Minimal tax rate increase for 2017
Sharon McLeay
Times Contributor
The 2017 Town of Strathmore financial plan was released on Dec. 7, with a request for a small residential and commercial tax increase.
“The 2107 financial plan has been prepared taking into consideration the priorities and direction established by council during the budget deliberations,” said Mel Tiede, director of corporate services. “The Town of Strathmore will strive to provide a level of municipal service to the community that will take into consideration the community’s service expectations and the community’s ability to pay for these services.”
Tiede said maintaining existing infrastructure puts pressure on preserving current service and developing new programs. He said the municipality is responding by adopting a more creative cost effective approach to service delivery. Some of his suggestions were to improve financial controls on expenditures and budgets within departments, prioritize future projects, and invest in the reserve funding, leverage financial opportunities, grow alternative revenue sources, contain tax revenue to core service delivery, and review and revise utility rate models to full cost recovery.
Tiede indicated borrowing should be done only for sustainable long-term assets at affordable levels.
Currently the town has approximately a 22 per cent borrowing limit. With additional borrowing predicted in the next year, the town will be at 39 to 40 per cent of its borrowing limit.
Provincial regulation caps debt limits at 60 per cent. Tiede suggested that funding reserves through long-term investment strategies would protect the reserve principal and leave investments fluid if required for use. He suggested council limit funding additions of programs and services that don’t have a revenue source; otherwise property taxes may have to increase over and above the Calgary inflation rate and affect existing service provision.
The town currently has an approximate 14 per cent difference in tax rate between commercial and residential properties. It is lower than other communities in southern Alberta. Tiede considered raising the commercial assessments marginally over a five-year period, as it would help the budget. He recommended increasing franchise fees paid by schools, churches, institutions, hospitals, the Legion, WID, senior’s lodges and health units to the maximum limit of 20 per cent. Recreation fees will be reviewed and adjusted to competitive rates with other municipalities to sustain full cost recovery, excepting graduating rates for seniors, youth and disabled persons. He cautioned that the town cannot depend on continued grants for capital funding from senior levels of government, and will need to maximize and leverage infrastructure and operating grants where possible.
The town’s municipal debt limit sits at 27 per cent and has a servicing limit of 30 per cent, as of December 2015. Tiede said guidelines for acquiring debt should include only municipal infrastructure of high importance and essential municipal services, so debt limits don’t continue to climb. Essential services are water, sewer and emergency services.
At the beginning of the year, total operating reserves were $9,617,000. After council authorized draws on the unrestricted surplus, the balance is $6,583,000.
Town engineered structures, buildings and land improvements are currently valued at $155 million, with an estimated depreciation of $45 million for these assets. The town has $5 million in capital reserves, which leaves $40 million of infrastructure deficit. Tiede said infrastructure depreciates by about $3.8 million annually and currently there is no plan to replace these assets over the long term.
Tiede suggested a capital asset replacement reserve be developed with funding coming from a one per cent tax increase over 20 years, to a maximum of 50 per cent coverage of infrastructure deficits.
The 2017 operating budget for the town is $31,414,748. The largest amounts in the budget are for contracted and general services. Long-term debt is about $8.1 million and major savings were recently realized by searching out alternate utility providers last year. The Family Centre, Aquatic Centre and Civic Centre lose $2,108,000 annually. About 20 per cent of resident tax dollars go to subsidize these facilities.
Council approved a one per cent residential tax adjustment for 2017, which works out to about $16 per household. Commercial properties taxes will increase by two per cent, for about a $38 increase.