Tax increase from capital budget

The Capital Budget for the City of Yorkton was approved by Yorkton Council at its regular meeting Monday.

This year's capital budget is one being influenced greatly by the City's current drainage program, offered Lonnie Kaal, Director of Finance with the City.

"The Capital budget includes debt, reserves and capital which will require additional funding primarily because of the significant drainage projects planned over the next five years. The design and construction of the four storm water retention ponds is estimated at $7,500,000 and will need to be funded from a combination of existing capital funds and tax increases," detailed Kaal's report to Council.

This year's capital budget will see a 2.5 per cent tax increase, detailed Kaal. The increase will generate an additional $365,470, all of which will be dedicated to the capital side of the City's budget.

A 2.5 per cent tax increase relates to $38 a year, or $3.15 per month on a residential property with an assessment of $100,000.

On a commercial property with a $100,000 assessment the tax increase would be $6.25 per month, or $75 per year.

The additional tax revenue will be added to a $3,398,290 contribution from city operations, and $905,285 from capital grants, for a total 2012 contribution to capital of $4,669,045, explained Kaal.

On the expenditure side of the capital budget are debt payments of $1,800,045, with transfers to reserves of $625,000, leaving a net toward capital projects of $2,244,000, she added.

The debt payments are the same as last year, and the proposed allocations to reserves of $625,000 should continue, in spite of the added capital requirements, said Kaal.

Kaal said the drainage program will impact not just the 2012 Capital Budget, but budgets over the next several years.

Phasing in the drainage project over five years - even if this is paid for over 10 years - requires a minimum of $785,000 annually, said Kaal.

The costs associated with the drainage plan is the reason for the 2.5 per cent tax increase in 2012, and an additional 2.5 per cent increase suggested for 2013, said Kaal.

Even with the tax increases, Kaal presented Council with two budgetary options which required either $200,000, or $400,000 from the annual Capital Budget.

Council was split on whether taking the $400,000 option to shorten payments but lessen the amount available for capital in the next half decade was better than prolonging payments by drawing only $200,000 annually from the budget, but extending payments out to near a decade.

Councillor Larry Pearen made a motion to go with the longer payment option. He said the drainage projects are "important" but they are not the only important work the City is undertaking. He said by drawing less from the capital budget on an annual basis future Councils would have "more flexibility" to deal with other projects.

Coun. Richard Okrainec agreed with the need to be aware of other projects on the horizon.

"I just know there's so many other things we have to do," he said, adding drawing only $200,000 annually gives them more options.

Coun. Bob Maloney also spoke in preference of the longer payment period, based on the idea the additional $200,000 annually available for other capital projects would "give us flexibility.

"We don't tie our hands where the money is going."

Maloney said it is impossible to predict future needs, so greater flexibility is a wise choice, it "is short-sighted."

By contrast, Coun. Chris Wyatt took up the cause for opting for utilizing $400,000 annually in order to shorten the payment period.

"It will leave the Council of the future a little more freedom," he said.

Wyatt said he also still held out hope the City might qualify for additional grant dollars, in particular on the drainage projects. Tossing out a figure of $1 to $2 million Wyatt said that could offset the capital budget draw down of $400,000.

Coun. Ross Fisher said he too liked the shorter payment option.

"I was going to second what Councillor Wyatt was saying," he said. "I like the idea of paying projects as we go if possible."

Fisher said the quicker payment option creates greater "flexibility down the road," adding a longer payment period will cost the City more in percentage.

Coun. Les Arnelien said as a banker he too likes the shorter payment option, and the interest savings that it will create.

Arnelien also noted that the City is still spending significantly more on capital today; $2.2 million in the 2012 budget compared to $1.2 million in 2006.

"That's twice as much as we had six years ago," he said. " We've come a long way from where we were five, six years ago."

With Council clearly split the decision would come down to Mayor James Wilson, who asked Kaal if a decision was binding over its term, or whether future Councils could alter the payment schedule if a need arose?

Since the $400,000 was a budgetary item, Kaal said it could be adjusted annually if required.
"Every year the capital budget may change," she said.

The initial motion to go with the Capital Budget including the longer term payments was defeated, with Councillors Pearen, Okrainec and Maloney in favour.

The budget with the $400,000 for the drainage projects included was then passed, with the same trio opposed.

The Capital Budget in 2012 also includes a carry forward of a significant amount of work budgeted for in the current year, but not completed.

Projects carried forward from 2011, are $4,808,380, the majority of which relate to completing the waterworks projects. These are fully funded, said Kaal.