Town of Olds council spent much of its Nov. 28 budget meeting discussing amortization before asking for more information on the subject.
While the proposed 2012 budget is balanced and no tax increases are proposed at this point, this situation could change if council decides to start funding its assets amortization in 2012.
At a previous council meeting on Nov. 21, Terryl Allen, the town's director of corporate services, estimated that to fully fund the depreciation of town assets, it would cost in the range of $2 million for 2012, including $722,000 for utility assets and $1.2 million for all other town-owned assets.
One of the scenarios considered by council to fund utility assets would be to increase the base rate for water and wastewater from $8.60 per month each to $17.04. Moreover, the cost per cubic metre would increase by $.35 to $2.66 per cubic metre for water and $1.83 per cubic metre for wastewater, or some combination of base rate and use.
Meanwhile, depreciation of non-utility assets would be funded through municipal taxes, which would increase by 18.3 per cent.
Council would also have the option of spreading those increases over a period of up to four years.
While council had concerns about increasing taxes and utilities to such an amount, town CAO Norm McInnnis reminded it that depreciation is here to stay.
“We can start talking about reducing levels of service in order to fund depreciation but at the end of the day, depreciation is now on our balance sheet and we are funding it, whether it is through money that we banked or through surplus,” McInnis said.
“If we don't fund it, soon our accumulated surplus will be gone and we will be into negative budgeting, which is prohibited under the Municipal Government Act. We will get ourselves in a position where we can no longer meet our obligations under legislation.”
McInnis urged council to take some steps to fund amortization in 2012.
“We are certainly not suggesting that we fund 100 per cent depreciation out of the gate, but is it reasonable to take some steps,” he said.
Up until last year, Town of Olds funded amortization by transferring money to its reserve account.
“The problem with that is that it was always the easiest first thing to cut when budgets came forward,” said McInnis.
“Doing that never put anywhere near enough away to cover the amortization cost.”
McInnis still hopes to have the 2012 budget approved by or on Dec. 12.
“We said that we had brought forward a balanced budget before amortization,” he said.
“If council decides to do nothing with amortization in 2012, there will be a zero increase in taxation.”
"If we don't fund amortization, soon our accumulated surplus will be gone and we will be into negative budgeting, which is prohibited under the Municipal Government Act. We will get ourselves in a position where we can no longer meet our obligations under legislation."Norm McInnis, town CAO.
