City debates significant tax increases for 10 straight years

City facing massive shortfall of money for capital projects

Will city residents be facing 10 straight years of 4.5 per cent per year property tax increases? Or will it close arenas, libraries, and community halls, or maybe limit garbage pick-up to every other week? All this and more were debated at the recent committee of the whole meeting by Kawartha Lakes Council.

The city learned that over the next 10 years it will need to generate $959 million dollars just to cover predicted capital projects.

What was even more concerning to councillors was that the information provided by CAO Ron Taylor and city treasurer Carolyn Daynes clearly showed that without a special capital tax levy of 1.5 percent each of the next 10 years, the city will either have to borrow more money to make the capital improvements or ignore work that needs to be done and let city assets degrade.

CAO Ron Taylor spearheaded the two hour look at the city’s long-term financial health and shared what he called “lessons learned” over the first half of the city’s long term financial plan that began in 2017.

“We have too little money in capital reserves,” Taylor said. “We are asset rich and those assets need to be maintained. We have a small population and lots of buildings. We have a massive gap to catch up building up the capital reserve to where it needs to be.”

Taylor told council that the city has only managed to save 35 per cent of the funds they hoped to have for major capital projects leading to a backlog of capital-supported building projects, and the backlog of projects “is not sustainable.”

“We hoped to have $25.6 million saved. Instead we have only $9.1 million saved,” Taylor said. “We have too many older assets that need work. We have too many post-amalgamation assets that are not used nearly enough.”

Taylor explained that two crucial predictions were made in 2017 when the first long term financial plan was being assembled that have not been met. The first miscalculation made by the city was that staff predicted its operating costs would rise two per cent per year instead of the 5.4 per cent per year that has happened. The second mistake was the plan required on average a four per cent increase per year in taxation instead of the averaged 2.8 per cent increase taxpayers have seen since 2018.

Taylor showed that from 2018-2021 the city did not collect $11 million in revenue that the long-term plan required to function. The CAO pointed out that if things continue at this current pace, by 2031 that number will have risen to $77 million in revenue not collected because of less-than budgeted tax increases.

“We need to build the capital reserves. This has to be a priority,” Taylor said. “We have deviated from the (long-term financial plan) and starved the capital reserves. We have many costly upgrades and repairs on the horizon.”

The CAO did come with potential answers to this shortfall, and it was hotly debated for over an hour. Senior staff proposed a dedicated capital levy of 1.5 per cent per year for the next 10 years, with that money going to pay for capital upgrades and repairs. Another option is increasing the amount the city can borrow.

Councillor Ron Ashmore wondered if a partial solution to the shortfall in the capital reserve is the selling of city-owned gravel pits. “Those could be worth millions.”

“We are looking at all efficiencies,” Taylor said. “We need a methodical review involving council and staff to take a look at our assets.”

Treasurer Daynes made it clear that “there needs to be a minimum three per cent tax increase in each of the 10 years to maintain what the city already has in the way of services.”

Councillor Pat Dunn said that council always seems to be trying to improve services “for the sake of improving services.”

“We have two choices. We could do less or tax more. We are not addressing our problems. We are making the same mistake year after year. We are digging ourselves a hole. Look at the Logie Street Park. That was a good use of capital money, but now we need to spend funds to operate it. Are we looking at everything we do to determine if they are a need or a want? We need to be looking hard on what we need to cut.”

Taylor admitted it “was almost impossible” to balance expectations of taxpayers with what the city can afford.

Dunn told senior staff that the capital shortfall is on the current council who failed to implement the 4 per cent tax increase the plan needed to be financially viable.

Mayor Andy Letham brought up cuts as he has many times in the past. “We have a business model we cannot afford. We are pushing the can down the road. We have too many arenas, service centres, libraries and community halls. Can we pick up garbage every second week? We could reduce services. Why are we servicing private roads when we can’t service the ones we own? We don’t want to upset our constituents. This is not on staff. This is on council.”

Letham said council hasn’t “nearly gone far enough” to reduce what the city does. “We need to find a happy medium between reducing services and increasing taxes. It is just BS…we can’t afford what we are doing.”

Ashmore wondered if after the significant growth the area is experiencing is factored in to the budgeting process will the city’s finances be any healthier.

Taylor said typically a one per cent growth rate is factored. “We are expecting that growth rate to increase to 2 to 3 per cent.”

Daynes added, “We are building rich and revenue poor. Our arena revenues have one of the lowest fee structures in the area. This needs to be looked at.”

Councillor Doug Elmslie asked how much pressure the potential of a new Victoria Manor long term care home by 2025 is putting on the budget. Elmslie was told by Taylor that even with the elimination of the Victoria Manor project, the three per cent increase plus the 1.5 per cent surcharge would be necessary.

“We have 20 years worth of work to achieve in the next 10 years,” Taylor told council.

A conversation was also had about raising the city debt limit from 6.3 per cent of total city revenues including taxes, grants and user fees to 7.5 per cent of total city revenue that might allow borrowing to help finance capital projects.

Dunn said the city will never make a serious decision “about living within our budget as long as we can entertain the thought that we can just borrow money and someone else can pay for it.”

“Some of us are only looking at one more year on council. We don’t have the gumption to make sure we have the money to pay for our spending. Our kids and grandkids will be dealing with this debt. We need to find some savings. We could start with the $12 million set aside for the Colborne Street Bridge. It doesn’t need to be spent this year.”

Elmslie countered, saying he does not “entirely agree with the vision laid out by Councillor Dunn.”

“It is easy to say cut spending and services, but the reality is some of those services are important.”

Daynes pushed for an increase in the debt limit saying it is necessary before the city goes ahead with its backlog of capital projects.

Dunn said constituents need to realize they are paying directly for projects with tax increases. “These projects shouldn’t be buried with the debt where folks won’t make the connection. It is just wrong.”

Taylor said every year the city tries to figure out what is needed in the way of services. “There are no frivolous lists and wants out there. There are many projects that year by year we cannot accommodate. Council will need to prioritize the options and either approve, shift or eliminate programs.”

Council, after hearing all the numbers presented, recommended raising the debt ceiling to 7.5 percent of total city revenue, which is still till less than the 10 percent that some staff recommended.

“We don’t have a choice,” Elmslie said. “We need to keep the services where they are.”

The 1.5 percent capital levy will be discussed further at the next council meeting on Oct. 19, where its implementation for 2022 is expected.