time is fast approaching. Council and staff have been working diligently to find ways to reduce costs and increase efficiency without reducing services. As you can imagine, this is a daunting task in the best of times, but it is an even greater challenge as we approach 2015 and the significant costs of operating our new water treatment plant while meeting the needs of residents and meeting our contractual obligations with our employees. While there has been some growth in revenues, it is not sufficient to meet our future needs.
In December 2013, my council introduced our very first budget for 2014. At the time we stated that “Council’s objective in this budget is to ensure that every tax dollar is used as efficiently and effectively as possible. From day one, our Council has set out with a clear mandate to reduce expenses and to find ways to provide better, more cost effective services, while holding the line on taxes and fees.” And we are committed to continuing to find cost savings while providing quality service to our residents in improved roads, snow clearing, parks and leisure services and more.
I have always felt that as Mayor and Council, we must lead by example. Among my Council’s very first acts was to implement a wage freeze on our own salaries for our full term in office, we eliminated cell phones and blackberry devices for City Councillors and we reduced council and staff travel and eliminated other expenses.
We also implemented a temporary freeze on hiring, out of province travel and discretionary spending which resulted in a $1.2 million surplus for 2013 which was applied to the city’s existing debt which stands at a very acceptable 15% of expenditures. Most of our current debt is due to borrowing associated with the new $50 million water treatment plant, but it is still well below the 30% debt servicing limit set by the province.
For 2014, we also had to deal with the loss of the Provincial municipal operating grant (MOG) in the amount of $666,000 per year, $17,000 in NL Liquor Corporation Grant and an estimated $150,000 in reduced poll tax as we brought in measures to eliminate students from the poll tax rolls.
In addition to this loss revenue of approximately $ 800 000, we had to absorb new costs which included $400,000 in additional waste collection and disposal costs and a projected $400,000 to operate the new water treatment plant for the last 3 months of 2014 based on an annual operating cost of between $1.2 and $1.5 million. In other words, we were dealing with a difference of about $1.6 million for 2014 from the previous year.
Yet, while there were significant increases in expenditures, operational spending in Budget 2014 actually decreased by 1.5% from the 2013 levels while we kept our contractual obligations to our employees which included a wage increase of 4.25% for the city’s firefighters, and a 2.0% increase for all other employees – and this without any reduction to service levels.
Budget 2014 predicted total expenditures of $30,281,300 million which was 2.91% or $908,000 lower than the 2013 Budget of $31,189,800.
Residential property tax remained the same for 2014 at 8.0 mils, the commercial property mil rate remained at 12.5 mils and the general commercial business tax mil rate at 17.0 mils in 2014 and there were no increase in any fees. In fact in 2014, we actually eliminated the landscaping deposit to reduce the burden on home builders and encourage new homes.
Our preliminary estimates for 2015 show a shortfall of approximately $1.7 million, $1.2 million of which is directly associated with the new water treatment plant. Increases in employee wages and other fixed costs account for the rest of the shortfall. With 10 000 units in the city, this equates to $170 per unit that we need to find either through new revenues, further cuts to existing expenditures or a reduction in services.
Over the next few weeks council will be working with staff to find savings where possible, however, as you can see from the 2014 budget, we have made significant cuts already while absorbing both major operating increases and a reduction in revenues. We must also realize that some of the reductions introduced throughout 2014 cannot be sustained forever or we run the risk of reductions in service levels.
I hope this gives you a better understanding of the budget process. I invite your comments as to what is important to you and how we might meet these fiscal challenges we are all facing.
If you would like to see the 2014 budget along with comparisons to previous budget years, please click on this link.