Tuesday, January 17, 2006

Richter Report - January 17, 2006

Township Tax, Spend & Borrow Plans - Going from the sublime to the ridiculous

20.35% tax increase and $35.6 Million in new debt presented!

Yesterday, Township Council spent 2½ hours reviewing the Township’s draft 2006 to 2008 Budget. On December 21, 2005, Council had asked staff to “prepare the 10 year Long Term Financial Plan based on the preferred Service Enhancement Option D” and to bring this back to a Budget Workshop on January 16, 2006 at 3 pm (as reported in Langley Free Press [LFP] on Dec. 23/05). Those of you who visited LFP in December 2005 will recall that “Option D” was the most expensive option presented to Council for its consideration.

At yesterday’s meeting, Council did not get past the 2008 numbers. So the new Council failed to meet its earlier objective of reviewing a 10 year plan as originally scheduled. However, given the dramatic cost increases presented for 2006 to 2008, it was probably a good thing that we stopped at 2008 and did not proceed to 2016. (Otherwise, we’d likely all have to sell and move out of Langley because we wouldn’t be able to afford either the anticipated taxes or the new debt load).

We were fortunate to have had one member of the local media present. However, he only stayed for the first hour of the meeting and therefore missed the major piece of Council discussion on anticipated new debt plus new tax rates over the next three years.

While he was there, staff confirmed that the basic general levy tax increase being presented over the next 3 years is 20.35% (5.6% in 2006 plus 8.95% in 2007 plus 5.8% in 2008). Of course, this simple total of 20.35% does not include the compounded effect over 3 years.

I’m sure though that the editor of his paper will explain the difference between ‘simple’ and ‘compounded’ increases so that we’ll all be able to understand how a simple increase of 20.35% is not so bad, especially because the compounded increase is 21.7%.

Of course, these numbers depend on an increase in assessed property value of 13.58%. If your assessed property value increased more than this, the 20.35% won’t apply. You can expect more. Again, I’m sure that the newspaper editor will explain all of this to you.

Getting back to the main issue, tax increases may be justified (depending on who you are talking to). But, how do you also explain/justify increases in Township debt? Is new development really paying for itself? (This is a key issue that I’ve raised before).

Yesterday, Council was informed that in addition to the 20.35% tax increase in the general levy from 2006 to 2008, a new debt load of $36.5 Million in same three year period (2006 to 2008) would also be required (and this new debt does NOT include the $30-$52 million estimated in the Fall of 2005 for Aldergrove’s Sewer and Water).

Our existing debt is about $4.5 million. Previous councils have worked very hard to pay the Township’s debt level down. So now that it is down, why do we want to run it back up again? And especially if running it back up again does not include key health and safety issues like sewer capacity in Aldergrove.

I sincerely hope that the rest of Council (especially the new Councillors) finally understand what I have been concerned about for many years. We are living beyond our means and our growth is not financially sustainable.

Council has been approving spending and new development on a piece-meal (by project) basis without regard to the bigger picture. As a result, Council has been increasing taxes to homeowners to pay for it. I don’t think we can continue in this manner. We must start differentiating between “Need-to-Have” and “Nice-to-Have”. It would be nice to have a new museum in Fort Langley but we need to have a new sewer system in Aldergrove and better roads in Willoughby.

If we don’t start making this key differentiation soon, we’ll be bankrupt (or taxed out of existence). Like many other people in this community, I started my family here and I want to retire here, but if taxes keep going they way they are, I won’t be able to afford to do so (and neither will you).

Like a buoy, I have been ringing a bell. The numbers are out of control. If you want examples, look at field houses and grandstands. Look at “old” (3 years ago) and “new” 10 year financial plans. Look at blackberries and expense accounts.

The budget planning meeting was to have been completed yesterday. But after the many questions that I (and a couple of other new members of Council) asked, Council decided to review these numbers again at a workshop in February and to delay all the public open houses/surveys for another month. Here’s hoping that the Council will be what it was elected to be and that is a Board of Directors. The Board should set the parameters and staff should respond to those parameters.

Now as shareholders who elect the Board of Directors, here’s your job. Do you agree to the following numbers? If you don’t, call your councillors and let them know your position. (Their phone numbers are available on http://www.tol.bc.ca/Langley/Council/Members/).

Proposed Tax Increases (2006 to 2008)
2006 tax increase 5.60%
2007 tax increase 8.95%
2008 tax increase 5.80 %
Total 3 yr simple increase 20.35%

Proposed Debt (2006 to 2008)
New Debt:
2006 General Capital $ 6.65 million
2008 General Capital $ 10.00 million
2007 Water Capital $ 1.50 million
2008 Water Capital $ 4.00 million

2006 Storm Water Capital $ 1.5 million
2007 Storm Water Capital $ 8.2 million
2008 Storm Water Capital $ 3.8 million

Total NEW DEBT $35.65 Million

Current Existing Debt $ 4.5 million
Grand Total Debt $40.15 Million

Summary Comments & Suggestions:

  1. In the last term, Council proudly announced that the Township no longer had significant debt. Obviously, this could be history. And, why should we incur more debt?

  2. Substantial decreases in the Township tax rates contemplated in December 2005 will not occur.

  3. Council should consider hiring an independent financial actuary to assist it in drilling down to, and understanding, the macros of the numbers presented by staff. With all due respect to Council, a business background is an asset and we need independent advice.

  4. It clearly appears to me that even with dramatic growth in housing and commercial development starts, we are not able to pay for new development. We either have to stop new development or dramatically raise DCC’s. Alternatively, we could tax and borrow a lot more BUT only if our spending is non-exorbitant (which it’s not).

  5. At what point do we ask ourselves whether we are living beyond our means? Maybe it should be soon and maybe we should start requiring more reports from developers as to their impact on the immediate and extended neighbourhoods, and especially about impact on new residents’ expectations concerning neighbourhood and community services.

Kim Richter

Kim Richter is in her 3rd term as Langley Township Councillor and also is a Professor of Business at Kwantlen University College. She holds a masters degree in health administration and was a health care management consultant.

No comments:

Post a Comment