Unpaid property taxes in city lower than provincial average, audit shows

By Kirk Winter

In 2019 the city collected a little over $139 million in taxation from the citizens of Kawartha Lakes, with $5.57 remaining in unpaid taxes from 2019 currently sitting on the city’s books.

“The ratio of taxes not paid is 4.01 per cent,” Carolyn Daynes, the treasurer for Kawartha Lakes, told council at their September meeting.

“And any delinquency under 10 per cent is deemed okay by the province. The average of uncollected taxes across the province sits at 5.6 per cent so the city is generally doing a good job.”

Daynes was presenting the results of the 2019 budget audit to council at their regular September meeting.

The audit, much delayed by COVID and done electronically for the first time, began with some good news.  The city ran a surplus in 2019 of $4.9 million. The city transferred $1.6 million of that surplus to help with costs of water and sewers, and about $100,000 to help with library expenses.

Those transfers left the city with almost $3 million remaining, which with the approval of council, was moved to the contingency reserve later in the meeting.

Daynes explained that the surplus was the product of several unrelated circumstances that included a windfall of $420,000 after the city found a short-term fund that was paying 2.9 per cent for short term investments.

Additional savings came from the city road budget where almost $2.6 million was not spent because winter came early forcing road improvements to be rolled over into another budget year.

A surprising $70,000 was saved in the streetlight budget as the installation of LED lights right across the city has begun to show returns on investment.

Daynes then detailed some statistics with council that appeared to be less rosy. She shared that city expenses are almost $203 million with about $33.6 million currently in reserve. That ratio of expenditures versus reserves puts the city into the moderate risk category for the province.

“We are going to have to try to manage this long term,” Daynes stated.

The treasurer moved on to focus on the city’s liquidity which is a comparison of the cash on hand the city currently has versus outstanding liabilities. Kawartha Lakes has $16.7 million on hand with liabilities of $27.2 million. To be deemed low risk by the province they should have a cash/current liabilities ratio of .5 per cent rather than the .62 per cent the city is currently registering.

The city also lags behind the provincial average on the issue of debt servicing. The average ratio for debt servicing provincially is 4.6 per cent with Kawartha Lakes well above that at 6.63 per cent. The city is currently carrying a combined debt of almost $121 million.

“Anything above 7.5 per cent is of concern,” Daynes added, “and we are looking into this issue closely.”

“Based on our assets the city could legally be carrying between $145-443 million,” the treasurer added.

The Northwest trunk line stood out in the budget presentation as the water and sewer line built by the city to encourage development in the Colborne Street and Hwy 36 quadrant still has $19.6 million owing on it.

All that money was to be paid by developers once they started to build new homes that would benefit from access to the trunk line. With development just beginning in 2020, Daynes told council that in 2018 developers made no payment on the trunk debt. The city was planning on contacting the individual companies to remind them of their legal commitments to pay for this infrastructure project.

Daynes concluded her audit presentation reminding councillors that with tangible capital assets of over $540 million the city finishes the 2019 audit with almost $435 million in accumulated surplus which is calculated by subtracting total debt from the city’s total assets.

Councillor Doug Elmslie wondered if development charges should be collected before construction rather than after development to avoid a circumstance like this happening again.

“We will get it all back,” Daynes promised, “we have liens on the developments so the money will be paid.”

Elmslie was surprised at the large surplus in the roads budget at a time when so much work needs to be done to local roads.

“$2 million dollars could pave a lot of roads,” Elmslie said.

Daynes suggested that with everything that is going on currently, “2020 was a great year to have a budget surplus.”

Councillor Ron Ashmore was concerned about the city’s liquidity looking at the ratio of cash on hand versus current outstanding liabilities.

“If we include our investments that are the same as cash our liquidity number is much better,” Daynes suggested.

The Omemee and Dunsford area councillor asked the treasurer when the city borrows what does it offer as security for the loan.

“Our balance sheet and our ability to raise taxes is what potential lenders look at,” Daynes stated.

Mayor Andy Letham wanted additional information on the $33 million in reserves, wondering if the money is already committed to other projects or is it uncommitted and unencumbered.

“The $33 million is uncommitted,” Daynes said.

The mayor also wanted to know what tax arrears for 2020 looked like. He seemed relieved when he was told by Daynes that there would likely only be a “minimal increase” for the 2020 taxation season.

Councillor Patrick O’Reilly wanted to know if it is legal for the city to borrow against the assets that currently sit in the combined CHEST funds that are managed and invested by a volunteer board of trustees and the city.

“Yes it is legal,” Daynes said, “but has never been a popular option with past councils.”

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