January 10, 2015
1306
Kincardine council is set to continue budget talks Monday night (Jan. 12) at a special meeting, slated for the Underwood Community Centre, beginning at 5 p.m.
An information report at that meeting will also outline the $1-million in legal and professional fees incurred by the municipality in association with the sale of Bruce Telecom.
According to the staff report, legal and advisory costs pertaining to the initial planned sale of the telephone company (announced last January and scuttled in August) including “significant unforeseen professional fees resulting from the intervention of the Competition Bureau,” amount to $1,057,007 over 2013 and 2014.
Of that, legal fees total $865,709, advisory services total $187,524, and accounting fees total $3,774.
The report states that included in the legal fees, is $387,000 (45 per cent) as a result of the intervention of the Competition Bureau, Freedom of Information requests, and the closed meeting report.
“Ultimately, a decision will need to be made as to how the 2014 professional fees of $817,000 will be funded,” states the report. “Had the asset sale been completed, these costs would have been recovered out of the $3-million in cash assets of Bruce Telecom that would have been retained by the municipality. The 2013 costs were funded out of the operating surplus.”
Kincardine is already facing huge challenges with this year's budget.
At the initial budget meeting in early December, treasurer Roxana Baumann explained that the municipality is losing a considerable amount of revenue, including $248,000 (20-per-cent decrease) in the Ontario Municipal Partnership Fund, with another 15 per cent reduction in 2016; a loss of $770,000 from the Ontario Power Generation (OPG) annual Deep Geologic Repository (DGR) hosting agreement because the project's milestone was not met this year; and a decrease of $200,000 (25 per cent) from the Bruce Telecom dividend.
On the expense side, are increasing energy costs of about $130,000, said Baumann, and new loan payments of $247,000 for the rescue truck and the municipal administrative centre building renovations. One positive note, she said, is the reduction in policing costs of $350,000, due to the new billing model.
“Without any service level changes, a 12.7-per-cent tax rate increase would be required to make up this shortfall,” said Baumann. “Even with this 12.7-per-cent increase, all 2015 capital projects would need to be funded entirely from debt or existing reserve funds.”
She said staff has cut expenses in wages and recruitment costs by $107,000; travel, conferences and training by $50,000; audit fees by $22,500; community investment grants by $20,000, building and equipment maintenance costs by $12,500; equipment purchases by $12,500; other miscellaneous expenses, $5,000; reduction in election reserve contribution of $3,000; for a total of $232,500 in savings.
Baumann said there are other budget considerations, such as the funding of the Penetangore Regional Economic Development Corporation (PREDC) at $142,000; a new fleet co-ordinator at $83,000 (net cost of $49,000 due to reduction in outsourcing); and funding Team Kincardine's implementation of the Integrated Community Sustainability Plan (ICSP) at $12,000.
Included in the budget, she said, is a contribution of $1,080,000 to the lifecycle reserve fund to finance the asset management program.
Baumann emphasized to council that the funds set aside for asset management are far too low. “Right now, we have an annual infrastructure deficit of about $4-million. All we have in reserve funds for infrastructure is $930,000. We should be setting aside $3.6-million per year, instead of the $175,000 we are contributing to reserves.”
To properly fund all of the municipality's assets, Baumann recommended allocating all future DGR hosting payments to the lifecycle reserve fund, beginning in 2016; and increasing the tax rate by three per cent each year for the next 10 years and dedicating all of this money to the lifecycle reserve fund.
As for the 2015 budget, Baumann said the draft report proposes a nine-per-cent increase which would allow the municipality to continue offering existing services and programs to the community; incorporate a full user-pay model for garbage bag tags, and allow the municipality to begin achieving long-term financial sustainability through the implementation of an asset management program with a lifecycle reserve fund contribution of $1,080,000 for 2015.
This increase, she said, would cost the average residential household an extra $117 in property taxes. Currently, the average homeowner pays about $1,300 per year for the municipal portion of the tax bill, she said.
Budget talks continue Monday night in Underwood.
Written ByLiz Dadson is the founder and editor of the Kincardine Record and has been in the news business since 1986.
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