Loading...
HomeMy WebLinkAboutFND-017-04 , ~~fJl-!lJgron REPORT FINANCE DEPARTMENT Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE TUESDAY, SEPTEMBER 7, 2004 Resolution #:G(/lJ -~&<P u-l- Date: Report #: FND-017-04 File#: By-law #: Subject: FINANCIAL UPDATE Recommendations: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. THAT Report FND-017-04 be received; 2. THAT a Rate Stabilization Reserve Fund be established pursuant to the attached By-Law; 3. THAT the non-refundable portion of the Assessment Appeals Reserve Fund be transferred to the Rate Stabilization Reserve Fund; 4. THAT any unencumbered balance remaining in the Working Funds Reserve be transferred into the Rate Stabilization Reserve Fund; and 5. THAT any annual surplus or deficit as a result of the annual audit be financed from the Rate Stabilization Reserve Fund. Reviewed by: r nklin Wu, ~ Chief Administrative Officer. NT/hjl 1301 REPORT NO.: FND-017-04 PAGE 2 BACKGROUND: Through the annual budget process, it has been past practice to finance approximately $1 million each year from the accumulated surplus from prior years to offset the impact to the tax base. This accumulated surplus came about over many years particularly during years when a much greater level of funding was received from the provincial government. These long past budgets included some flexibility for unanticipated items that could occur throughout the year. Between this and a conservative approach to revenue forecasting, the accumulated surplus gradually built up. However, over the past number of years, budgets have been pared down on a line by line basis and no longer incorporate flexibility for anything but planned items. As a result, the accumulated surplus has been declining at a very significant rate, year by year. This is referenced in the annual budget reports every year. In 2004, this surplus has been completely drained and the Working Funds Reserve has become the source of financing for the annual $1 million draw. As shown in the 2004 budget, the Working Funds Reserve has a balance of approximately $1.7 million. After the 2004 budget draw, $700,000 is remaining. Of this balance, approximately $300,000 will be required for the King Street East Ontario Municipal Board hearing. This will leave only $400,000 for the 2005 budget and the Working Funds Reserve will then also be depleted. Without taking any additional steps, this would result in a budget increase for this item alone of approximately 3% for 2005 and a further 2% for 2006. ASSESSMENT APPEALS RESERVE FUND: As Council is aware, staff have been involved in a multi-year, very lengthy assessment appeal for a significant taxpayer. All but one of the necessary regulations were executed by the Minister of Finance on July 17, 2004. The final regulation pertains to the tax capping legislation and cannot be executed until the House resumes in October 2004. The settlement agreement pertained specifically to the 1999 to 2002 tax years but lays the groundwork for the settlement of 2003 and 2004. 1302 , REPORT NO.: FND-017-04 PAGE 3 The 2004 Capital Budget included the Baseline Community Park project contingent upon the necessary regulations being executed by the Province. Funding of $3 million was identified for this project from the Assessment Appeals Reserve Fund. After refunds for the 1999 and 2002 years are issued, the estimated refund for the 2003 tax year is deducted and the $3 million for the Baseline Community Park project is applied, there is an approximate remaining balance in the Assessment Appeals Reserve Fund of $3.4 million. CONCLUSIONS AND RECOMMENDATIONS: At this point, the Municipality has substantially depleted its existing allocations for tax rate stabilization. As mentioned above, this source of financing to offset the tax rate impact must be replaced in order to allow a gradual transfer of the impact to the tax base. Surpluses are a historical item that due to very lean budgeting practices, are not likely to been seen in the Municipal scene in any magnitude in the future. It is therefore recommended that the balance of the proceeds from the assessment appeal process explained above be transferred into a Rate Stabilization Reserve Fund. This will allow for adjusting the tax base to absorb the full costs of our services over a three to five year period. Interest will also be earned on this balance in the reserve fund to potentially extend the time period a little longer. Attachments: By-Law to Establish Reserve Fund CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE. ONTARIO L 1C 3A6 T (905)623-3379 F (905)623-4169 1303 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON BY-LAW #2004- Being a By-Law to establish a Reserve Fund For Rate Stabilization WHEREAS the Council of the Corporation of the Municipality of Cia ring ton considers it desirable to establish a Reserve Fund for Rate Stabilization. AND WHEREAS Chapter M.25, Section 4 I7(I) and (2) of the Municipal Act S.O. 200 I, provides that, "Every municipality as defined in the Municipal Affairs Act, and any other body exercising a power with respect to municipal affairs under any Act in unorganized territory may in each year provide in its budget for the establishment or maintenance of a reserve fund for any purpose for which it has authority to spend money. If the approval ofa municipality is required by law for a capital expenditure or the issue of debentures of or on behalf of a local board, the local board must obtain the approval before providing for a reserve fund for those purposes in its budget". NOW THEREFORE, Be It Enacted and It Is Enacted, as a By-Law of the Corporation of the Municipality of Clarington as follows: 1. THAT the Director of FinancefTreasurer be authorized to establish a reserve fund entitled "Reserve Fund - Rate Stabilization" for the purposes of tax rate stabilization through the annual budget process; 2. THAT the non-refundable portion of the Assessment Appeals Reserve Fund be deposited into this reserve fund. and 3. THAT the unencumbered balance remaining in the Working Funds Reserve be deposited into this reserve fund, and 4. THAT the Council may, by resolution passed by a majority of members present, direct the use of the funds for municipal purposes. By-Law read a first and second time this \3'" day of September 2004. By-Law read a third and finally passed this \3'" day of September 2004. Mayor Clerk 1304