Council heard from its administrative staff why cutting this year's 1.9 per cent tax increase to zero per cent is not advisable.
Many businesses in Alberta have been taken by surprise and have taken quite a hit with the drop in oil prices and the downturn in the economy, said Dave Dubauskas, administrator, during the March 7 meeting.
"Like those businesses, the Town of Sundre also faces challenges in this economic downturn," he said.
In 2014, council had approved a two-year budget for 2015 and 2016, he said.
"In those days, things were rosy and things were looking good."
However, revenues for this year were projected to be about $6 million, which represents a shortfall of a little more than $900,000 ó or a 13 per cent decline in revenue ó compared to what had been budgeted in 2014, he said.
"We needed to address this issue to avoid a 13 per cent increase in property taxes."
Administration had been working towards finding reductions in the budget, and held meetings with each department to see where costs could be cut to offset the projected operating shortfall, he said.
The result of their work found cost savings that include about $640,000 in reduced purchasing costs for water, natural gas and other services, $26,000 in reductions in staff development, $75,000 in road improvement projects, $50,000 in corridor enhancement planning, $30,000 in water treatment supplies and $23,000 in waste tipping fees, he said.
"During the economic growth of the past six years, like other businesses in Alberta that had to ramp up to meet service demands, the Town of Sundre had the same pressure," he said.
"What did not occur, unlike private business, was extraordinary spending in the areas of hiring additional staff, or large increases in operating budget to meet this growth."
There was a two per cent cost of living increase this January, and administration has managed to retain the appropriate cost increases in the review of the budget to meet that increase, he said.
"Why is this important? We don't want to move towards the status of zero per cent increase as that would be equivalent to a fixed income," he said.
"On fixed income, a person receives the same income every year, but the buying power of that income erodes over the years as inflation increases, as you don't receive an adjustment to keep up to inflation."
He said that any further reductions to the 2016 budget would require council to review what services would or could be cut or reduced.
Victor Pirie, director of finance and administration, also addressed council.
"The Town of Sundre has shared along with the residents this year in the reductions. We have seen a shortfall and we have made the adjustments," he said.
Council certainly could decide to reduce this year's tax increase to zero per cent and cover that additional shortfall from the town's reserves. However, the 2015 fiscal year had not yet been finalized, and Pirie said he was not sure whether there would be a surplus yet.
"We'll know that by the end of March when we finish with the audit. But there are certainly reserves that we could look at taking the tax shortfall out of."
However, he warned council that it's not just a one-time adjustment.
"You have to keep that in mind."
Regardless of whether council covers the shortfall from a reserve if it decides to reduce the tax increase to zero this year, when it goes forward in 2017, the town will be about $43,000 ó roughly the amount represented by the 1.9 per cent tax increase ó behind the eight ball right off the bat, he said.
"You're going to go to our taxpayers next year, potentially, with an increase in the 2017-18 budget to meet the needs of our services for 2017. And on top of that increase it by two per cent to bring us back to Square 1."
Going into 2017 likely won't be much different than going into 2016, so council will have a far more difficult time increasing its tax rate going into 2017, "and there'll be the temptation again to just take it out of the reserves," he said.
"That's why the provincial government has no rainy day reserves ó they used it for operations."
So council should be cautious about using reserves for anything other than what they're meant for, he said.
There are provincial programs to help offset taxes for seniors on fixed incomes. As for the average person, the increase is $5 a month ó and that's on a high-end home, he said, adding a few dollars a month on a house worth a few hundred thousand dollars is not insurmountable for most people.
On top of it all, barring a major boom in development in the coming months, assessments moving forward are going to remain relatively flat, he said.
"Those are my comments ó it's not a one-time adjustment, it's going to come back when we're looking at 2017."
