Budget 2013: Spending increases by $9.2m, city tax by 4.5%, $2m in “nice-to-haves”

Though the budget includes several need-to-have items – our contribution to the hospital redevelopment, money for infrastructure, the new Alton community centre and library, and enhanced transit service – it also includes almost $2 million in “nice-to-haves”.

Nice to Haves

I found $2.2m in savings we could have cut from this year’s spending:

• Reduce merit pay increases for non-union staff from 1.5% to 1% (inflation/growth around 1% last year) = $157k
• Eliminate Egov’t facility rentals (find space/dollars within existing resources) = $165k
• Eliminate Risk & Consulting services over three years (not a priority given other needs) = $909k
• Eliminate additional leadership training (find money within existing $500k in professional development budget) = $80k
• Museum curatorial conversion (Find $ within existing budget and 2% across the board increase) = $7k
• Eliminate Burlington Art Centre foundation board restructure (this is a blank cheque; need more detail on how the money will be spent and its benefit to users of the BAC; consider raising fees) = $100k
• No additional funding for BPAC (city contribution should be tied to assisting local arts groups, rather than going to general revenue and subsidizing professional entertainers; additional staff funded through increased bookings/tickets) = $488k
• Reduce BEDC funding to $160 (from $370) to cover economic analyst, new Business Development position; use current dollars for mkt (business plan for $370k request lacked clear outline of how the additional marketing dollars would deliver jobs) = $210k

Raiding the reserve fund

Most of these nice-to-haves above were funded by raiding the Tax Rate Stabilization Reserve Fund.

Though items paid for through the reserve fund don’t add anything to the tax levy, the spending does represent an opportunity cost. Those dollars can only be spent once, and could have gone toward additional infrastructure work this year, enhanced contribution to the hospital levy, or other priority items.

That reserve fund was replenished with surplus money from 2012. The balance of all reserve funds is only slightly more than it was in 2009, after significant draws in 2010. The reserve fund balance in 2009 was $107.8m; at the end of 2012 it is 108.8m. You can read the detailed breakdown and history in the financial status report as at Dec. 31 (hereschedules 1-45). The report also includes our investment position, tax collection, and debt.

Retained Savings or Surplus?

We are being encouraged to call surpluses from the 2012 budget “retained savings.” However, retained savings suggests left over money that wasn’t spent, due to diligence in keeping costs down. A closer look at the source of the 2012 surplus, however, reveals that the $2.3m comes largely from factors beyond the city’s control, including:
* better than expected return on investments
* more applications and revenues for site plan applications
* warm weather resulting on less cost for snow clearing
* human resources “gapping” – savings in salaries that arise from a time delay between someone departing the organization, and the position being filled. Read the retained savings report here with Appendices A B C

Until retained savings truly arise from retained savings and cost efficiencies, I will continue to call positive variances to our budgets a “surplus.”

When I reviewed the budget, I only found about $650k in cost/efficiency savings ($457k plus one headcount). That’s a relatively small amount on a $120m budget, and I’m expecting we can do better.

In the end, 87% of spending requests (those 80 change items) were approved, either in full or at a slightly reduced rate.