If council is going to stick to its resolve to not increase property taxes by more than three per cent, while at the same time adding to reserves instead of depleting them, then cuts are going to be necessary.
And it's not just cuts to the proposed 2011 budget; council will have to take a look at how it's currently doing business.
"We are looking at significant cuts," Mayor Bob Turner said on Monday after council spent two hours going over the items on the municipality's wish list that weren't covered in the previous meeting.
"We're in a tough place," he said. "In part we're living beyond our means."
At present, if the status quo was preserved and proposed new projects were added, the municipality would have to draw down its reserves from $3 million to $2 million.
Councillor Doug Hooper said, "It is clear we were living beyond our needs and drawing down our reserves faster than we're replenishing them. We need to restore a savings account. We need to see what's gone in and what's gone out."
The municipality has been building itself over the past 10 years, Turner said, and now council is getting a clearer idea of whether the present model is sustainable. "We built the municipality by instinct rather than what we can afford."
Chief financial officer Karen Blow gave the analogy of a family tightening its budget by buying hamburger instead of steak. However, for that budget transition to be made within a municipality, it will take time and planning.
Last June, council approved a series of motions that set the stage for this year's budget. It said it didn't want to increase taxes beyond three per cent. In 2011, the municipality's tax revenues were $3.25 million. A three per cent increase is $97,000. Added to this is $108,000 in additional revenues from non-market assessment changes. That gives the municipality an extra $205,000 in 2011.
Council also said it wanted an increase in its aggregate contributions to reserves of no less than three per cent. Last year's reserve contribution was $762,000. Council will have to put in that and an extra $23,000 this year.
The municipality's staff compensation policy allows for a cost of living increase that equates to $26,000 as well as the possibility of merit pay increases of $30,000.
The municipality has also been told to expect a decrease of $64,000 in provincial funding.
Now you have to figure in the cost of running the municipality. Last year, operating costs before fiscal services and transfers to reserves was $4.4 million. Last June, council passed a motion limiting an increase of operating costs, including staff increases, to no more than two per cent. Councillor Peter Frinton noted that the decrease in provincial funding is almost equivalent to two per cent.
If the municipality does nothing, it's already in a negative position.
Councillor David Wrinch said, "we're trying to keep our tax rate artificially low in comparison to our real costs."
Council accepted as information all the various department's projected 2011 budgets and has asked department heads to now let council know which items in those budgets are negotiable and which items must go ahead.
Mayor Turner said that the municipality needs a corporate review "an in a sense this budget is a first step."
Cost recovery
As council tries to make sure that it properly recoups the overhead costs of various services, it will place a priority on water and sewer services.
The suggestion was made by Councillor Alison Morse. She said that some services are shared by everyone on the island. Water and sewer services are used by specific property owners. They pay for the direct costs of those services but not the municipality's cost of providing administration.
She thinks that people who use the water and sewer services should be helping to pay for the municipality's staff costs related to those services.
Frinton agreed with Morse's approach because "that's where so much senior staff time is tied up."
Environmental protection
The public will soon be asked to comment on the municipality's proposed environmentally sensitive development permit areas.
The planning department is creating a map which outlines which areas on the island have environmentally sensitive lands. Landowners who wish to do work on these lands - including modifications to existing structures - will have to conform to a new set of regulations.
Not every project in the identified environmentally sensitive areas will need to undergo an environmental consultation. That will be determined on a case by case basis. The intention is to reduce the potential negative impacts of development and avoid significant disruption to the natural terrain.
Councillor Peter Frinton was concerned that the current wording would include someone adding something like a new vegetable garden.
Director of planning Hap Stelling says the department will be fine-tuning the document to avoid such situations.
