Notes for an Address by
George McLellan, Chief Administrative Officer
2004/2005 Proposed Budget
April 6, 2004
Your Worship, Members of Council
Before we hear staff's Budget presentation, I would like to make some general comments about the fiscal year that we have just come through, and the new one that we are about to begin.
To borrow a phrase from Queen Elizabeth 2, the past year has been our "annus horribilis."
To say that we've weathered many a' storm during the past year would be a gross understatement-both literally and figuratively. From the flooding in late March last year, to Hurricane Juan in the fall, to the Blizzard of 0-4 in February, we have had more than our share of burdens to bear.
These events, although catastrophic in nature, brought out the best in our community. All things considered, we rose to the occasion and I am very proud of the employees of HRM for their unequalled commitment and unwavering dedication in providing the services that only we can provide under such horrendous conditions.
The winter's record-breaking snow storm, and to a lesser degree Hurricane Juan, virtually paralysed our community. It was our job to keep it safe and to ensure continuity of service-- and we did just that. But not without a price.
Because of the devastation of Juan and the enormity of the amount of snow brought about by the blizzard, we had to virtually put our lives and our business plans on hold to keep our residents safe and to get our community moving again. These two events were among the top news events in the country for a number of weeks and I cannot understate the challenges they presented us.
Aside from the human challenges, when all was said and done we were left with financial challenges. The flooding, the hurricane and the "storm of the century" were all every expensive operations. As a result, we had to divert some of the money we had budgeted to spend on the many programs and services that we must deliver to our residents every year, to the extensive clean-up operations.
Even though we applied for funding under the federal government's Disaster Relief Program, we all know that money does not come down the pipe overnight. It could be years before we recover our expenditures, and there is no guarantee that we will get what we asked for. So, in the meantime, we have to continue with our day-to-day operations and do the best we can with the monies available.
After all of these natural disasters passed, we had no choice but to look for areas of the Budget where we could cut back on, or completely cut out, to balance the budget. Some things didn't get done, and for that we apologize. But in the end, our responsibility was to balance the budget and provide basic levels of service.
There is still money to be spent this year in cleaning up after Juan and, I say again, there is no guarantee that we will be getting any of the relief funding we applied for from the federal government, through the Province. And, there is no guarantee that we won't experience natural disasters or public emergencies in this new fiscal year. That is not up to us.
In spite of everything, we are pleased to advise Council that we ended the fiscal year with a balanced Budget and we continued to pay down our overall debt. Thanks to Council's guidance and to the commitment of our employees, we ended a very difficult year in the black.
As we prepare to enter a new fiscal year, I want to remind our residents that:
Due to the ongoing costs associated with the damages from Hurricane Juan, and the start on construction on the Harbour Solutions Projwect, HRM will begin to draw down on its reserves Accounts this year.
HRM experienced an unexpected loss of $5 million in revenue recently when the Province of Nova Scotia lowered the assessment of a major commercial property.
HRM dervices 70% of its revenue from property taxes, which is the highest ratio of any municipality in North America. As a result, we recognize that HRM property owners paying a disproportionate share of the municipality's operating and capital expenses, but we have limited sources of revenue streams.
For the first time since amalgamation, HRM's total debt is just under $300 million-- it's about $290 million. At the time of amalgamation in 1996, the combined debt of the former municipalities was approximately $268 million. This quickly rose to close to $347.5 million due to a number of unexpected and unforeseen issues, mostly related to the amalgamation. Only through HRM's Multi-Year Financial Strategy has this debt been brought under control and being reduced in an orderly manner.
Managing a proposed cut in tax rates and reduction in debt has been helped by the Federal Government's recent decision to rebate its portion of the GST back to municipalities. HRM originally hoped to spend the rebate money, forecast at $3.3 million this year, on increased services. However, the drop in a major commercial assessment this year forced staff to rework plans.
As you will see in the new Budget presentation, I believe that we are recommending a reasonable and balanced approach for the coming fiscal year. Not everyone will get want they want, but if they did, I'm sure the taxpayers certainly wouldn't like the bill. So we are going to move ahead, keeping within the guidelines of our Multi-Year Financial Strategy, and continue to provide for the needs-- not the wants--- of our residents.
As we were preparing the budget for this coming year, Council is aware that we were hit with another unexpected challenge. We learned that the assessed value of one of HRM's largest industrial taxpayers had been reduced, which resulted in a $5 million shortfall in our projected commercial taxation revenues for the coming year. HRM is appealing the assessment.
As we look ahead to the 2004/2005 fiscal year, the proposed gross Operating Budget is $547.5 million, an increase of $18.2 million or 3.5 per cent over the 2003/2004 budget.
This increase includes a total of $11 million for all business units to cover such things as: collective agreements, regulatory requirements, inflation and increased demand of services due to growth.
There is a further increase of $7.2 million in Fiscal Services, for such things as:
an additional $3.5 million to the Province for education. That would bring total mandatory education funding this year to $70.1 million. (Staff is recommending the Supplementary Education Funding remain at its current $20.8 million.)
$1.7 million in operating costs for new Capital assets;
$1.3 million in debt charges, and
a further $900,000 in insurance costs.
It's worth noting that 15.2 per cent or $80.3 million of our total $547.5 million proposed Operating Budget will go to the Province of Nova Scotia in the form of mandatory funding for such things as education, correctional services, housing, etc.
Moving now to the Capital Budget, staff is recommending the gross expenditure for this fiscal year be $137.7 million. Out of that total, HRM will have to borrow $35.5 million to finance the Capital Budget.
In addition, there is $26.1 million of Capital from Operating available--- $6.5 million of that is being transferred to the Solid Waste Reserve.
About $4.1 million of funding is being provided from Capital Surplus and as a result of deferral of some Capital projects.
There is $57.8 million in Reserve withdrawals
An additional $2.7 million of Capital projects are secured with Local Improvement and Capital Cost Contribution charges.
Rapid, steady growth in HRM is creating new demands for programs and services. It's fair to point out that we can't even bridge the gap now between what we should be spending on infrastructure, and what we can afford to spend on infrastructure. The shortfall is about $27 million this year alone.
In spite of these challenges, we are recommending to Council that there be a modest decrease of 2.4 per cent in Tax Rates for this fiscal year.
However, I must point out that this will not necessarily mean that all property owners will see a decrease in their tax bill, due to rising assessments.
The average increase in residential assessment this year has increased 5.25 per cent.
Slightly more than 30 per cent of the properties have seen an increase of 2.4 per cent or less. That means these properties will see a drop in their tax bills.
About 60 per cent of residential properties saw an increase in assessment of between 2.4 per cent and 10 per cent, so they will see modest increases in their tax bills.
Only about 12 per cent of properties saw increases of more than 10 per cent.
Just briefly, I would like to list a few of the highlights of the proposed 2004/05 Budget:
Improved and enhanced public transportation, including the introduction of a new Bus Rapid Transit (BRT) service to the downtown core from the communities of Sackville and Cole Harbour.
Expanded pollution prevention efforts and enforcement, leading to a cleaner environment. This includes continued progress on the $330 million Harbour Solutions Project
Development of a long-term blueprint and action strategy for sustainable environmental practices and the reduction of Greenhouse Gas (GHG) emissions.
There will be a new Integrated Dispatch Centre for better coordination of, and faster response times for, public safety and emergency services.
There will be a fully-integrated voice communications system for police, fire, medical and emergency services (a new Mobile Trunk Radio network).
HRM's Strategic Growth Fund will be used to leverage additional funding from the federal and provincial governments to enable the municipality to undertake new infrastructure projects, particularly those related to a new Regional Plan for the municipality.
Construction of a new all-weather sports field in Dartmouth is expected to begin this fiscal year.
HRM will work with the Province of Nova Scotia to establish a Regional Transportation Authority for the overall improvement and future planning of the region's transportation network, including all modes of transportation.
As Council is aware, we have adopted a Corporate Scorecard approach to the delivery of municipal services in HRM. Our goal is to be the most liveable, best managed municipality in the country. We want to ensure that we are providing the programs and services that taxpayers need us to provide.
Council has identified citizen and taxpayer outcomes that it expects us to meet. We have put in place appropriate ways in which to measure our performance, so that we can provide the public with an annual scorecard on how we are doing. We expect to present our first Corporate Scorecard in the next number of months.
Our goal is to ensure everything we do is related to the programs and services that our residents need us to provide.
In closing, I would like to reiterate some comments made about HRM by the international bond rating agency, Standard and Poor's following a recent independent review of our financial picture and credit quality.
In its release Standard and Poor's linked its rating in part to both past fiscal performance and the outlook for the future.
It stated "The (A/Stable) rating reflects a robust financial performance in fiscal 2003 (year ended March 31), steady economic growth, a liquidity position that has strengthened dramatically since 1999, and a total municipal debt burden that is moderate by peer comparison."
It went on to say that 2003 was a "stellar year for building permits and housing starts in Halifax, boding well for continued growth in the taxable assessment base."
We can only hope this will continue.
Thank you.
