If something that is clearly incorrect is repeated often enough - does that make it true?

burlbudget2016By Pepper Parr

January 19th 2016


The budget city council is debating this week and will make law next week adheres to the Long Term Financial plan created in 2012 which contained the following key strategic objectives for the city:

1. Competitive Property Taxes
2. Responsible Debt Management
3. Improved Reserves and Reserve Funds
4. Predictable Infrastructure Investment
5. Recognized Value for Services

Ford Joan at Budget Bazaar

City treasurer Joan Ford puts the numbers together – she does so at city council’s direction.

Staff have shown a realistic scenario where assessment growth is slowing; no new legacy projects are forecasted; and infrastructure renewal funding is addressed over the 20 year time horizon.

The budget being debated recognizes budget drivers and includes the following assumptions within each item:

Maintaining Current Service Levels – Base Budget

Inflationary Impacts and User Fees

With the exception of human resources and commodities (hydro, water, fuel etc.), 2.0% inflation per year has been applied to all other expense categories (materials and supplies, purchased services and contributions to local boards and committees)

• The increases to User Rates and Fees assumed a 2.0% increase per annum, which is dependent on the nature of the revenues and external market conditions

• An annual increase of 3% to the Vehicle Depreciation Reserve Fund to sustain the City’s fleet and equipment inventory

Corporate Expenditures/Revenues

• An annual increase to the provisions for Insurance and Contingency Reserves of
$300,000 and $100,000 respectively

• An increase in Investment Income of $100,000 per year in 2019 and beyond given the current low interest rate environment

Financial impact 20 year

Long term tax increase projections – above current inflation every year.

Other Expenditures
Infrastructure Renewal Funding and Joseph Brant Hospital

• An annual increase of 1.25% for Dedicated Infrastructure Renewal Funding from 2016-2022, reduced to 1.0% for 2023-2033 and 0.5% for 2034 and 2035. This provides funding for capital renewal, as per the Asset Management Financing Plan (approved 20 year scenario)

• An annual increase of 0.2% (2016-2019) in order to finance the repayment of additional tax supported debt for roadways. This will be repositioned in 2020 to fund renewal needs for new infrastructure

• Includes the repositioning of the hospital levy to infrastructure renewal in 2019 ($1.3 million), 2026 ($900,000) and 2027 ($2.6 million)

As with all forecasts, it is imperative to recognize that there are a vast number of unknown factors that will likely occur in the future that could impact the model. In order to address these unpredictable factors, an amount of $300,000 has been included in the 2018 forecast, increasing by $50,000 per year.

A community, still in its formative stage, holds a fund raising drive for a school that has yet to open. Construction is on going and so are the muddy roads.

Assessment growth is stagnant – costs of running the city increasing – there is a crunch coming that is going to hit pocketbooks.

Assessment Growth
Assessment growth is estimated to be 0.9% in 2017 and decreasing by 0.1% per year to 0.6% in 2020 and beyond. Over the last 5 years, weighted assessment growth has ranged from a low of 0.5% to just over 1.0%. The five year average is 0.9%.

Financial Matters:
The single largest portion of City funding comes from property taxes. As outlined in the Long Term Financial Plan, strategic objective 1 is Competitive Property Taxes; whereby, “the city must respond to the demand for programs, services, and the continued maintenance of our existing infrastructure in an affordable manner.

The city must strike a balance between conflicting goals, such as minimizing tax increases, while maintaining existing programs, services and infrastructure, and providing new services in a climate of increasing costs.”

The report then comes to this astounding conclusion: The 2017 -2035 forecast meets recommendation 1, whereby, “Base budget tax rate changes align closely with inflation”.

Inflation currently hovers at the 2% level and is expected to remain at that level for the next few years. The simulation forecasts the city tax impact from 2017 to 2035 to begin at 3.89% reducing to 2.96%.

Do they do mathematics differently at city hall?

And if they repeat the statement: “Base budget tax rate changes align closely with inflation”. often enough does that make it true?

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4 comments to If something that is clearly incorrect is repeated often enough – does that make it true?

  • Tom Muir

    The compounded tax rate increases will double the tax take before the forecast period of 20 years is elapsed. Use the rule of 72 to figure that out.

    What do residents and businessmen think about that exponential curve trend upwards of this tax burden?

    Can your business double the price for your goods and services over the same time period?

    I hope your net income is increasing by more than 4% a year for the next 20. Mine is not.

    Is this really raising taxes in an affordable manner?

    This is really inflationary, in fact, and is shifting income from residents and business to the city for them to spend.

    It seems like Council isn’t really thinking about this cumulative trend, in and of itself, and the consequences, at all.

    No comment or request in the budget papers that I saw.

    And residents were not asked what they thought, they were not “engaged”, just “informed” – this is what we are doing and here’s the tax take.

    I would like to see Council pay a lot of attention to this trend.

    We need the Managers to find the cuts needed to shave this to the inflation rate.

    Don’t tell me there’s no fat to be found.

    • John

      For the business this is actually worse. Most commercial tax rates are base on about 1.5 times the residential number, when we read 4% they read 6%.

  • John

    “If the facts don’t fit the theory, change the facts”
    Attributed to Albert Einstein, I think he understood most politicians.

  • JQ Public

    I think it’s all in the definition of base tax rate. Base rate is for all the things we need (at 2%, matching inflation) and the other “extra” rate is for all the other things we need (again at about 2%, matching inflation). Both match inflation, so we’re good to go! New math strikes again!