Council was presented with a good news, bad news scenario in terms of the 2015 and 2016 budgets.
Although 2015 ended with a modest "break-even" surplus, the 2016 budget is facing several "headwinds," said Victor Pirie, director of finance and administration.
"It'll tell you exactly where we are," he said during council's Jan. 18 meeting.
The amount town officials are looking at for the 2015 year-end is almost a $60,000 surplus, which had originally been budgeted at only about $9,000, he said.
"We ended the year in a break-even position," he said.
"When you take a look at our operations of over $12 million in expenditures, that $60,000 comes out to less than a half of one per cent of our expenditures as a surplus, and so it's basically a break-even point."
He pointed out that because this is his first time working with the auditors and the year-end, there might be some items that he was not yet aware of that would come to light.
"So this figure may change as a result of that," he said.
"Plus we've done estimates as to what our final accounts payables are going to be for the closure of the year, and again if those estimates are a little high or a little low, it'll change that figure as well. But based on the best information we have at this time, that's approximately what we should be looking at."
He broke down a 64-page financial document outlining council's budgets for 2015 and 2016, and said he wanted to provide an overview. The figures provided to council compared the approved budget and the actual budget to Nov. 30, 2015, along with the projected numbers for December. It also included details on reserves.
"There are three items we would like to suggest to council," he said. "This would come forward later on when we're closer to finalizing the actual operations for the year, and if this number's actually correct, then we would be coming forward with three requests for transfers."
One of those requests is to establish a new reserve fund called the Budget Stabilization Reserve.
"The idea behind that is to help council as we're moving into multi-year budgets," he said.
"This budget stabilization reserve would be used to account for when you've developed a multi-year budget and you're into maybe the second year like we are this year, and there may be factors that are impacting the bottom line in your second year, and rather than having to do a spring budget adjustment and increase taxes when you committed to a certain tax rate for example, you could pull money from this reserve to help offset the shortfalls for the year."
In a good year, council could put some money back into the reserve, he added.
"It's to sort of stabilize for council the ability to ensure to our businesses and to our residents that what you've approved, they can count on basically occurring for the first and second year, or as you go into even a further multi-year budget."
The other requests for transfers would be to have staff complete upgraded training to operate the town's gas service as required by Occupational Health and Safety and to cover the shortfall in the town's solid waste service department, he said.
Looking to 2016, there are a number of issues council needed to be aware of. The first is assessments. When council approved the 2015-16 budget in December of 2014, it had to estimate what the assessment value would be for 2016, he said.
"In the budget, you estimated that our assessment would grow by $7 million from 2015 to 2016 for tax purposes," he told council.
That was a 1.93 per cent increase in the assessment value. When comparing that to how much it grew from 2014 to 2015, it had gone up by $15.8 million, or more than a four per cent increase in the assessment value, he said.
"So when you were establishing what kind of increase you could anticipate for 2016, a 1.93 per cent increase of $7 million was fairly conservative given your past three/four years of growth in the community."
Administration won't know what the final figure is until the end of February when all the official assessment values are done, but in talking to the town's assessors, "their feeling is that we're going to see probably at best a hold-the-line. We're not going to see an increase in our assessment, and we're really not going to see a decrease either, but our assessment isn't probably going to grow by $7 million."
In setting its tax rate, council had based it on higher assessed values, he said.
"If our assessment comes in at the same level as 2015, we have a shortfall of about $55,000 in taxes because of the reduced assessment value."
"The indication is that we're probably not going to see much growth, if any, in our assessment for 2016. So that's the first headwind we're up against."
Other shortfalls the town is facing include certain service revenues from some departments. Council had, for example, budgeted revenue in both 2015 and 2016 from the former town office, he said, adding that while the building at one time had paying tenants, it has since not been occupied as much.
"We received very little towards the latter part of last year, and we don't anticipate receiving any, or a minimal amount, for this year. That's another $54,000 shortfall in revenues for 2016 because that's what the budget was based on."
Further compounding the situation were "dramatic decreases" in water and gas consumption, and administration does not anticipate any significant increases this year, he said.
"Waste water is a function of consumption, so if our consumptions are down in water, our consumption is going to be down in waste water as well."
And the town has seen a drop in water consumption each year for the past four years. From 2014 to 2015, water consumption dropped by about 20,000 cubic metres to 255,000 cubic metres from 276,000, he said.
"We would hope that going into 2016, we're not going to see any further drop. But your budget was based on 275,000 cubic metres, so we're looking at a similar level of 255,000 cubic metres for 2016 ó that's going to generate a significant shortfall in water (revenue)."
Bulk water sales were also down significantly to about 10,000 cubic metres in 2015 from 24,000 cubic metres in 2014, he added.
Overall, there was more than a half million dollar shortfall, which was offset by about $400,000 in savings on expenditures. However, that still leaves about $100,000 shortfall, he said.
"Those are the kind of headwinds that we're coming up against in 2016 that will make it difficult if we were to look at any further kind of reductions in revenues, for example further reduction in mill rates."
