Friday, October 17, 2014
Complete Picture of Fiscal Responsibility
This Year and Last Four Years:
As I reported in April and June, both Pelham Town Council and Regional Council approved only slight tax increases for 2014. The combined property tax increase for an average property in Pelham for 2014 is 0.9% above the 2013 amount. Since I report this as a “out-of-pocket” value, that translates into an approximate $36 change from last year for the average residential property owner (2014 value of $298,000). This increase was the lowest or second lowest in Niagara Region again this year.
But, what about over a longer period of time? Let’s compare this term of Council with the last term of Council, and with inflation.
The average increase of property taxes on your combined residential property tax bill for the last four years was 1.5%; the cumulative increase was 6.0%. For the previous four years – from 2007 to 2010 – it was 1.8%; the cumulative increase was 7.3%.
How do we measure whether that is “good” or not? Another important comparator would be inflation. Inflation for the last four-year period was 7.4% or an average of 1.8% per year.
I hope you too are pleased that our residential tax increases have been 1.4% below inflation for the last four years. (Please see the chart for more information.)
Debt Reduction & Capital Improvements:
After writing about it in September, some folks have asked me for more information about the Town’s long-term debt.
You will be pleased to know that since the end of 2006 to the end of 2013 (the most up-to-date, audited data), we reduced our long-term debt by 20% – from $6.3M to $5.0M. Over the same period, our “debt to revenue ratio” – a private sector measure – reduced by 30% (from 53% for 2006 to 33% for 2013). (Please see the chart for more information.)
Taking Advantage of 66¢ Stimulus Dollars:
You will note from that chart that we did drop our long-term debt to a low of $4.2M in 2010 from a all-time high of $6.3M in 2006 (before I began serving as Mayor).
Why did it increase slightly since 2010? The main reason we increased our debt slightly was to take advantage of two-thirds funding dollars – what some call 66¢ dollars – from the Federal and Provincial governments. You will recall that we applied for and received unprecedented stimulus funding – $8.4M of investments which supported $13.6 M in projects and improvements in 2009 and 2010.
But, since we didn’t have all of our one-third share – our 33¢ share – on hand, we added some strategic debt in 2011 and 2012. The Town added this debt after completing the projects and to also take advantage of some of the lowest interest rates in generations. For example, instead of saying “no” to $3.7M of Federal and Provincial funding for Haist Street, we accepted the funds and added our $1.84M share.
Property Sale Soon:
Further, I anticipate that we can significantly reduce our debt levels when we complete the sale of property for public benefit. You will recall that the Allen Group agreed to purchase 7.7 acres of Town-owned lands in the East Fonthill area for $375,000 per acre to facilitate the construction of a Medical Centre (5-10 Family Doctors and Allied Professionals) and a Retirement Home (135 apartment-style units with 12 town-house units). Part of that $2.9M can be used to help reduce some of our debt over the next few months.
Development Charges – One-Quarter of Total Debt:
Finally, some of this long term debt is to help support new development and is, therefore, not funded by existing residents and businesses.
You may know that Development Charges are applied on new developments – from new homes to new commercial buildings – to help pay for the facilities and capital projects that are required to support that new development. For example, if a road needs to be widened, a new water line installed (like on Rice Road), new Fire Trucks purchased, or a new park needs to be built to serve specific new development, that new development needs to pay for those new items. Development Charges allows “growth to pay for growth.” And, that’s good news for current residents and businesses.
But, sometimes those facilities or improvements need to be built or installed ahead of the growth – like that new water or sewer line – to help serve and stimulate the growth. In those cases, the Town might build the project but add the debt to the Development Charges account; in this case both interest and principal are paid by Development Charges and the new developments occur.
In Pelham’s case, $1.2M (or nearly one-quarter) of our $5.0M total long term debt at the end of 2013 was actually for these Development-Charge-funded projects. To be clear: one-quarter of our long-term debt will not be paid back by existing residents and tax-payers, but, rather, by new development.
Improvements and Fiscal Responsibility:
During the same period that we reduced our long term debt and kept our property tax increase at a rate lower than inflation, we dramatically improved the Town’s infrastructure. These improvements included better roads and more sidewalks and trails, new playgrounds and new and improved parks, and renewed Downtowns.
As this complete picture shows, Pelham Council and I continue to ensure that we only minimally impact you and other property tax-payers while we continue to improve our infrastructure and increase the quality of services in the Town.
Posted by Mayor Dave Augustyn