Mayor's Report - May 1999

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. Two years ago 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 eight years. This means that other sources of funding (the tax levy) must make-up the equivalent of 20% of the grant total, i.e. the amount of inflation over the past seven years (approximately $20,000) 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 1999 is $495,075 , that is, 1.3% less than the 1998 actual expenditures of $501,819. Notwithstanding the 0% budget increase last year, Council felt it important to "hold-the-line" again this year.

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:

Capital Works Reserve	$266,750
Equipment Replacement Reserve	$25,396
Marine Avenue Reserve	$22,869
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TOTAL RESERVES =	$315,015
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During 1998, interest earnings from the reserve accounts amounted to $14,678 , which is equivalent to $0.113 per $1000 of assessment. This is an increase from interest earned in 1997 of $7,461. For 1999, an interest accrual of $12,000 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, 1998, the taxes receivable totalled $51,674 , comprised of overdue 1998 taxes and arrears 1997 taxes. This represents an increase from the $41,837 in taxes receivable as at December 31st, 1997.

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 1998 (interest and bank charges) amounted to $1,975, an amount equivalent to $0.015 per $1000 of assessment. This was slightly higher than the 1997 borrowing costs of $1,096. For 1999, the projected borrowing costs are estimated to be $2,000 , which is $0.015 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 1999 taxes are received. However, as a result of Belcarra's 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 1998, a total $10,848 was earned as interest on investments (equivalent to $0.083 per $1000 of assessment) which was more than the $9,026 interest earned in 1997 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 1999. However, because the prevailing interest rates during the third and fourth quarters are not known, investment income is being projected at $10,000 ($0.077 per $1000 of assessment).

PROVINCIAL GOVERNMENT GRANTS

Same as last year, the 1999 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 eight 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 20% or $20,000 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 1999 Garbage levy is proposed to remain unchanged at $125 per household, which will be the 8th year that the rate has not changed. Calculated on the basis of a user group of 274 households, the garbage revenues will amount to $34,250 for 1999.

LICENCE FEES

A new revenue item in the budget is Licence Fees that are conservatively projected to be $3,500 for the coming year.

PLANNING PROGRAM

The budget for general planning in 1999 has been set at $6,000 for 1999.

PUBLIC WORKS MAINTENANCE

The 1999 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 1999.)

CAPITAL EXPENDITURES FUNDING

In response to elimination of provincial secondary highways grants, the Contribution To Capital was increased to $110,000 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 1999 municipal tax rate is proposed to be $2.20 per $1000 of assessment, which is the same as 1998. This levy will yield a total of $285,650 on a 1999 net taxable assessment role of $129,840,579. (Note: The residential tax levy accounts for 58% of Belcarra's overall municipal operating budget.)

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