first published on Shaun on Council
On April 14, Council finally passed the 2015 budget. The vote came a few weeks later than expected due to a debate among councillors over the relative importance of tax cuts versus the town’s long-range financial plan (LRFP). Some councillors wanted to use capital reserves to fund a tax cut. Others felt taking from reserves amounted to short-term gain for long-term pain. The result was a compromise.
For the 2015 budget, the revenue increase will be 6.4%, lower than the last three years. Council left all projected capital costs in place and trimmed operation costs in a few areas. When blended with the school board and county levy, the average property tax increase will be 3.5% in 2015.
From 2012 to 2014, the town increased its revenue by 7% annually as part of the LRFP. When blended with the school board and county levy, that amounted to an average property tax increase of 4%.
Long Range Financial Planning
If we stick with the LRFP, Mississippi Mills will be in good financial health. I look to the County of Lanark for inspiration. Their annual tax increases are 2.5% or less. The county’s debt is half of ours and is declining rapidly. Lanark’s reserves are four times greater than ours, which means they can lend themselves funds to cover capital costs instead of borrowing from banks.
Under the LRFP, we need to continue with an annual town revenue increase of between 6.5% and 7% for three more budgets. That will help fund infrastructure upgrades and build reserves. Beginning in 2019, we expect the town’s annual revenue increase to drop to 2.5%.
Mississippi Mills faces significant capital costs in the next few years. We need $4.5 million by 2018 to fix or replace old bridges and failing culverts. By 2018, we will have committed over $1 million to upgrade the sewer and water lines in downtown Almonte and rebuild Mill Street. We will finance much of that with new debt.
The town’s asset management plan shows that we need to invest $53 million by 2030 to replace or repair our roads, bridges and buildings. (That does not include water and sewer infrastructure.) We can expect about $16 million of that from the gas tax rebate and development charges. The remainder will come from property tax and reserves.
Our current debt is about $16 million (including water and sewer) and will grow to between $17 and $18 million by 2018. We need to build up reserves in order to end borrowing money for big-ticket items.
Our current reserves are $3.3 million and should reach $12 million by 2030 under the LRFP. After 2018, we can finance most projects through reserves if we stick with the LRFP. That means bank debt and interest charges will decline and come close to zero by 2030.
I believe we can trim some operating costs, as we did this year, and still meet the goals of the LRFP. But, if we use reserves for any purpose other than to cover capital costs, the LRFP will fail.