”

Bryan says that the following reserves should be disclosed and discussed:

  • HOLDCO
  • Marina
  • Campground
  • Police services
  • Northam
  • Development Charges

Staffing

From 2013 to 2017, staffing levels appear to be steady – that is, not growing overall.  Bryan said that these numbers are not provided in the budget discussion but should be since they are already available publicly via the FIR.

Surplus and Overspend

Bryan quotes FIR showing a significant Surplus for several years as well as Overspends. It’s not clear what this means; they seem to contradict each other.  Is Bryan implying poor budget management? He says: “Has the surplus been used?” and “the overspend is cause for serious concern.”  In any event, an explanation would be useful.  To my knowledge, although Council asked for quarterly reports on budget performance, few have been provided.  The last one I am aware of was Q3, 2017.  Go here. It did not show any significant deviations from the planned budget.

Bryan Lambert trend graph
Bryan Lambert’s trend graph

Expense Trend

The graph at right illustrates the increase in personal incomes as represented by OAS and CPP compared to the increase in the Town’s expenses and Property Tax increases.  He concludes that Cobourg doesn’t have a Revenue problem, it has a spending problem.

In summary, I would say that Bryan’s overall message is that there are some items that impact budget that are not discussed in budget meetings but should be.

Links

Bryan Lambert Presentation

Print Article: 

 

Click to Notify me of
Ken Morden

You are to be commended for doing such an analysis – it is complex and time-consuming. I have done this sort of analysis for a number of years about the Municipality of Port Hope and know quite a bit about Surpluses and Deficits. I have commented a number of times to Port Hope Council and the individual Councillors about this but to little avail The Municipal Act Section 289 (4) (b) states: (paraphrased) “The Municipality shall treat as estimated revenues any surplus of any previous year that resulted because revenues were greater than budgeted and/or expenses were less than budgeted.” (read the Act for precise info) If the municipality does not include this in the budget, the “surplus” just disappears. In Cobourg’s case $19.5! This really represents an OVER TAXATION of Cobourg taxpayers for unknown expenses/reserves. If the $19.5 million had been included in the following years’ budgets, tax rates would have DECREASED! This action is in direct contravention of Section 289 of the Municipal Act and could possibly make the Council and individual Councillors legally responsible. Port Hope Council have chosen to ignore the Act despite showing $3,894,580 as Surplus in 2017 per the audited statements. This amount appears… Read more »

cornbread

Perhaps our new Deputy Mayor can straighten things out for Cobourg residents on “surplus money”…also
Our previous councils have lacked vision when they refused to go “OPP” for an almost $2 million a year saving and then they blew it with and extra $1 million expense for the CCC every year.

Perhaps it is time for a few cutbacks…too many people expect too much right now.

Walter L. Luedtke

Don’t worry!
In late December, Minister of Finance Vic Fedeli penned a letter to municipal leaders and treasurers telling them that the Ontario Municipal Partnership Fund (OMPF) grants will be reduced by an unspecified amount and allocation notices for 2019 will be delayed.
OMPF is the largest provincial grant provided to municipalities for their operating budgets.
Last year, the Town of Cobourg’s combined benefit of the 2018 OMPF and provincial uploads totalled $151,500.
The estimated total benefit of the 2018 provincial uploads for the County of Northumberland was $11,709,200, which is the equivalent of 9% of all municipal property tax revenue in the County.
Until the Province drops the other shoe on this, Cobourg will have a hard time finalizing its budget.

ripped off

Cobourg has the highest Residential Tax Rate in Ontario at 1.48. Hopefully Doug Ford will blow up
this ongoing injustice. Wake up Cobourg Property Taxpayers !

Cobourg Person

“..although Council asked for quarterly reports on budget performance, few have been provided”

I have never understood why this has not been resolved and why the previous council did not insist on consist budget performance updates. Mr. Lambert’s report indicated an average overspend of approximately 9% from 2015 to 2017. I’m not overly concerned regarding an overspend of 9% if there is a specific reason that caused the budget increase, the increase was unforeseen, and the overspend was discussed at council. Further, quarterly reports can provide assistance with preparing future budgets by highlight deficiencies within the budget process.

User fees are summarized on the final page in the Town of Cobourg 2017 audit financial statement. It appears to be mainly Protection Services, Environmental Services and Water Services. There is no mention of Electricity income being included in user fees.

Bryan

CP. Totally agree with you regarding the need for quarterly financial reports. Regarding budget overspend, I believe that a 9% budget overspend is cause for concern, particularly when it is a trend rather than a one-off event. Unforseen events occur and are certainly mitigating factors. The East Pier problems are not unforseen. They have been known and discussed for years. Monk’s Cove might qualify as an unforseen event.
As noted in my comment below, LUI’s “electricity” fees (and LUI/LUSI’s expenses) are not included in the Town’s Revenue & Expense statement. A note to the financial statement gives an overview of HOLDCO’s financial state. HOLDCO (LUI & LUSI) are accounted for in the Town’s financial statement as an investment, rather than a full entity consolidation.

Ben

” LUI’s “electricity” fees (and LUI/LUSI’s expenses) are not included in the Town’s Revenue & Expense statement. “

Why would they LUI is a standalone company the only thing to be reported in the Town’s revenue statements should be the loss/gain in ownership revenue. Details of LUI should be standalone, as it has been done as an attachment.

Walter L. Luedtke

Just another meeting in the days of openness and transparency.
Mr. Carman asked Council for big bucks for Trinity Place. He had been turned down by County because “they don’t have the money” He says.
Actually, County is examining four other applications for funds for affordable housing, but is not considering Mr. Carman’s. Hmmmm
Predictably, the CTA’s inner circle was also heard from. And they are not happy.
Mr. Williams wants lower taxes without a reduction in services. Hmmm.
Mr. Lambert told Council that they have been doing it wrong for all these years. Cobourg does not have a revenue problem, it has a spending problem. Hmmmm.
Actually, all Ontario municipalities will see a reduction in Provincial grants. They just have not been told yet by how much.
Grants from the provincial and federal government are a critical part of the municipal financial picture. They account for 20% of municipal revenue across the sector and for many smaller municipalities, represent an even higher percentage of local revenue.
Any shortfall will have to be made up by tax increases or cuts in services. That’s my contribution.
Happy New Year!

gerinator

Before the Trolls get at the above piece, I just want to say ‘hellofapresentation’. Talk about a template. This is material that the CAO should be able to absorb within his purview, make internal improvements to financial reporting back to Council and the public at large.

Bryan

John, Good article, Some points of clarification that may help: JD wrote: Financial Information Report (FIR) from the Ontario Ministry of Municipal Affairs which covers all revenue and spending in municipalities – for example in Cobourg, that includes includes electricity, water and Northam Industrial Park which are reported separately. FIR is a report that the Town makes to the Ministry of Municipal Affairs. The other data source was the 2017 Cobourg Audited Financial Statements. “Electricity” revenue is LUI’s. The revenue and expenses of Holdco (LUI & LUSI) are NOT included in the Audited FS or the FIR. Included however, are Water & Sewer, Northam, Police, Police Business Services, Marina, Campground. JD wrote: Although not spelled out, user fees have to be Water and Electricity income (for Holdco) and rental income would be from Northam Industrial Park. These are interesting numbers but not contributing to Town Expenses covered by Taxation. My understanding is that user fees includes: Water & Sewer, Parking and Police Business Services. As noted above, Holdco (LUI & LUSI), operations and capital are NOT included in the audited FS or FIR. Rental includes Northam, Marina, Campground, These net revenue streams MAY affect the tax levy. For example: –… Read more »