Budget 2018: For the last few months Council has been working through the 2018/2019 budget process and in our last Budget Committee we got our first look at the whole picture. The municipal budget is complicated in the details and impacts, but in a very basic way, it’s similar to how a household functions. Every year, HRM collects money, mainly in the form of taxes, that can then be used to pay for programs (income and bills), put in reserve for future expenses (savings), pay for capital expenses (generally one-time large items), or to pay off debt. The pressing questions for HRM are: How much money is coming in and does that pay the bills? If not, can we raise more money or cut expenses? What balance do we strike between the two? How much should we pay upfront for larger items versus saving for them or taking on debt? How much should we be saving? How aggressive should we be in paying down the debt we have?
The good news in answering these questions is that HRM has options because the municipality’s books are in pretty good shape. HRM’s debt has been steadily declining, falling from a high of $350 million just after amalgamation to just over $240 million in 2018. HRM has money stashed away in reserves totaling over $200 million, of which $85 million is available for use. HRM takes on new debt for capital projects, but each year the municipality also pays a substantial amount from the operating budget (taking money raised in taxes that year and using it to pay for capital instead of using debt). HRM’s goal is to pay for the state of good repair from the yearly budget and borrow or save for larger longer-term projects like the Dartmouth 4-Pad. HRM’s fiscal situation isn’t care-free, but the municipality has room to maneuver and prioritize.
While HRM’s fiscal position is strong, this year is proving to be a bit more challenging than the last few. After years of growth, the commercial market in HRM is slowing, which is impacting the value of commercial assessments. While previous years have seen steady assessment increases, 2017 saw very little increase and projections for 2018 have almost no assessment increases at all. Projections indicate this trend will continue for at least the next few years as the market absorbs the excess space. Since commercial contributes a larger relative proportion of municipal revenue than residential, the slowing commercial market has put pressure on HRM’s budget. Rising costs, particularly in police and fire have also added to the mix. The planned tax increase to cover HRM’s costs for this year is 1.9%, which equates to a $36 increase in the average residential tax bill ($1,880 to $1,916).
Budget Options List: At this point in the budget process, Council has heard from all of the various HRM departments and the broad strokes of what programs, projects and work will happen in the 2018/2019 fiscal year are pretty much set. Council does, however, still have the task of going through its options list on the 28th. The options list are items that weren’t budgeted for when Council started its two-year budget cycle back in 2017, but that have been identified by a majority as being worthy of further consideration. The complete list is available below and includes two key Dartmouth items: the extended Alderney Ferry hours and the Lake Banook Pollution Study (see the Downtown Dartmouth Business Commission petition for the ferry).
|Item||2018/2019 Cost||Average Bill Impact|
|Council Office Travel Expenses||$30,000||$0.12|
|Sackville Youth Centre||$65,000||$0.26|
|Recreation Trail Pilot with HRTA||$250,000||$0.99|
|2nd Parade Float||$40,000||$0.16|
|Library Taste Like Home Program||$50,000||$0.20|
|Lake Banook Pollution Study||$150,000||$0.59|
|Alderney Ferry Hours||$550,000||$2.17|
|Grant Funding for Arts Organizations||$100,000||$0.39|
|Additional RCMP Officers||$225,000||$0.9|
|Additional Halifax Police Budget*||$555,000||$2.22|
|Rural Transit Grants||$60,000||$0.24|
|Fire Department Training||$294,000||$1.18|
|Fire Department Uniforms||$268,000||$1.07|
|Fire Department Logistics||$278,000||$1.11|
*HRP isn’t technically on the options list due to particulars about how the police budget functions, but it’ll be considered at the same meeting
If Council voted to include all of the proposed items in the budget and they were all funded by raising taxes, the cost would be $11.67 for the average homeowner, bringing the total tax increase up from 1.9% to 2.5% ($36 to $48). Whether its 1.9% or 2.5%, the tax increase will be roughly in line with inflation (2.0%) and the growth in income in HRM (2.5%).
Council always needs to be careful about raising tax rates. Rates should never go up just because HRM can raise them. Taxes though are also what provides us with the services that make our community a better place to live. I don’t think 1.9%-2.5% is unreasonable given HRM’s rising costs, that it’s in line with inflation and income growth, and that taxes have only gone up twice in the last five years. For many of my colleagues though, keeping the increase to 1.9% is a line in the sand, which doesn’t leave room for pretty much anything on the options list, including the Alderney Ferry and Lake Banook. So what should we do? A showdown between those who want to see specific items funded and those who want to keep the rate increase down or is there another way?
A solution that I’m advancing is to divert a portion of HRM’s $12 million 2017 surplus to cover the extra cost of funding whatever options list items that Council might want to implement. The 2017 projected surplus is largely due to higher than expected deed transfer tax revenues. Staff are suggesting that $1.0 million be used to fund the reopening of the Dartmouth Sportsplex, $3.5 million go to the 2018 capital budget, and $6.0 million be put into long-term capital projects. Rather than put $6.0 million into long-term capital, Council could reduce how much capital money is paid for from the operating budget in 2018 to free up room to pay for items on the options list. I doubt Council will fund every item on the options list so the bulk of the deed transfer tax windfall would still go into long-term capital. I think it would be a prudent balance. On Wednesday, I set the groundwork for this compromise. Hopefully this will mean that the Alderney Ferry hours can be retained for 2018 without having to increase the tax rate more than 1.9%. More to come on the 28th.