Preamble to Budget Review Posts
08 Friday Mar 2013
Written by Jo Bossart/ParrySounds.com in Budget/Financial
The 2013 budget discussions are currently a top priority at Parry Sound Town Hall. This is, as one councillor noted, after fully one-sixth of the budgeted year has already passed. I wonder how we paid for anything the last two months considering that there hasn’t been an approved budget and a couple of the councillors made a strong point at council meetings of not being willing to considering any new ‘pre-budget’ expenses. Hmm. Maybe we’re issuing IOUs.
The municipal budgeting process is, I am beginning to understand, its own unique beast that ties in with municipal accounting practices. It’s neither good, nor bad; it’s what it is. The bottom line is that the annual budget needs to be balanced every year (a good thing), but it can be balanced by increasing or decreasing taxes, adding money to – or taking money from reserves, or issuing debentures (taking a loan). Regardless, I’m not going to be discussing the financial mechanics of the Parry Sound budgeting process; rather I will be looking at where staff and council are planning on spending, or not spending, money in 2013. I actually prefer to consider it as ‘investing’ rather than ‘spending’. Where money is invested can provide a good idea of where council places its priorities.
One interesting aspect of the budgeting process is that for the most part smaller capital items are budgeted and paid for on an annual basis. That means if you want two pickup trucks in 2013 at $40,000 each you need to budget $80,000 that year. If you can’t afford the two in one year you need to forgo the truck until the next year. This is despite the fact that a truck purchased in 2013 will not be used up this year, it will be useful for a number of years. This means the town needs to have, and implement, a capital items replacement plan so that it doesn’t get whacked with three or four pickup trucks and two snow plows in one year (as we see in the Parry Sound 2013 budget). Council can only keep pushing back capital replacement items before it piles up and bites us in the ass. That seems to be a little of what we are facing. It’s pretty easy for staff to cave in to council and push things back another year. That doesn’t seem to be the case here where staff is trying to recover from a number of years of relative underinvestment. This creates an interesting dynamic with council who are trying to keep the expenses as low as possible so as to limit, or eliminate, any property tax increases. And we are now past the half way mark in this term of council so they are starting to think about an election, even if it’s more than a year away.
So in these posts I’ll focus on the various items that staff and council are wrestling with, rather than the accounting part of it. As appropriate I’ll adding a little colour commentary to share my sense of where the various players, staff and council, are with respect to individual budget line items.
The budget is a public document. If you want a copy you can request it from the town. Better yet request a copy and show up at the next budget meeting to follow along as the discussion progresses. I’ll be offering a summary of the discussions a day or three after the budget meetings are held. Oh, the traditional media doesn’t consistently cover these meetings and Cogeco doesn’t record and broadcast them, so attend the meetings or check back for the latest post right here.
This is where they make the ‘budget sausage’.
No comments
March 8, 2013 at 10:31 am
Most of the important stuff is decided at budget time, I’ll be interested in reading more about the decisions they make.
The period during a year before a budget is passed is similar to say negotiating a union contract, in that operations continue under the same conditions as the previous contract until a new one is negotiated. In other words, they would use the previous year monthly figures as a guideline to operate until a new municipal budget is passed. They would also avoid any discretionary spending.
Capital items are usually funded on a “savings” basis. The council transfers surpluses into the capital account and they make withdrawals to fund capital purchases. If they are diligent they are planning several years ahead for major capital items. Most municipalities have a significant amount of money set aside for future capital expenditures.
March 8, 2013 at 11:49 am
Thanks for the clarification. My initial comment was a little tongue in cheek given the relative lack of pre-budget work that has been done by council. Many items that are being, and will be, discussed could have been reviewed and prioritized, if not approved, last year. So listening to the budget discussions about the ‘merits’ of the various line items seems to be too much (discussion), too late. At this point of time, almost the Ides of March, it seems to me that budget review time should be spent doing a final review of the various priorities and making decisions, not debating at length the merits of purchasing one or two plow trucks. This should have been a November or even October discussion.
March 8, 2013 at 8:11 pm
Mayor Pro tempore:
Excellent report Jo.
For example, it makes budgetary sense vis-a-vis amortising capitol expenditures, such as the cost of a municipal truck, which may have an estimated life expectancy of 8 years at an original cost $40K. Looking forward, council needs to amortise these costs in terms of a replacement truck and factor-in $5K every year (plus inflation) for a replacement vehicle rather than being ambushed with a huge capitol expenditure eight years down the road. Does the town Foreman (or whatever he/she is called) provide council with an annual inventory of rolling-stock relating to when it was purchased, and approximately when it may be required to be replaced. If this is done, Council could budget accordingly.
I like the fact that you are NOT a town council “basher” and, rather, take an objective and rationale approach to what I consider constructive criticism.
I think you are on to something neighbor! “Build it and they will Come.” B2.
On Fri, Mar 8, 2013 at 10:20 AM, Parry Sounds wrote:
> ** > Jo Bossart/ParrySounds.com posted: “The 2013 budget discussions are > currently a top priority at Parry Sound Town Hall. This is, as one > councillor noted, after fully one-sixth of the budgeted year has already > passed. I wonder how we paid for anything the last two months considering > that ther”