Good financial management needs transparency

As was recently reported by Julia Sacco’s article in the Nov. 28 edition of The Lake Report (“Draft budget proposes 14.4 per cent tax hike”), the town’s finance staff in their draft budget has proposed a whopping great increase in our property taxes for 2025.

And, this increase follows on the two previous years’ increases — 8.9 per cent in 2023 and 6.75 per cent in 2024.

Simple math might suggest this totals 30.05 per cent tax increases over three years but, of course, annual percentage increases cannot be calculated quite so simply due to compounding.

Be that as it may, if we stick to simple math, that’s an average annual increase of slightly more than 10 per cent per year, while Canada’s annual inflation rate, according to statista.com, was 6.8 per cent in 2022, dropping to 3.8 per cent in 2023 and is currently projected to end the 2024 calendar year at 2.44 per cent.

Furthermore, this organization suggests an even lower rate of inflation (provided economic conditions remain stable, which is somewhat questionable given Mr. Trump’s re-election) for 2025.

So, in real terms, the town’s annual budgetary increases — and subsequent tax hikes — have far and away exceeded the rate of inflation.

But, the population of the town is growing say some, and that surely will result in higher costs of service.

Well, according to Statistics Canada, the town population in 2021 was 19,088 and, the latest data I could find (by worldpopulationreview.com) estimates the town’s current population in 2024 at 20,102.

That’s a population increase of 388 additional residents per year which, expressed as a percentage equals 1.8 per cent in annual population growth from 2021 to 2024.

Somehow, I can’t see that relatively minuscule increase in town population having any notable impact on the town’s operating costs.

However, as the town’s director of corporate services, Kyle Freeborn, identified, salary increases and volunteer firefighter compensation are budgeted to increase by $1.9 million. 

Looking back, the salaries, wages and benefits line of the 2023 budget showed an increase of 8.6 per cent which would have included the 16 new staff positions approved for hiring during that year.

In the 2024 budget, this same line reflected an 8.2 per cent year-over-year increase and again should have encompassed seven more new staff positions.

Note: That is a total of 23 new staff positions over the two-year period (2023 and 2024) or an increase in town administration employment of 16.8 per cent when, during the same period, the town population grew only 3.6 per cent.

Now, moving to the draft 2025 budget, a $1.9 million bump to the salaries, wages and benefits line suggests a proposed increase of 13.6 per cent.

Say what?

Look, I know that insurers that provide employee benefit programs have ramped their rates — the Chartered Professional Accountants suggested a weighted average of seven per cent for 2024 in Canada — but benefits should comprise no more than 30 per cent of this budget line.

And, I’d argue that, properly negotiated, 25 per cent would be more appropriate.  

Still, let’s err on the high side — while assuming that the 2024 budget number was not messed with by “discretionary” hires into new, unbudgeted staff positions:

In the 2024 budget, at 30 per cent, benefits would have equalled $4,204,685. Then, applying the Chartered Professional Accountants’s seven per cent cost escalation, we arrive at an additional $294,328 expense to this line.

That leaves us with a proposed increase associated with salaries and wages of $1,605,672 or 11.5 per cent — again, assuming that finance staff has not incorporated more newly created staff jobs.

In an economic theatre wherein the prevailing inflation rate is 2.44 per cent, this seems exorbitant.

Moreover, I find it very interesting to observe that the town of Grimsby, with a population approximately 40 per cent larger (28,883 in 2021) than Niagara-on-the-Lake’s, had a similar number of employees, 150, and a 2024 budget reflecting $30.6 million in gross operating expenditures — significantly less than NOTL’s $48.5 million operating budget for the same year.

And, the 2024 budget for the town of Lincoln, which has a population of approximately 25,750, also reflected a notably lower number in gross operating expenditures.

While I realize that the town of Niagara-on-the-Lake has some unique characteristics that may add to its expenditures in comparison to Grimsby and Lincoln, I am forced to question whether those items justify the level of total expenditures reflected in the town budget.

Nor do I understand why NOTL requires a similar number of employees as a town that is more than 40 per cent larger.

It is little comfort to the Niagara-on-the-Lake taxpayer to know that our town – as/in 2023 – has the lowest property tax per $100,000 of the assessed value of any municipality in the Niagara region when our property value assessments are markedly higher than those anywhere else in the region.

Bottom line, it’s the actual amount that comes out of the bank account to pay our property taxes every year that really matters.

And, for many retired folks on a fixed income, you can bet your last dollar that their income isn’t going to go up by 14.4 per cent.

This year, the Town of Lincoln won the Distinguished Budget Presentation Award for its 2024 Budget from the Government Finance Officers Association of the United States and Canada.

In response to receiving this award, Lincoln’s mayor, Sandra Easton, stated, “This award underscores our unwavering dedication to transparency, fiscal responsibility and effective communication with our residents. We are committed to maintaining these high standards in our budget process to best serve our community.”  

Greg Reimer, chair of Lincoln’s budget committee, noted, “This award highlights the town’s hard work and the collaborative effort behind creating a budget that not only addresses the immediate needs of our town but also ensures sustainable growth and development for the future.”

And, Lincoln’s director of finance/treasurer, Charlotte Tunikaitis, added, “Receiving the Distinguished Budget Presentation Award from (the Government Finance Officers Association) is a testament to our commitment to excellence in financial management.”

“Our annual budget process is a vital part of our strategic planning, enabling us to address the needs of our community while fostering transparency and accountability.”

Given that Lincoln was presented this award after its budget had been assessed as best among 1,700 scrutinized municipal budgets, it seems that one of our neighbours here in the Niagara region appears to be a model of best practices.

Perhaps it would behoove the Town of Niagara-on-the-Lake to study and understand Lincoln’s methodology.

After all, isn’t employing “best practices” what every organization should strive to do?

While it wouldn’t make the pain of increased property taxes any less, a process dedicated to “transparency, fiscal responsibility and effective communication with our residents” would certainly go some distance to increasing the confidence of NOTL’s voters.

Brian Marshall is a NOTL realtor, author and expert consultant on architectural design, restoration and heritage.