In the last post, #2, I summarized the key Town of Parry Sound expenditures for 2011, and noted that there was a $1.8 million gap between the listed revenue and expenses. In this post we will look at that difference and get the difference down to zero, as is required with a balanced budget.

Well nothing is as simple as looking at expenses and revenues and expecting them to balance. As it turns out these expenses also include significant capital asset amortization expenses, about $4.6 million, that impact the balance sheet and a balanced budget, but not simple cash flow. In addition there were a large number of capital expenses in 2011 that similarly did not hit the expense side of the ledger. These capital investments amounted to about $7.2 million in 2011 and included new municipal office costs, road repairs, Canadore College costs, and water service capital expenses. Combined with the $1.8 million gap noted earlier, the difference in ‘cash out’ reaches about $4.4 million ($1.8 million + $7.2 million – $4.6 million). This is $4.4 million ‘in the hole’.

Now to bring this figure to zero, a balanced budget, we need to come up with $4.4 million in additional funds. These figures came from a variety of sources, most notably reserves. Reserves are created exactly for this purpose, to cover the costs of expensive capital items that have an appreciable lifetime. The total amount taken from reserves in 2011 was about $2.1 million, which leaves a deficit of about $2.3 million. This apparent deficit was reduced by $0.9 million in capital asset disposal (I’m not sure what was sold) and another $1.7 million that was in the municipal office building fund (presumably financed). We now have a positive balance of about $0.3 million, but zeroes out when we add in some additional revenues not noted earlier, an opening surplus of $0.3 million, and back out some money transferred to reserves ($1.4 million).

I hope I have not made this too confusing. As you can tell I am not an accountant. The way I look at finances is pretty simple. I like to look at what revenue was received, how much was spent, and how much we added or withdrew from our savings account (reserves). This simple approach provides a good start to understanding where revenue can be improved and expenses better managed. What hasn’t been discussed so far is how much debt we are carrying as a town. I’ll look into this in a future post.

The next post will take a more detailed look at 2011 town revenues which were briefly summarized in the first post.

In the last post, TOPS Financial Analysis #1 – 2011, Revenue Top Line, I provided a quick look at the revenue sources for the Town of Parry Sound (TOPS) in 2011. In this post I’ll summarize the expenditures for the same period – 2011. This is again a top line look at the figures, I’ll tear them apart in future posts, so hang tight and check out the big picture of where the money goes.

The chart below provides a broad summary of the general areas of expenditures for TOPS in 2011. To make it a little easier to understand there is a table with the same data right below the chart. Total expenditures in 2011 amounted to $29.8 million as opposed to total revenues of $28.0 million. That is a shortfall we will need to look at in more detail in a later post. For now though let’s try and understand where the money went. In the next post I’ll explain what costs fall under each of these rather large expenditure categories.

This is the first of a series of posts looking at the Town of Parry Sound (TOPS) financial figures for 2011 and 2012. For information on the process and objectives please take a look at the page “TOPS Financials“.

The reported revenue for Parry Sound in 2011 was $27.97 million. There were three major sources of revenue as defined by the TOPS budget summary. These were ‘Taxation’, “Payment in Lieu of Taxation’ and ‘Non-Taxation Revenues’. A summary of their contributions is presented in the chart below.

What is readily apparent is that taxation, primarily property taxation, accounts for a little more than a third of the town’s total revenue. The majority of the revenue is sourced from non-taxation sources. Just one percent of revenues are derived from ‘Payment in Lieu of Taxes’, with the largest source being the Government of Canada, presumably for federal facilities located in Parry Sound. But we will perhaps look at this in future posts, it is a small component of total revenue.

So where does the taxation revenue come from? The table below provides a breakdown of the taxation revenue. It’s worth noting that residential property provides most of the taxation revenue followed by commercial property. Industrial properties account for only 2% of the revenue, about $150,000. It’s worth pointing out that the railways pay a total of $4,316 for their right to own land and operate in Parry Sound. Even the pipelines pay more than this.

The non-taxation revenue is a real mixed bag. In total this category amounts to $17.8 million. Some of it is revenue that is available to the town for its operations, while other revenue is a ‘pass through’ for regional expenses. Medical services most notably fall under this category of pass through revenue. The same is true for the Provincial Offenses Court, revenue is offset by expenses or transfers. This whole area of non-taxation revenue is complex and will be the subject of separate posts looking at individual revenue components and their associated expenses. The big picture is presented in the chart below. Much of the revenue, almost 60% comes from federal and provincial sources.

So there is a quick look of where the money comes from to operate Parry Sound. In the next post I’ll present a similar top line summary of where the money goes. In subsequent posts I’ll tear apart each of these entries and look at them in much more detail.