BUDGET 2018: Lessons of Underfunding

April 13, 2018

Snapshot: 5.84% tax increase, 10.1% water bill increase, regional costs not yet finalized.  Why is this a positive story?

 

Council has a duty to keep costs in check while providing quality services – and we have an equal or higher responsibility to be financially honest, ensuring taxes and fees reflect the real costs of service delivery.

 

It’s no secret I am concerned by the under-funding of our infrastructure and the tremendous added cost of deferred work; it forms the majority of my “Murdoch4Mayor” FUND and BUILD policies for Oak Bay.

 

Last night, March 12th, while still falling short on cost containment, Council agreed to partially make up for underfunding the 2017 budget.  This is a big deal. In 2017, to the point I could not support the budget, the current Mayor insisted money be taken from reserves to pay for operational projects while no money was put in to the budget (or reserves) to address paving or infrastructure deficits.  This resulted in an artificially small tax increase at the expense of more potholes and far higher long-term costs.  Optics over planning.

 

However small a step, I am hopeful that the 2018 budget initiates a philosophical change in the majority of Council toward managing our finances.

"We have a... higher responsibility to be financially honest, ensuring taxes and fees reflect the real costs of service delivery."

 

What was achieved? The most important two developments were:

  • The paving budget went from covering 16% of the bare minimum (2013) cost of maintaining roads to 19.6% of the minimum.  There was also agreement to provide an additional $115,000 of one-time funding from 2017 surplus. This means we will spend $265,000 more on repairing roads in 2018 than we did in 2016 or 2017. To indicate how far behind Oak Bay is: we are still more than $2,250,000 short of the required annual spend.

  • Council agreed to add 1% to the budget to seed future infrastructure spending.  This is so small to be almost entirely symbolic, but it at least changes the direction from last year where the 1% to reserves was rejected then (to add insult to injury) an additional 1% was taken from infrastructure reserves to keep the perceived tax rate down.

It should be pointed out that, while starting to be realistic about costs, the downside of the 2018 budget is that we did not spend enough time on prioritization and cost reductions, a necessary ancillary to increasing infrastructure funding.

 

What does the 2018 Budget look like after the last Estimates (budget) meeting?

  • Taxes: Increase of 5.84%, or approximately $140 per household

  • Water Bill: Increase of 10.1%, or approximately $81 per household

  • Other Regional services: not yet included

  • Total Increase of for an average household (estimated): $221 (or 6.9% over total 2017)

"Strategic and honest financial management is fundamental to the viability of our community..."

 

What’s next?

 

Oak Bay Council needs to send a clear message to staff that we support them in their efforts to prioritize and budget major infrastructure upgrades to the point we have a fully funded and planned infrastructure refresh model. At this point I am hoping that candidates in the upcoming election will include fully funded infrastructure as a policy priority.  

 

By focusing on artificially low taxes and not the structural financial requirements, the current Mayor has made it clear attention to these details are not his priority, and that fact is one of the primary reasons I am running for Mayor in October. Strategic and honest financial management is fundamental to the viability of our community, and needs to be part of leadership vision and commitment.  Tackling this now is a positive change we can make in our community for this and future generations.

 

UPDATE:

Since posting I have had a number of people asking about the water bill increase and why it's so high. Scarily enough, it's actually the norm for this Mayor's term: in 2012 the average water bill was $509. In 2018 it's $886, averaging a 10% increase every year. The primary reason is that all CRD capital projects, borrowing, and operational costs related to sewage treatment have been moved to the water bill. While the municipality reports the annual tax increase, it does not report water bill changes, so the year-over-year water bill increase is hard to find. I recently brought forward a motion to move 25% of regional sewer costs on to taxes so there would be a line item that could be seen (and these costs could also be deferred if over 55). Council saw the wisdom of that approach and voted 6-1 in favour, with only the Mayor opposed...

 

...but the very next meeting, having had the opportunity to speak to key Councillors outside of public view, the Mayor used his Mayoral powers of reconsideration to nullify the previous vote and call the same question again. While no new arguments were made, it was defeated with Councillors Croft, Kirby, and Ney switching their votes.

The result is that costs remain largely hidden on the water bill which continues to increase 10+ percent each year (equivalent to about an additional 3% on the tax bill). 


Here is a rough "per-household" summary of increases since Nils took over as Mayor (excluding regional costs collected separately):

[For those interested in specifics, the water bill is made up of a fixed water charge, plus individual per-unit costs for water consumption (rate set by CRD), municipal sewer, and CRD sewer and debt. In 2018, for every $1.00 charged for water use you pay $1.40 for sewage]

 

 

 

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