Council approved the 2021-2023 Operating Plan with transfers from an accumulated surplus to reflect a reduced tax obligation and achieve the maximum three per cent tax rate increase previously approved by Council.
Transfers approved are in the amount of $336,300 in 2022 and $576,000 in 2023. Without the transfer, the plan would indicate that Council approved a 5.6 per cent increase in 2022 and a 4.7 per cent increase in 2023.
“This is a temporary measure that we’re using to be able to get a three-year operating plan approved by council but when it comes time for developing the actual draft budget and operating plan, that transfer from accumulated surplus won’t be considered within those documents,” said Coun. Albert Ostashek.
He said he would be uncomfortable approving a budget reflecting the higher tax rates as it would provide informal approval to move ahead with those in future years. Instead of actually using an accumulated surplus transfer for the reduced tax obligation, the 2022 draft budget and 2022-24 operating plan that are currently being developed by administration will provide different options.
Rob Osmond, Hinton’s strategic financial support, clarified that administration will look at other means to achieve the three per cent increase and will not simply take funds from the surplus to balance the budget. During budget talks, Council can ensure that target is reached with decisions on service levels, programs, and purchases.
CAO Emily Olsen explained that the three per cent tax rate increase obligation was met in the 2021-23 operating plan but that decisions made during budget deliberations for 2021 impacted future years and caused the increases.
Coun. Ryan Maguhn saw this as an opportunity for Council to set clear direction and that by working collaboratively, Council’s tax rate direction could be reflected in the three-year plan without relying on the accumulated surplus.
“This operating plan sets a perception to our community on what the goal of our council is, but more importantly, following the next election, if we have a completely brand new slate of councillors, this also sets the tone and direction for them moving forward and they may not have the context that this council has moving forward with budget,” he said.
Coun. Dewly Nelson felt approving the plan with the accumulated surplus and then later taking it out didn’t make sense.
Maguhn suggested that it would be cleaner to modify the operational expenditures in the three year plan. He said he wasn’t concerned about where the modified expenditures would come from as Council will budget for that in the upcoming years.
Reworking the plan would take focus away from other priorities and delay future budget development, according to Osmond. To move things along, he suggested approving the plan during the meeting instead of opening the plan back up to cut expenditures.
Regardless if the 2021-23 plan was accepted as is, showed a reduction in operational expenditures, or used the transfer of the accumulated surplus funds, the next three-year plan will still be brought back to Council within their expectations and for their approval, he added.
Olsen noted that the reason they hadn’t recommended reducing or removing expenses was because these are actual budgets and removing actual expenditures would mean it’s not a true budget anymore.
Osmond stated that an accepted plan is a requirement under the Municipal Government Act (MGA). He said this is usually done prior to approving the tax bylaw and that the Town should avoid being in contravention of the MGA.
Council is required to annually adopt an operating and capital budget for the municipality, to approve estimated revenues, expenditures, and transfer for the operation and capital purchase for that year. Under the MGA, the preparation of a three-year operating and five-year capital plan is also required to estimate anticipated financial operations and capital property additions with a longer-term focus. Osmond added that these plans must be reviewed and adjusted every year, meaning these plans are not fixed.
Although the 2021 operating budget was approved earlier this year, Council was still required to adopt the 2021-23 operating plan, which did not meet Council’s target of a property tax increase below three per cent. Funding from the accumulated surplus is provided to the 2021-23 operating plan to reduce the tax obligation.
Administration is preparing options for the 2022 Draft Budget to achieve the target of a property tax increase below three per cent.
The first conversation on the upcoming budget will happen in September, with budget discussions proceeding in November.
Masha Scheele, Local Journalism Initiative Reporter, The Hinton Voice