After several days of deliberation, Prince Edward County Council has passed the 2022 Capital Budget in the amount of $18, 576, 613. The draft budget outline was presented by County of Prince Edward Director of Finance Amanda Carter and includes new infrastructure projects and much needed rehabilitation for items such as roads, bridges, etc.
The Capital Budget, as per Carter, isn’t just a budget.
“It is a strategic way to implement studies and master plans as well as providing work plans for staff that complement the operating budget. Further, it’s the strategic investment in municipal infrastructure that supports the services that are provided in the operating budget…these investments have a long-term benefit,” she said.
Before beginning their final day of deliberations, CAO Marcia Wallace was careful to qualify the limits of a Capital Budget as it pertains to determining the much-anticipated tax levy.
“While we can calculate the impact to reserves and levy should there be debt taken out, we are not passing an operational levy. We are not going to be able to give you a definitive analysis of the impact on the operating budget,” Wallace stated. “We will take away the decisions made today, which will inform the operating budget which will come back in February. You are approving the capital elements of the 2022 budget so we will take those decisions and build them into the operating budget.”
The 2022 Capital Budget offers a glimpse at a municipal budget affected, like everything in the past two years, by the pandemic. From supply chain issues that have affected calls for tender to financial help from the government, the municipal coffers have fared much the same as any. With this in mind, Carter walked council through a careful budget, demonstrating support of corporate strategic priorities while staying withing the annual capital funding available.
“The capital budget this year demonstrates support of the corporate strategic priorities,” stated Carter. “No projects in the proposed capital consider the use of debt. The proposed 2022 budget sees a budget that stays within the annual capital funding available. Currently, we raise approximately 8.5 million and that feeds our capital reserves. We are budgeting to remain within that funding model.”
She explained that the municipality has a $2,000,000 operating surplus from 2020, largely due to revenue windfalls and an operating budget that was passed right before the pandemic began.
“We had passed our levy expectation then the pandemic hit and the province started throwing money at us to help ease us through it,” explained Carter. “Because we had budgeted as per revenues and expenditures, all of a sudden, we had money that helped us go through that. So, where spending may not have occurred, such as at arenas, we did have some expenditure savings. But, it’s really those revenues we received that resulted in that surplus. We received $2,5000,000 to support us in 2020.”
Carter also noted the municipality received an unbudgeted rebate from Hydro One for participating in an energy saving street light program. This totalled $104,000.
“We also had some development agreements that arose and there was about $169,000 that were not budgeted for. Oddly, in this kind of environment, proceeds from debt are classified as revenue because of how we receive them. So, with the hospital grant being provided in 2020 of 2.3 million, the debt servicing undertaken is classified as a revenue.”
Overall, the budget surplus, Carter noted, is driven from revenues and not from expenditure savings.
“As you will see, currently after growth, we are projecting a 0.7 tax levy increase,” she stated.
Apart from reducing expenditures, the pandemic has affected the revenues municipalities can expect from new developments due to lack of property values being assessed.
“All our growth is at the 2016 assessment value. So when we think 100 new homes came online and the market is hot and home are selling at $500,000 to $1,000,0000, we are not experiencing that same increase in a our growth numbers as a result of this being behind.”
As Carter explained, despite higher than average building permits, the municipality is not seeing an increase in tax revenue and one might otherwise expect.
“This will continue to be a burden to the municipalities across the province. At this point in time, we are not looking to see any new phase in assessment until 2024,” said Carter. “It’s disheartening the province isn’t bringing things along more quickly. The real assessment growth we received in 2021 was $680,000.”
Currently, the expected levy sits well below the current rate of inflation, Carter added.
“Before growth, the levy increase is up 2.35 per cent, then 0.7 after growth,” she explained. “The increase in the levy sits well below the current rate of inflation which is 4.9 per cent as published by the CRA for October.”
In her presentation, Carter brought council up to speed on the seven main reserve funds and their respective reserve fund forecasts. These include: road construction, road equipment, capital sustainability, information technology, fire equipment, land ambulance and studies.
“These are used like a savings account,” said Carter. “These are raised in the operating budget and put into reserves. The funds are then pulled out of reserves to finance capital works.”
Carter further noted that projects, when funded by reserves, have no impact on the Operational Budget.
In speaking to the Roads Reserve, Carter explained there has been evidence of supply chain issues. Earlier this year, the Picton Main Street Project had to be cancelled due to the expensive nature of tenders received. The project, partially funded through reserves, has a cost of $600,000.
“As costs continue to increase, it will place a higher burden on this reserve and could impede the county’s ability to complete future capital roads projects.”
Other projects of note that would draw from the Roads Reserve are the County Road 49 storm sewer expansion with an estimated cost of $2,000,000, the Talbot Street Phase 2, with an estimated cost of $722,000 and rural roads rehabilitation with an estimated cost of $2,700,000.
“The Roads Equipment Replacement Reserve has been maintained throughout at $674,287 with no planned increase in funding,” said Carter. “The market for large tandems and single trucks have experienced an increase, with supply chain issues driving the cost upward. I caution, when we need new vehicles by the time we tender and receive it’s about a year. Within that year we will see a large cost in the cost of vehicles.”
Carter was careful to comment that this particular reserve has been significantly underfunded.
“This reserve has been significantly underfunded….the problem is, projects were financed out of this reserve that were never initially planned for-such as the sweeper-that has a very high dollar purchase. That came out of this reserve and should not have been financed from here,” she expressed.
Essentially, Carter described a reserve that had been overdrawn, with an expected deficit by 2026 of $2, 600,000. This is, as she noted, as due to rising costs and supply chain issues.
“Some projects being proposed are the replacement of a tandem axle truck with winter implements costed at $315, 150, the light duty vehicle replacement program at $154, 800 and partial funding for a second tandem at $100,000,” Carter explained. “This is highlighting the problem- we don’t haven enough money in this reserve to finance the projects this reserve was intended for.”
Moving on, Carter unpacked the Capital Sustainability Reserve, which is intended to improve facilities/buildings, land and land improvements and other buildings.
Funding for this reserve has been estimated to be set at $715,000 and maintained that level from 2021 onward. 2022 will not see a proposed increase to this reserve, Carter stated.
“This reserve is heavily utilized. It is the main funding force for all facilities and equipment capital not related to roads, fire, IT or land ambulance. Supply chain issues are driving cost of some equipment and building supplies,” she explained. “We are seeing tenders coming in higher last year or being told there are issues within the supply chain itself and there would be time before equipment delivered. By end of 2026 forecast, the balance could be $589,000.”
Proposed projects to draw from this reserve include the Macaulay House Museum rear wing roofing, costed at $150, 000, Crystal Palace Phase 2 Revitalization Project at $315,000, minor upgrades to county facilities to support community use and staff office space estimated at $125,000 and partial funding of the parks and recreation master plan estimated at $9,000.
Other big ticket items proposed to draw from this reserve include an ice plant compressor for the Prince Edward County Community Centre (PECC) at $70,000, dehumidifiers for PECC at $70,000, the Mortimer Street boardwalk repair estimated to be $60,000, Picton landfill improvement worth $52,000 and partial funding for replacement of a second tandem axle truck estimated to be $215, 150.
With regards to the Reserve for Information Technology, funding has increased by $20,000 over 2021.
“This is financed by the Operating Budget through the workstation replacement program. This one area of municipal procurement where we saw a large increase in the price of equipment, as all municipalities were struggling to send staff home to work,” stated Carter. “The market exploded in this area. We saw prices of computers skyrocket. By the end of the 2026 forecast, it is estimated this reserve will have $26,800.”
The workstation replacement program (to replace laptops, desktops, tablets etc.) is estimated at $41, 600. The network infrastructure project will draw $25,500 from this reserve, while data storage and back up will cost $20,000.
The Fire Equipment Reserve, required to purchase the fire fleet, gear and equipment, carries a proposed Operating Budget contribution of $610,000. Expenditures in the 2020 Capital Budget will equal $529, 460 and be comprised of: Pumper tanker for $397,700 , 3/4 ton replacement estimated at $58,000 and a Bunker suit replacement for $36,000.
The Land Ambulance Replacement Reserve, intended to procure first-responder fleet and related equipment, carries a proposed Operating Budget contribution of $80,000. The opening balance is over $220,000 and expenditures will amount to $197,000. The only project, as per Carter, anticipated from this budget is a land ambulance replacement that will cost $197,000.
The Studies Reserve funds all planning related studies not tied to a specific project, and as per Carter’s presentation will have an estimated draw of $134,000 in the Capital Budget. These are from such projects as: Cultural Heritage Master Plan estimated at $90,000, Shore Land Designation Review estimated at $37,000 and Partial funding of Comprehensive Zoning By-Law Review estimated at $7,000.
The Studies Reserve has an opening balance of over $500,000, an estimated Operating Budget contribution of $225,000 and an estimated 2022 year-end closing balance of $600,428.
In speaking to Council, Mayor Steve Ferguson implored council to consider the seriousness of the choices to be made during budget. Noting a range of consequential decisions lay before them, that could affect everything from housing to healthcare, Ferguson outlined the task at hand as an opportunity to make a positive impact.
“This is this council’s last Capital Budget. Over the course of our term, we’ve been confronted with a number of pressing issues. During 2019, it was the threat of significant flooding which was averted, later that year the announcement of a global pandemic that came to light and came into effect in March 2020. The effects of this were felt throughout the community from then until now- an influx of tourists, pressure on resources, etc. and also a significant effect on housing,” said Ferguson. “Concerns continue to unfold. We continue to have an issue of housing that must continued to be dealt with head on and, on Wednesday, we were confronted with a very clear picture of a looming medical doctor shortage which will affect a number of people. During today’s deliberations and when we get into the Operating Budget in February, we must weigh very carefully everything we are talking about and making a decision about. Please consider we have an opportunity as this council to make a significant dent in housing and we have already started that. We have the opportunity to recruit doctors more significantly than we have and, my feeling is that part of our legacy should be that we have really taken a strong approach toward housing and doctor shortage for benefit of our residents. At the end of our term, I’d like to be able to stand tall and proud and say that we have done something hugely significant for the community. Please bear that in mind as we go through items today and when we get into the Operating Budget.