Norfolk County’s budget talks have hit a snag.
Councillors can’t agree on whether to borrow from the county’s $76-million legacy fund to lower taxes this year.
The fund was created after the 2014 sale of utility company Norfolk Power to Hydro One. The idea at the time was to invest the proceeds and put the annual income toward road repairs and other infrastructure needs.
But county staff, led by CAO Jason Burgess, floated the idea of borrowing from the fund to avoid saddling residents with a steep property tax increase for a second consecutive year.
Senior staff say high taxes are needed because former councils made a habit of borrowing from the county’s reserves without replenishing the kitty, leaving the county in debt to the tune of $82 million.
Burgess argued that borrowing from the legacy fund this year and next — for a proposed total of $7.5 million — is less risky since staff came up with a 10-year plan to pay the money back with interest.
“I want to stress that it’s a borrow,” he said. “We would actually put terms in it that the legacy fund would have to be repaid.”
Dipping into the fund now, Burgess added, spares the county from making major cuts to wrestle down the tax increase and gives staff time to find more savings.
That strategy doesn’t sit well with Coun. Amy Martin, who is worried that future councils may not stick to the repayment plan were it not politically expedient. She said using money from a long-term fund to lower taxes could set a dangerous precedent.
“What I feel is right here is to preserve the integrity of that fund, because I fear for what future councils may do,” she said.
Martin noted that the legacy fund makes the county money annually and safeguards Norfolk’s credit rating.
“It would take a municipality of our size decades to put that much money away again,” she said.
Veteran councillor Mike Columbus supported borrowing from the legacy fund to keep the 2021 residential tax increase at 3.3 per cent rather than 7.7 per cent.
The lower rate would save taxpayers just under $150 on residential properties assessed at the average value of $270,000.
Columbus said COVID-19 has created a financial crunch for residents and business owners who already saw their taxes go up 8.4 per cent last year.
“If ever there was a time to provide support to our constituents, I’d say this is it,” Mayor Kristal Chopp agreed.
Coun. Kim Huffman said drawing from the legacy fund is the “responsible” thing to do.
“I think not only have we hit a rainy day with this pandemic, we’ve hit a flood,” she said.
When budget deliberations resumed on Tuesday, Martin was one of five councillors who voted against borrowing $5 million from the legacy fund. Chopp, Columbus and Huffman were in favour.
Four subsequent motions to take out lesser amounts from the fund this year went nowhere, with a compromise plan to borrow $2.5 million failing in a tied vote.
Ties are possible after the unexpected resignation of former councillor Roger Geysens in January. The longtime Langton-area councillor announced his retirement midway through his term, and councillors have not yet decided whether to call a byelection, appoint someone to fill the seat or leave Ward 2 without a representative until the 2022 general election.
Being down a councillor complicates decision-making, as seen at several points throughout the budget process when the eight remaining council members were at loggerheads with no one to break the tie.
Coun. Ian Rabbitts, the budget committee chair, said he was “really torn” over the legacy fund decision, but ultimately decided borrowing from the fund would be “a losing strategy.”
“It’s going to be putting us in a very difficult position in our next budget session,” Rabbitts said, predicting it would be difficult to find the needed savings to repay the money.
Staff has already proposed $3.3 million in cuts for 2021, from axing dozens of county jobs to reducing museum hours, upping recreation fees and trimming the library budget by 7.5 per cent.
That pared Norfolk’s budget down to $220 million, of which $105 million is funded through property taxes.
Public opinion on what to do with the legacy fund reflected the division among councillors. Some residents wrote to the county urging councillors not to use the one-time cash windfall for short-term gain, noting that most homeowners can afford to pay higher taxes now in the name of a stable financial future.
Others contend the legacy fund is not a “sacred cow” and should be used to help residents already hurting thanks to the pandemic.
Dennis Travale, who was mayor when the sale of Norfolk Power went through, took to Twitter to protest raiding the fund.
“The legacy fund was not designed as a ‘rainy day’ fund,” Travale tweeted, adding that council should instead look to use the expected 2020 budget surplus and money from the $1-million council initiative fund to lower the tax increase.
Burgess confirmed there will be a surplus from 2020 that can be applied to the 2021 budget, but the exact amount will not be known until June.
“We have to show a funding source to balance the budget, but that doesn’t mean we have to take the funds right away,” he said, adding that council could use the surplus to immediately pay back the legacy fund loan.
The council initiative fund was the source of $250,000 for an economic recovery task force that brought in civilian members to advise the county on how to rebound from the pandemic.
Also reducing the tax burden is $734,000 from the federal-provincial Safe Restart Agreement, a fund to help municipalities handle increased costs connected to the pandemic and avoid running a deficit in 2021.
Residents already face a 6.1 per cent water and wastewater rate hike that will raise monthly water bills by just over $6.
In a show of solidarity, the mayor and council voted to forgo salary increases for 2021, saving the taxpayers roughly $4,400.
Norfolk’s budget deliberations will continue for a seventh day on Feb. 16.
J.P. Antonacci, Local Journalism Initiative Reporter, The Hamilton Spectator