Transcript How to Budget through a recession!

Budgeting for Council priorities
during a Recession!
David Douglas
Director of Financial Services
City of Powell River
Budgeting for Council priorities,
while significantly reducing the reliance of
taxation from one property class (Major
Industry),
due to economic conditions!
Reliance
In 1999 the City of Powell River collected the following
taxation by property class.
1999
1999
Residential
$3,481,873
33.7%
Utilities
39,298
0.4%
Major Industry
5,667,447
54.9%
Light Industry
39,309
0.4%
Business other
1,082,517
10.5%
Managed Forest Land
524
0.0%
Recreational Non profit
12,515
0.1%
Farm
411
0.0%
10,323,894
100.0%
Budgeting for Council priorities
Background
•Industry is in the most severe economic conditions in
history
•Industry that is in a global market decline
•Company does not have access to the capital required to
re-invest and re-build
•Has been devastated by the appreciation in the Canadian
dollar
•Lacks funds to invest in research and development
•Feels it pays an unfair portion of Municipal taxes
Background
•Mounting financial losses
•Substantial Increases in costs (energy, chemical,
transportation, fiber)
•Lacks the availability of skilled labour
•Lacks access to valuable raw materials (Fiber supply/
wood chips)
•Four British Columbia Cities/Municipalities affected by the
same Corporate owner.
Major Industry response
Since 2000 market demand for most paper products has
been on the decline. Major Industry Corporation has
embarked on many cost saving measures, including staff
reductions, closing paper machines, closing craft mills,
temporary closures and working with local governments to
reduce municipal taxation. *
Adjusted product mix
Efficiencies
Mill closure (indefinite)
Why a concern of Council?
•Mill town
•Closure of Craft mill
•Reduction of mill employees from over 800 to under 600
•Community viability (short term, long term)
•Sustainability
•Local economy
•Taxation
•Retain business
•Service levels
•Time – Economic Development
•Control of short, medium, long range planning
Do some Homework!
Analysis (annually)
Comparison of tax ratios of other Cities
Comparison of tax ratios of other levels of government
(RD, RHD, ST, MFA, BCAA)
Comparisons of municipal taxation on an average house in
other Cities
Reliance: Municipalities with Major Industry assessment
Actual Powell
River %
Provincial average
%
2003
2003
Residential
38 %
43 %
Major Industry
48 %
28 %
Business
13 %
22 %
Reliance: Other authorities on Major Industry in 2003
Municipal Finance Authority
20 %
BC Assessment Authority
36 %
School Tax
23 %
Regional District *
28 %
Regional Hospital District *
28 %
City of Powell River
48 %
Where did we start?
Comparisons of fees and charges with other Cities
Reviewed Management structure
Refined our budget process (accuracy, capital)
Reviewed Strategic Plans
Reviewed service levels
The Plan!
Tax Shift from Major Industry Property tax class
2004 $200,000 tax shift
2005 $200,000 tax shift
2006 $200,000 tax shift
2007 $200,000 tax shift
2008 $200,000 tax shift
2009 312,500 tax reduction
Council Priorities?
Strategic plan!
•Reduce reliance on Major Industry (tax shift)
•Revenue generation
•Health and safety related projects and capital (public and
employee risks)
•Prudent financial management (Sustainability?)
•Cost reductions
•Project planning
•Maintain similar level of services
•Economic Development
The Plan!
•Adopted user pay philosophy
•Significantly increased fees and charges
(Building inspection, recreation fees, new fees)
•Shift taxes from Major industry to other property classes
•Reduce operating costs
•Initially reduced capital funded from taxation
•Capital projects funded only from reserves
•Reduced service levels*
•Reduced staff through attrition
•Reduced management staff
The Plan!
Reduced transfers to reserves
Slowly increase capital funded from taxation
Significant tax increases since 2004
2004
7.50%
2005
11.0%
2006
9.50%
2007
8.49%
2008
8.71%
2009
8.50%
Increased service levels
Reliance
In 2009 the City of Powell River will collect the following tax by
property class
2009
2009
Residential
$7,068,897
53.4%
Utilities
39,644
0.3%
Major Industry
3,722,363
28.1%
Light Industry
54,301
0.4%
Business other
2,334,019
17.6%
Managed Forest Land
1,165
0.0%
Recreational Non profit
24,371
0.2%
Farm
3,500
0.0%
13,248,260
100.0%
Reliance
Comparison of the City of Powell River tax collected by
property classes
1999
2009
Residential
33.7%
53.4%
Utilities
0.4%
0.3%
Major Industry
54.9%
28.1%
Light Industry
0.4%
0.4%
Business other
10.5%
17.6%
Managed Forest Land
0.0%
0.0%
Recreational Non profit
0.1%
0.2%
Farm
0.0%
0.0%
100.0%
100.0%
Reliance: Municipalities with Major Industry assessment
Provincial
average
Actual Powell
River
2008
2009
Residential
46 %
53 %
Major Industry
25 %
28 %
Business
21 %
17 %
Reliance: Other authorities on Major Industry
2003
2009
Municipal Finance
Authority
20 %
19 %
BC Assessment Authority
36 %
33 %
School Tax **
23 %
14 %
Regional District*
28 %
19 %
Regional Hospital District*
28 %
19 %
City of Powell River
48 %
28 %
Future!
2009 Tax reduction $312,500 from Major industry
2010 to 2012 $250,000 tax shift from Major industry in each
year
Senior staff have been directed by Council to complete an
efficiency review of City operations in 2009
Continue with the PLAN!
Service level reductions!
City of Powell River’s goal!
Competitive industrial tax rates
Fair and equitable property taxation across all tax
classes
Fair and equitable fees and charges for services delivered
Economic diversification
Delicate balance between fees and charges and property
taxation
Delicate balance between the allocation of taxation
collected by property classes
Tax Standoff ?
Major Industry tax payer is threatening to pay only
$1,500,000 of City taxes, (3.7 million) in 2009.
Thank you!