LAKE COUNTRY THINKING FORWARD2010-2011

2011-2015 Financial Plan and 2011 Annual Budget

Process

Strategic Priorities and Corporate PlanStaff Submissions:

Base Budget Increases Operating Budget Increases Capital Projects – 5-Year Plan

First Meeting with Council – Big PictureDraft Budget Package to Council by January 7th, 2011Second Meeting with Council – Details of Budget and

Financial Plan – January 25th, 2011Annual Budget and Financial Plan Draft prepared by

StaffThird Meeting with Council for final deliberations (To be

rescheduled in February)

First Meeting with Council

Provide Council with the Big Picture in terms of Finances and account allocations

Show the alignment with Strategic PrioritiesProvide Council with comparables to quality of

lifeProvide Council with policy recommendations as

to: Options for tax increases Options for fee increases Options for reserve levels and replenishment Options for funding capital projects and long term

infrastructure deficit

Elements of Budget

Year End Results for 2010 (not available)Base Budget and Expected Variations for 2011Operating Service Increases (Supplemental Requests)Capital Expenses and 5-Year Capital PlanSurplus and Other Reserves (estimates)Proposed Budget, Tax Rates and Policy

Recommendations

Current Financial Situation - Revenues

Revenues 2010

Property Tax (Including Fire Levy) $7.91M

Parcel Tax $0.94M

Fees & Charges $6.30M

Other Revenues $6.53M

Proceeds from Borrowing $2.40M

Transfers from DCC Reserves $1.20M

Transfers from Statutory Reserves $1.70M

Transfers from Non Statutory Reserves $0.82M

Operating Surplus $0.10M

TOTAL REVENUES (Including Water & Sewer Funds)

$27.90M

Current Financial Situation - Expenses

Expenses 2010

General Operations $11.1M

Water Operations $2.1M

Sewer Operations $1.1M

Debt Repayments (Interest and Principal) $1.4M

General Capital Expenditures $3.3M

Water Capital Expenditures $6.3M

Sewer Capital Expenditures $0.8M

Transfers to Statutory Reserves $1.2M

Transfers to Non Statutory Reserves $0.6M

TOTAL EXPENDITURES (including Water & Sewer)

$27.9M

Comparison Revenues-Expenditures

Revenues 2010 Expenditures 2010

Property Tax (including Parcel Tax)

$8.85M Operating Expenditures

$14.30M

User Fees $6.30M Capital Expenditures

$10.40M

Other Revenues

$6.53M

Transfers from Reserves

$3.82M Transfers to Reserves

$1.80M

Borrowing $2.40M Debt Payments $1.40M

TOTAL $27.90M TOTAL $27.90M

Allocation of Property Tax and User Fees

Fund Revenue Expenditures Variance

General Operating $7.60M $11.06M $3.69M

Water Operating $1.70M $2.06M $0.36M

Sewer Operating $1.36M $1.13M $0.23M

TOTALS $10.66M $13.25M $2.59M

Fund Revenue Expenditures Variance

General Capital $0.30M $3.26M $2.96M

Water Capital $0.21M $6.16M $5.95M

Sewer Capital $0.03M $0.85M $0.82M

TOTAL $0.54M $10.27M $9.73M

Analysis 2010 Budget

Direct Revenue from Taxpayers:$15.15MTotal Expenditures: $26.17MGap funded from Other Sources: $11.02M1. The direct Taxpayers contribution is 58% of

our entire budget2. The other 42% comes from Grants,

Borrowing, Reserves, and Other Sources3. What does this mean?

1. Using more reserves2. Using more surplus3. Need to apply for more grants

Budget Sustainability

Establish a reasonable annual tax increase for the next 5 years

Establish reasonable annual fee increases for the next 5 years

Establish an annual reserve allowance to replenish our reserves

Establish targets for asset management and new capital projects

Establish targets for a sustainable surplus

2011-2015 Financial Plan and 2011 Budget

New Growth is estimated to be $150,000 (Revenue)

1% Tax increase is equivalent to $79,000The average residential assessed value in

Lake Country is $502,000The effect of a 1% tax increase on a

$100,000 of assessed value is approximately $2.75

The additional cost of a 1% tax increase to a taxpayer owning an average assessed value home ($502,000) is $13.80

Tax Increase in Perspective

1% Tax Increase to an individual owning a residence assessed at an average $502,000 represents the cost of a package of cigarettes plus a coffee at a convenience store;

In 2010, the tax increase was 3.48% or about $47 for the same taxpayer. In other words a dinner for two at a neighbourhood restaurant.

All this is a one time expense in July.The benefits the taxpayer receives for the

$47 a year are huge

Tax Rate Increases for the last 5 Years

2010: 3.48%2009: 3.93%2008: 4.90%

Election Year and Beginning of Recession

2007: 3.20%2006: 4.50%AVERAGE: 4.00%

Funding Reserves

Usually we set aside 4.5% of the total operating budget for reserves. Let’s see the numbers:

Year Amount

2010 @ 4.5% $355,865

2011 additional growth @ 4.5% $18,354

Total 2011 @ 4.5% $374,219

Extra 0.5% for 2011 $41,580

Total 2011 @ 5% $415,799

2011 Base Budget Increases

Base Budget is the current budget approved by Council for 2010

The Base Budget is subject to increases: Contractual Agreements External Agencies charging more for services (RCMP

for instance) Collective Bargaining/Salary increases Inflation

The Base Budget is also subject to possible reductions in revenue (charges/fees)

The estimated net increase of the current Base Budget is approximately $460,000

Tax Rate Increases for the last 5 Years

2010: 3.48%2009: 3.93%2008: 4.90%

Election Year and Beginning of Recession

2007: 3.20%2006: 4.50%AVERAGE: 4.00%

2011-2015 Supplementals

The question is: if just the base budget is going up $460,000, can we afford service increases?

What is Council expectation about services?

What are the factors that we should consider in order to introduce service increases?

Is it wise to cut services to make room for new services?

The estimated total for supplemental requests is $132,000

2011-2015 Capital Budget

The integrated Asset Management Program (IAMP) requires that we reach an acceptable level of revenue to fund for aging infrastructure

The acceptable level of funding to maintain current infrastructure conditions is an average of $4.2M a year (although ideally, in order to reduce the deficit, the funding should be an average of $6.4M)

In 2010 we allocated a total of $0.5M for capital projects

2011-2015 Capital Budget

The annual average funding needed in the budget to take care of the infrastructure deficit for roads and transportation is $2.2M

Water infrastructure will need an annual $3.5M

Sewer will need $80,000 a yearStormwater will need $150,000 a yearOther infrastructure will need $450,000

a year

2011-2015 Capital Budget

Municipalities our size usually fund capital projects with an amount of $1.0M a year from General Revenue Fund

Our budget should increase to $1.0M in 2011 to begin meeting the targets of our IAMP (this is a $0.7M increase compared to 2010)

The Sewer Capital fund needed in 2011 is $1.15M

The Water Capital fund needed in 2011 is $0.57M

Proposed Policy Recommendations - 1

That Council direct staff to prepare the 2011 Budget and the 2011-2015 Financial Plan, based on the following principles: Maintain the current level of service provided to the

residents and provide for necessary increases of services in areas identified in the Corporate Business Plan and in Council Strategic Priorities;

Reduce the current asset management maintenance gap by consistently providing the necessary funding to improve and maintain existing infrastructure

Maintain an acceptable level of reserves by balancing the use of reserve funds for projects with an adequate replenishment of reserves by adding an extra 0.5% annually to the current 4.5% of the total property taxes for the year

Proposed Policy Recommendations - 2

That Council direct staff to prepare a 2011 Annual Budget based on the principles guiding the preparation of the 2011-2015 Financial Plan and with the following parameters: A 4.0% tax increase to provide for inflation increase and to

maintain the current level of services provided to the community. This percentage is also to provide sufficient funding to accomplish the strategic objectives of Council;

An allocation of 5% of the total property taxes to replenish the Capital Works Reserve;

An allocation of $1.0M from General Funds for capital expenses in order to deal with our aging infrastructure needs

An adequate water and sewer fee increase, if necessary, to: Balance the Water and Sewer operating accounts; Increase the sustainability of water and sewer infrastructure

Alternative Recommendation for 2011 Budget

That Council direct staff to prepare three budget options to be considered at the January 25th Budget meeting