Budget Questions & Answers
QUESTIONS:
How does council arrive at its yearly budget?
What is the cost of services in the approved 2011 operating budget?
What is the cost of capital works approved in the 2011 capital budget?
What are the budgeting challenges?
What is the City of Kingston doing to meet the challenges of 2011 and the future?
How will the 2011 budget impact my tax bill?
How will the 2011 budget impact my utilities bill?
How does the city's AA- credit rating affect our ability to borrow money or issue debentures?
ANSWERS:
A: Budget documents tell a city's financial story and set spending and revenue targets for municipal programs, services and initiatives. The budget is an important element in the accountability cycle and provides a standard against which subsequent performance can be judged.
Q: What is the operating budget?
A: The operating budget is an outline of a city's spending plan intended to implement council's goals and priorities. The budget is organized by department and division showing its day-to-day operations including programs and services, such as water and sewer, transit, garbage collection and disposal, recycling, parks, arenas, recreation programs, road maintenance, libraries, policing and public health services. Contributions to capital reserve funds are also made from the operating budget.
Q: What is the capital budget?
A: The capital budget is an outline of a city's capital expenditure plan and related funding for assets, such as water and sewer mains, roads, arenas and parks, which will provide or support services to residents over many years.
A: Capital projects, once approved through the capital budget, are undertaken for major rehabilitation, replacement or expansion of existing assets and the acquisition or creation of new assets, such as roads, sewers, parks and arenas.
Q: How does council arrive at its yearly budget?
A: Budgets are developed based on council's directions, guidelines and the forecasts approved in the prior year's budget. Asset management and program services are part of city management's responsibilities and also serve as a major information source for budget planning. Residents provide budget input to their councilors throughout the year. Council, sitting as Committee of the Whole, reviews all the budget proposals from city departments and external agencies.
Q: What is the cost of services in the approved 2011 operating budget?
A: On March 1, 2011, Council passed Bylaw No. 2011-34, a Bylaw to Adopt the 2011 Operating Budget. The 2011 General Municipal Operating Budget has been approved in the amount of $289,273,395.
The 2011 Municipal Utility Operating Budget has been approved in the amount of $93,844,000. Municipal utilities, operated by Utilities Kingston, include water and sewer in all urban areas, and the operation of natural gas distribution in the geographic region known as the 'former' City of Kingston.
Q: What is the cost of capital works approved in the 2011 capital budget?
A: On February 15, 2011, Council passed Bylaw No. 2011-29, a Bylaw to Approve the 2011 Multi-Year Capital Budget. The approved 2011 capital budget for general municipal purposes is $49,138,780.
In addition, multi-year capital budget estimates specific to road, municipal utilities and strategic capital programs for 2012 through 2014 were approved in 2011 as part of a multi-year capital plan. The 2012 to 2014 capital budgets for roads, municipal utilities and strategic capital programs total $72,164,600, $57,860,000 and $48,736,000 respectively.
Q: What are the budgeting challenges?
A: The budget challenges are:
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Maintaining all current services
The City of Kingston continues to provide a wide array of services. While Council continues to review some of these services, the community response continues to favour maintaining and/or increasing current service levels. The challenge is to find a balance between service delivery cost and affordability. -
Increased pressure on the tax rate
Council has endorsed a multi-year financial forecast to predict impacts of various fees and taxation. Although this plan includes an annual inflation adjustment and dedicates 1% for capital infrastructure purposes, increased pressure on the tax rate continues. -
Economic environment
A volatile economy creates a variety of challenges in establishing revenue and expenditure budgets and staying within those parameters. Although the City of Kingston has weathered the recent economic slowdown better than many municipalities, interest rates, commodity prices and other unknowns continue to create challenges for departments trying to operate within a balanced budget scenario.
Q: What is the City of Kingston doing to meet the challenges of 2011 and the future?
A: To meet the challenges of 2011 and the future, the city is:
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Incorporating a coordinated strategic approach to planning and budgeting
The City continues to move towards a more synchronized planning and budgeting cycle with the objective of expanding our planning processes out to a multi-year vision. Departments are developing more comprehensive, multi-year strategic plans that will roll up into an approved corporate strategic plan. This approach will allow us to better identify and plan for the budget resources required to support the corporation's strategic plan.The concept of a multi-year operating budget, with an emphasis on finding long-term sustainable and affordable solutions to achieve a balanced budget, is being enhanced for 2012 and onward. The multi-year planning and budgeting process will help deal with annual budget challenges and find long-term solutions to improve the fiscal position of the municipality. It allows the city to respond to inflation, growth and growth related cost pressures, regulatory service changes, salary and wage adjustments and their effects on future budgets. It also presents an opportunity to find more efficient and effective ways to deliver affordable and valued services to our citizens.
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Prioritizing capital expenditures
For the past few years council has continuously looked for significant progress in the areas of infrastructure and recreation and culture, along with tangible progress in the areas of economic prosperity, environment and affordable housing.The current council has committed to the following priorities in alignment with the Sustainable Kingston plan, recognizing the four pillars of sustainability (environmental, cultural, social and economic):
- Maintain and enhance infrastructure.
- Enable economic development.
- Rejuvenate Brownfields.
- Facilitate affordable housing.
- Create and protect green spaces.
- Develop proactive community plans.
This direction will form the basis for developing future capital and operating programs.
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Monitoring revenue and spending targets
In the past few years, Departments have had to deal with the effects of an uncertain economic environment. To manage to approved plans, they continue to work with finance staff to monitor revenue and expenditure budget variances on a regular basis. Monthly budget variance reports are reviewed by departments and finance staff and operations are managed with the objective of having a balanced budget by year end. -
Lobbying the provincial and federal governments for grants and new sources of funding
The City of Kingston continues to focus on asset renewal. To assist with infrastructure rejuvenation, the city will continue to look for grants and new sources of funding from the upper levels of government. Cities cannot and will not be able to address this issue entirely on their own. Cooperation and support from federal and provincial governments is essential. -
Implementing changes in policy
In order to enable the city to finance certain service requirements and construct capital facilities, it will be necessary to move toward more focused user pay approaches. Examples of this in the past include council's approval of user charges as a significant share of project funding for the Grand Theatre, the K-Rock Centre and the INVISTA Centre.
Q: How will the 2011 budget impact my tax bill?
A: The City's 2011 operating budget increase was 3.39%; however, an individual property tax increase may vary depending on whether you live in the east, west or central areas of the city. The variance relates to the levy for fire services, which is area-rated according to the service provided to the area in which you live. Education tax rates, which are set by the province, and your property tax assessment for 2011 taxation, also have an impact on your final tax bill.
With respect to your property tax assessment, the Municipal Property Assessment Corporation (MPAC) reassessed all properties in Ontario using a base year of January 1, 2008. Provincial legislation requires assessment increases to be phased-in equally over four years from 2009 to 2012, while decreases will not be phased in. The MPAC reassessment resulted in an overall increase in the City's assessment base, for 2011 taxation, of approximately 4.37%. This increase does not provide additional tax revenue for the City. The reassessment redistributes the tax burden on individual properties that experienced a change in their assessment greater than the average increase.
The overall 2011 tax increase for a residential home ranges from 2.46% to 2.76%, depending on the area. The overall increase includes: a budget increase of 3.39%; an average assessment increase of 4.37%; and education tax changes.
Q: How will the 2011 budget impact my utilities bill?
A: Effective May 1, 2011, the commodity price for natural gas increased $0.0179 per cubic metre to $0.2376 per cubic metre and the transportation and storage price for natural gas increased $0.0273 per cubic metre to $0.1456 per cubic metre. The overall effect of these price changes will increase a typical residential bill (3,100 cubic metres annually) by an estimated $140.12 annually. There was no increase to the natural gas local distribution rates for 2011.
Water and wastewater rates increased on March 1, 2011 by 9.5% and 5% respectively. Utility rate increases are required due to infrastructure renewal.
Q: How does the city's AA- credit rating affect our ability to borrow money or issue debentures?
A: Standard & Poor's, after completing a 2010 credit review, announced that they were raising their long-term issuer credit and senior unsecured debt ratings on the City of Kingston to AA- with a positive outlook — a level up from the AA-/stable rating received last year. In addition, the esteemed ratings service's update and rating views Kingston as having a relatively stable economy with good prospects, healthy liquidity, and strong operating performance.
This rating demonstrates strength in the city's financial management practices and positions the city to secure funds on the investment market at attractive interest rates.
