By Pepper Parr
JANUARY 19th, 2015
BURLINGTON, ON
The report to council set out how the treasurer thought the surplus from the 2015 budget should be used. A cool $4,750,000 that was not spent in 2015 will not get returned to the taxpayers – it will get tucked into various reserve funds and saved for those rainy days.
The surplus came from money budgeted but not spent on city services and significant improvements on revenue the city was able to pull in. We overspent on corporate expenditures. The numbers are in millions.
Where were the savings experienced?
The city treasurer reports that expenses were closely monitored in 2015 to find ways to reduce operating costs; she reports the 2015 retained savings as follows:
• Human Resource Savings
City human resource costs (excluding winter control) are projected to have a favourable variance of $1,555,230. (The treasurer uses the term favourable and unfavourable balances which most of us know as a surplus and deficit.)
The city experienced a large number of vacancies throughout the year, some of them for senior positions. The favourable variance is primarily attributed to the period of time from when the position became vacant to being filled after the competition was complete.
• Earnings on Investments
Investment income is projected to exceed expectations by $1,327,017. This positive variance is attributed to $2,287,375 of realized capital gains, of which $960,358 will be used to meet the budget of $5.1 million. The proposed budget for Earnings on Investments for 2016 has been increased by $100,000 to $5.2 million.
• Supplementary Taxes
Supplementary tax revenues exceeded budget by $1,885,369. This is due to one property with three high rise buildings assessed as multi-residential for 3 years of taxes (2013-2015) totaling just over $2.0M in city revenues in 2015.
The city saved on the cost of fuel – but the projected bus ticket sales target was not reached. Transit is going to be an ongoing cost that the city does not seem to be really prepared for – where is the problem?
• Transit Fare Revenues
Transit fare revenue is projected to have an unfavourable variance of $719,870 as a result of the 2015 budget not being in line with actual receipts. The proposed 2016 budget has been decreased by approximately $592K to $5.1 million to better reflect the actual trend.
• Diesel Fuel Costs
Diesel fuel costs are projected to have a favourable variance of $643,572. The majority of the variance is found in Transit.This variance is mainly attributed to lower than anticipated fuel prices.The proposed budget has been decreased by approximately $110K for 2016 to $2.9 million.
The remaining difference in the retained savings is comprised of favourable and unfavourable variances spread across numerous programs within the city. The 2015 Operating Budget Performance Report will provide more details on these program variances.
Consistent with past practice and recognizing the one-time nature of the retained savings, this report recommends a transfer to provide flexibility for addressing future one-time expenditures.
The retained savings is not to be used to directly reduce the proposed 2016 tax increase. As this is a one-time funding source, it is important that there is no reliance on retained savings built into the budget process on an ongoing basis.
2015 Recommended Retained Savings Disposition
• $738,361 Provision to Tax Rate Stabilization Reserve Fund
It is recommended that $738,361 be set aside to finance one-time expenditures included in the 2016 Proposed Operating Budget. This allows unique one-time needs to be addressed without affecting the tax rate and without being built into future budget years. These one-time expenditures will be addressed through the review of the 2016 Proposed Operating Budget.
• $750,000 Provision to Capital Purposes Reserve Fund
In order to meet future funding challenges and for the city to support its vision for implementing priority capital projects, staff recommend that $750,000 be allocated to the Capital Purposes reserve fund. This will provide funding for unforeseen requirements for approved projects, funding related to potential future federal/provincial programs and the accelerated road renewal program approved by Council. The 2015 balance for the Capital Purposes Reserve Fund is $9.5 million.
• $750,000 Provision to Strategic Land Acquisition Reserve Fund
The $750,000 provision will assist in replenishing the reserve fund for future strategic land needs. The 2015 uncommitted balance in the Strategic Land Acquisition Reserve Fund is $908K.
• $750,000 Provision to Information Technology Renewal Reserve Fund This provision will provide funding for life-cycle renewal of Information Technology infrastructure.
• $500,000 Provision to Insurance Reserve
In order to maintain a sufficient balance to cover both premium and deductible expenses, it is recommended that funding be allocated to this reserve. The 2015 balance is $663K.
• $500,000 Provision to Benefits Reserve Fund
It is recommended that $500,000 be transferred to the Benefits Reserve Fund to help replenish the balance which is currently $1.2 million.
• $500,000 Provision to Policy Initiatives Reserve Fund
In order to support resource requirements to finalize the Official Plan and other related studies.The balance is currently $100K.
• $250,000 Provision to Severe Weather Reserve Fund
This will help stabilize future budgets when major storms dramatically impact the operating budget.
The balance in the Severe Weather Reserve Fund is currently $2.8 million. It is recommended that the City target a one-year budget for the Winter Maintenance (which is approx. $4.6 million). .
• $11,639 Provision to Tax Rate Stabilization Reserve Fund
The remaining amount of $11,639 to the Tax Rate Stabilization Reserve Fund.
Prior to the calculation of the preliminary 2015 year-end retained savings, staff estimated any minor accounts payable, year-end accruals, and any year-end transfers for net zero activities that needed to be made as part of the year- end close process. The following are the estimated year end transfers for net zero activities.
DAAP Reserve Funds
In 2005, the Engineering Fee Stabilization Reserve Fund, the Building Permit Stabilization Reserve Fund and the Planning Fee Stabilization Reserve Fund were created to ease budget pressures should development revenues slow down due to economic and/or market conditions.
The table below shows the projected year-end transfers included in the the calculation of the 2015 preliminary year-end retained savings.
• Engineering Fee Stabilization Reserve Fund
The decrease in Subdivision Administration Fees has resulted in a draw of
$91,829 from the reserve fund. Residential development in Burlington has changed from large-scale Greenfield subdivision applications, to small-scale, infill and intensification sites requiring OPA, zoning, site plan and condominium approvals. The proposed 2016 Budget for Subdivision Administration revenues has been flatlined to $100,000 and will be gradually reduced to zero over time using the $275,000 in the Reserve Fund.
• Building Permit Stabilization Reserve Fund
The Building Permit revenues for 2015 are $3,479,851. These revenues are offset by expenditures (both direct and indirect as per the Bill 124 model), with the resulting draw from the reserve fund of $244,544.
The proposed 2016 Budget for building permit revenues have been increased by
$98,770 to be in line with the 3 year average 2012-2014.
• Planning Fee Stabilization Reserve Fund
Planning Fee revenues have a favourable variance of $566,144 mainly due to increases in official plan and rezoning revenues. A provision of $566,144 has been made to the Planning Fee Stabilization Reserve Fund.
The proposed 2016 Budget for planning revenues has been increased by $45,000 to $1,695,000 to be in line with the 3 year average 2012-2014.
Budgeting is part science and part dealing with the unknown. Set out below is what the city experienced between 2011 and 2015.
Top portion of the report shows where the surpluses came from – bottom shows what city council decided to do with the surplus.
Interesting. Over the last 5 years, the city has built up the “Tax Rate Stabilization Reserve Fund” by approximately $6.5 million dollars.
Human resources has been the most persistent contributor – meaning that most of the city’s departments have been running at less than what they have budgeted for – likely a result of turnover and delays in replacing people who have gone elsewhere.
I understand that this represents increased assets that can only be applied in a one-time fashion (if we use it all in one year, taxes will go up by a much bigger percentage in the following year) but at what point does the city determine that it is time to use those reserves for their stated purpose – stabilizing the tax rate?
Thank you Chris for this insight into city finances and bringing it to our attention.
I agree with your question, but where do we get an answer?
More generally, all the Reserve Funds need a close scrutiny to see what contributes in, and what any disbursements out involve.
Something to think about and projects to do.
But Editor should be more sensitive and pay closer attention to detail. db is correct – a Burlington bus would have been appropriate!!!! Do it right or don’t do it all…is the saying!!
Every single Burlington resident should be marching Brant St in front of City Hall chanting our completer dissatisfaction with our local government!! An absolute disgrace!!!!
Why is there a picture of a Hamilton City HSR bus in this article? Was there no City Of Burlington bus available? We’re a pretty big city. Are we part of Hamilton now?
Editor’s note: This reader is seeing this the wrong way – Hamilton is now part of us? The picture was taken during a busy traffic time of day – buses from Hamilton pull into the terminal on John Street – part of the way transit works in this city.
This $4.75 million is 3.23% of the net tax levy of almost $147 million.
Taking $3 million of this and subtracting it from the tax levy, would bring the increase down to about the 2% inflation the city claims.
From the point of view of the residents and business people, adding all of this to reserves is akin to adding more fat to the city finances.
The 20 year trend of exponential tax increases that double the tax take, also has fat, for sure, somewhere, but Council doesn’t appear to have asked Management to go find some to make the cuts needed to stay within inflation.
Here’s another pot of money, paid last year by residents, that I am sure residents would agree could help reduce this years increase to something more like the “affordable” the city says is the number 1 goal.
Let’s see some talk and action about this, please.