Saving for a Snowy Day
Almost four years ago when I became a Councillor, I committed to practicing sound financial management; I remain committed to this today.
On Tuesday of this week, Council discussed the Preliminary Year-End Financial Results, which highlighted a $64.3 million budget surplus - $13.6 million of which will be used to fund the carry forward of expenditures where 2016 program commitments exist (this surplus is explained in further detail here). While I am pleased there was a surplus this year, I cannot in good conscience support directing these funds to be used to offset the anticipated 2.85% property tax increase, as some have suggested.
Our Reserve and Equity Accounts Policy is a policy that ensures the City of Edmonton has a minimum balance that will cover unforeseen circumstances should they arise; currently, this reserve is projected to be at $132.7 million. This “rainy day fund,” as some have put it, is much more than that. Simply put, like your own personal savings, this reserve safeguards the City of Edmonton for any unforeseen circumstance that may arise, like a winter with an incredible amount of snow for example.
If we were to direct these one-time savings towards offsetting this year’s expenses, it would eventually have to be paid back through a potentially larger increase to your taxes the following year. While it may be suggested that we forgo paying back this reserve fund next year, this suggestion does not take into account the critical role in which the Financial Stabilization Reserve plays in ensuring the financial security of our municipality.
On top of that, now is not even the time where we make decisions based off of these preliminary numbers because they are just that - preliminary. The decision as to what to do with these funds comes in April, when we have the final numbers and when the mill rate is set.
I, along with this Council, recognize the challenges that increasing property taxes pose on homeowners throughout Edmonton, which is why in December, when a potential increase of 3.8% was put in front of us, we worked to decrease it to 2.85% (.75% to maintain existing services, 1.5% for Neighbourhood Renewal and 0.6% for the Valley Line LRT), which is the lowest tax increase in 10 years.
Instead of easing the property tax burden through the usage of this surplus, other approaches can be used, and they have been. For example, we are currently working our way through a complete service review which examines every area of business the City of Edmonton is involved in to find efficiencies and remove redundancies. We continue to ask our Administration to find 2% in cost savings when they present their annual budgets. We have developed policies that encourage more compact growth so as to utilize our services and existing infrastructure more efficiently and effectively, and are actively working towards increasing our industrial tax base as it costs less to service. While these are just a few examples of what is being done, taken together, these approaches will help ease the burden on homeowners throughout Edmonton.
In closing, while I understand that using these surplus funds to offset property taxes might be a temporarily popular political decision, it is certainly not a sound financial decision.