Council begins budget deliberations on Feb. 19, but at least one member is scratching his head, wondering why, in his view, the published information appears to be misleading the public.

Ward 2 Coun. Michael Vagnini said there was a $17-million discrepancy last year between what the city projected in its public documents and what it projects to have actually spent. In other words, the city spent $17 million more than it planned.

“They’re using different numbers from those we approved in 2018,” he said. “The new numbers and percentages we’re going to be using are not from last year. The 3.5 per cent (tax hike) is a little bit misleading. “¦ The projected (budget) to 2019, the percentages are all going to be off.”

That becomes problematic when planning for this year’s budget. Tom Price, an adviser to Vagnini, said if you have a cost overrun one year, you would typically adjust the budget for the following year “if you know those overruns are going to occur again, and there’s no reason to believe they won’t unless you know exactly what they are and they’re a one-time occurrence.”

“If your actual costs are running $17 million higher than what you budgeted, you should be increasing your next year’s budget to compensate for that,” Price added. “They should be adjusting the budget unless they can explain where the $17 million overrun was.”

But Ed Archer, the city’s CAO, and Ed Stankiewicz, the city’s chief financial officer, say Vagnini’s numbers are inaccurate.

They admit the city has run deficits for a couple of years, but the numbers are nearer to about $2 million, much of which has been from winter road maintenance.

“The deficit we had in 2016 was $2.2 million, of which $2.3 million was due to winter control,” Stankiewicz said.

The city actually ran a surplus of $100,000, Stankiewicz said. In 2017, the city ran a deficit of $1.6 million, but went over their winter control budget by $1.9 million, meaning they were actually in the black by about $300,000. The numbers have not been finalized for 2018, but Stankiewicz said they are projecting a deficit of $2.4 million, about half of which will result from winter road maintenance. The remainder is related to contracts the city held and the fact recyclables have become less valuable on the global market.

The city has a consolidated budget of approximately $628 million annually (operating and capital). To support this, property taxes in 2019 will likely increase anywhere from 2.5 to 3.5 per cent, the city said earlier this month. Additionally, there could be a levy of 1.5 per cent to support asset renewal.

“While city council directed staff to develop a budget with no more than a 3.5 per cent property tax increase over the previous year’s taxation level, it also directed staff to identify potential changes that could reduce the tax increase to 2.5 per cent,” the 2019 budget document states. “Like most Canadian cities, Greater Sudbury has significant asset renewal needs that will not be fully addressed with the level of taxation recommended in this budget. The city’s long-term financial plan calls for accelerated asset renewal by establishing a special tax levy. If approved, a 1.5 per cent special levy would also be incorporated into 2019 plans to further address long-standing asset renewal requirements.”

On a $230,000 home, that 3.5 per cent increase equates to an additional $103 annually, or about $9 per month. With the additional levy – bringing the total increase to five per cent – that equals $146 annually.

Price said to cover what he says is a $17 million deficit, the city withdrew from reserves, which he finds worrying. But more importantly, he said this is a trend that has continued for at least two years.

“If you go back to the 2017-18 budget, they overran it by $16 million,” he noted. “This is two years in a row they’ve had greater than a $15 million overrun. It’s time to adjust your next budget to reflect that. You now have a trend.”

Stankiewicz and Archer said the city withdrew from the tax rate stabilization reserve, a winter road maintenance reserve and the capital finance reserve.

“The Municipal Act requires municipalities to have a balanced budget,” Archer said. “When there is a deficit, the Municipal Act says there are two ways to manage it: fund it from things like reserves or carry the deficit forward into the next budget year when it has to be recovered through that next year’s property tax.”

Archer expects the 2018 overrun will be covered by various reserve funds.

In order to keep tax rates bearable, Price said the city will draw from reserves and increase user fees to compensate for the overrun. As he pointed out, the city earned about $1.5 million less last year in user fees than anticipated, even though it projects earning an additional $5 million this year (user fees include water/wastewater services, which are scheduled to go up by 7.4 per cent).

“If your user fees went down last year by $1.5 million, how would you be able to get $5 million more in user fees next year?” he asked. “You’ve either got to be increasing your user fees or you’re expecting more people to use. But we just demonstrated here there are going to be fewer people paying user fees. That’s a big jump; $5 million in one year is a big jump.”

There are lots of unknowns in the 2019 budget, Vagnini said, partly because of the way the budget has been structured. He would have preferred to see a zero base budget that could be thoroughly vetted.

“It’s a top-down budget,” he said. “Let me shrug my shoulders again, top-down budget. I know the mayor, the CAO, the chief financial officer and the people around the table will tell you it’s a bottom-up budget, but it’s not. It’s a top-down budget. There’s a lot of stuff we don’t know.”

But Archer countered that Sudbury has won awards for its budget documents.

“That speaks volumes about the quality and level of detail that’s available,” he said.

Mike Jakubo, chair of the finance committee (and an accountant), said he has no issues or concerns with the budget.

“It is very well laid out,” he said. “If you read it from front to back – I know it’s more than 500 pages – but it starts out with an overview, which is looking at the entire corporation. Then it breaks it down into each department. “¦ For the last couple of years we’ve won awards for the budget. It’s not just that we’re saying it’s well laid out; we’re getting third-party recognition of that. Everything from start to finish is directed by a majority of council. The way the budget has been formulated in the last couple of years, it has been directly based on service levels and the costs to provide those services to our taxpayers.”

mkkeown@postmedia.com

Twitter: @marykkeown

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