Mayor's Report - March 1998

The dominant issues faced by Council regarding preparation of the budget this year continues to be loss of the revenue sharing grant and secondary highway maintenance grant for Bedwell Bay Road. Last year the province combined their grants into a single discretionary "lump sum" grant of $102,900 , however, the overall provincial grants (by whatever name) have not increased in seven years. This means that other sources of funding (the tax levy) must make-up the equivalent of 19% of the grant total, i.e. the amount of inflation over the past seven years (approximately $19,000) in addition to all other increased operating costs.

Although the budget won't be reconsidered and finally adopted until early May, the proposed Operating Budget for 1998 is $504,383 which is the same as the 1997 actual expenditures. Council felt that we must continue with our program of roads maintenance while slowly building our reserve funds, and also felt it important to "hold-the-line" to the extent possible.

In order to provide some perspective to the foregoing, I have provided the following background information regarding the financial status of the municipality.

RESERVE FUNDS

The Village reserve funds are in good shape! As at December 31st, 1997, the Village reserves stood as follows:

During 1997, interest earnings from the reserve accounts amounted to $6,060 , which is equivalent to $0.046 per $1000 of assessment. This is a slight decrease from interest earned in 1996 of $7,217. For 1998, an interest accrual of $10,400 is projected for the reserve funds based on an average interest rate of 4.0%. (Note: Reserve funds cannot be used, even temporarily, for operating in order to offset borrowing costs, and all interest earned by the reserve funds must be accrued to the reserve funds.)

TAXES RECEIVABLE

As at December 31st, 1997, the taxes receivable totalled $41,837 , comprised of overdue 1997 taxes and arrears 1996 taxes. This is represents a slight increase from the $38,309 in taxes receivable as at December 31st, 1996.

An important consideration with taxes receivable is the fact that the Village has to borrow funds to operate and pay the School Taxes whenever taxes are not paid by property owners. This places an additional financial burden in the form of increased borrowing charges. It is imperative that every effort be made to reduce the level of unpaid taxes.

BORROWING COSTS

The cost of borrowing money during 1997 (interest and bank charges) amounted to $1,096, an amount equivalent to $0.008 per $1000 of assessment. This was lower than the 1996 borrowing costs of $3,010. For 1998, the projected borrowing costs are estimated to be $2,500 , which is $0.020 per $1000 of assessment. (Note: The Village borrows its temporary operating funds at prime minus one-half percent.)

The most important factor influencing annual borrowing costs is the prevailing interest rate from January until July, when the 1998 taxes are received. However, now that Belcarra has a property tax prepayment program, there is a reduced requirement to borrow operating funds during the first six months of the year.

As can be appreciated, the prompt payment of taxes means that borrowed funds can be quickly paid back, and investments made to earn interest and offset the cost of borrowing during the first half of the year.

INVESTMENT REVENUE

An important financial consideration is the management of Village funds in order to maximize investment revenue. During 1997, a total $9,026 was earned as interest on investments (equivalent to $0.067 per $1000 of assessment) which was more than the $6,451 interest earned in 1996 due to higher interest rates. Following the receipt of taxes last July, we were able to invest tax revenues, after paying down the operating loans, in the MFA money market. A similar investment strategy is proposed for 1998. However, because the prevailing interest rates during the third and fourth quarters are not known, investment income is being conservatively projected at $8,000 ($0.06 per $1000 of assessment).

PROVINCIAL GOVERNMENT GRANTS

Same as last year, the 1998 Basic, Revenue Sharing and Secondary Highways Provincial Government Grants to the municipality have been eliminated and replaced with a single "lump sum" grant of $102,900. This amount, however, has not changed over the past seven years. As a consequence, the residential tax levy has to absorb increased operating costs due to inflation, which for the past seven years amounts to approximately 19% or $19,000 on the general purpose tax levy. Thus, "freezing" the provincial grants represents a subtle form of down-loading onto municipalities by the province!

GARBAGE LEVY

The 1998 Garbage levy is proposed to remain unchanged at $125 per household, which will be the 7th year that the rate has not changed. Calculated on the basis of a user group of 264 households, the garbage revenues will amount to $33,000 for 1998.

LICENCE FEES

A new revenue item in the budget is Licence Fees which for the coming year are conservatively projected to be $3,000.

PLANNING PROGRAM

The budget for general planning in 1998 has been set at $6,000 for 1998.

PUBLIC WORKS MAINTENANCE

The 1998 maintenance budget for roads, drainage and general purposes has been set at $80,000 , which reflects anticipated costs and includes Bedwell Bay Road maintenance and $16,000 for part-time help. (As noted above, highways maintenance grants have been eliminated for 1998.)

CAPITAL EXPENDITURES FUNDING

In response to elimination of provincial secondary highways grants, the Contribution To Capital was increased to $100,000 which approximates the average annual funding of capital expenditures over the past 10 years, and anticipates Belcarra's requirement to continue its program of roads maintenance and reconstruction.

MUNICIPAL LEVY

The 1998 municipal tax rate is proposed to be $2.20 per $1000 of assessment, which is the same as 1997. This levy will yield a total of $288,089 on a 1998 net taxable assessment role of $130,949,679. (Note: The residential tax levy accounts for 57% of Belcarra's overall municipal operating budget.)

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