Kapuskasing Council has been working diligently in the past couple of months to prepare a balanced budget for 2017.

As part of the budget preparation exercise, staff have been working at presenting scenarios to decrease costs and maintain services without creating major impacts on operations and service delivery. In order to balance the books, Council, under the recommendations of the Finance Committee, have made significant cost reductions in the 2017 budget exercise which include the following:

  • Discontinuation of the Bearskin passenger air service subsidy;
  • Reduction in airport operating hours with associated staff reductions;
  • Reduction in Kapuskasing Economic Development Corporation funding and elimination of the Economic Development position;
  • Cancellation of new capital projects;
  • A 0% salary increase for all non-union employees;
  • Reduction of summer student positions from 27 to 17;
  • Elimination of temporary employee positions at Public Works and Sports Palace;
  • Evaluation of user fees, essential and non-essential services;
  • Continuation of operational review of all municipal departments to identify efficiencies.

It is also to be noted that one of the contributors of the municipality’s financial position is the length of time in securing long-term financing for the Kapuskasing Energy projects which reflects on the current cash flow and financing options for other major projects. Council and staff are continuously working on restructuring projects and its operation in order to maintain and reduce any impacts on the community while taking responsible measures to plan for the future. The above cost cutting measures will help the municipality to reduce accumulated debts and work on rebuilding reserve funds for future projects as part of repositioning its vision.

At its meeting held April 17, 2017, Council approved the 2017 Capital and Operational Budgets with a 0% Capital Levy increase and a 0% Municipal Tax Levy. Some residents may see an increase on their tax bill due to MPAC’s re-assessment which occurs every four years in addition to the effects from Tembec’s re-assessment over the last ten years which has reduced taxation revenue from $2.3 million down to approximately $884,000 in the large industrial class with last year alone representing a reduction of $506,000 in taxation revenue.

Council and the Finance Committee made its recommendation for 0% increases on the Capital Levy and Municipal Tax Levy based on the average increases that will be implemented with the assessment values and rates while considering the quality of life of its residents and businesses.

Some of the key factors that remain the focus of this exercise are to spread out revenues generated from taxation in order to meet and maintain service levels. The majority of municipal revenues come from property taxation which is, in simple terms, calculated from industrial, commercial and residential property assessment values as follows:

  • Municipal Property Assessment Corporation (MPAC): responsible for assessing and classifying properties, legislated by the Assessment Act regulated by the province
  • Municipality: determines revenue requirements, sets municipal tax rates, collects property taxes to pay for services

Assessment values for each property, whether industrial, commercial or residential, are reviewed by MPAC every four years using market values to ensure that property owners pay their fair share. Starting in 2017, increases in assessed values between January 2012 and January 2016 will be phased in over 2017 to 2020. This is why some property owners may see significant variations on their property tax bill.

Working with the assessment values provided by MPAC, the municipality then calculates the base amount of property tax and education tax revenue required for its operating year.

Residential property taxes are calculated using your assessed value, a municipal tax rate, and an education tax rate which is set by the Province. An example of the formula is as follows:

2017 (based on a $100,000 property assessment value)

  • Assessed Value x Municipal Tax Rate = Amount of Municipal Property Tax (i.e. $100,000 x 0.02372392 = $2,372.39)
  • Assessed Value x Education Tax Rate = Amount of Education Property Tax (i.e. $100,000 x 0.00179 = $179.00)
  • Assessed Value x Sewage Tax Rate = Amount of Sewage Tax Rate (i.e. $100,000 x 0.00421547 = $421.54)
  • Municipal Property Tax + Education Property Tax + Sewage Tax Rate = Your Property Tax (i.e. $2,372.39 + $179.00 +$ 421.54 = $2,972.93)

The 2016 re-assessment, as undertaken by MPAC, of all property tax classes has created a taxation revenue shortfall of approximately $300,000. In order for the municipality to recover this shortfall to generate the same taxation revenue as the previous fiscal year, a revised taxation rate (called a notional rate) is applied to all property classes. The notional rate will inadvertently result in a taxation increase based on your phased-in property assessment for 2017 as determined by MPAC.

Variables that contribute to a change in municipal tax revenue is the total assessment value of all property classes such as industrial, commercial and residential. For example, when a property class decreases or increases in current value assessment, the rate for all other property classes will fluctuate to compensate. For the 2017 budget exercise, Council recommended to keep the taxation revenue neutral resulting in a 0% municipal tax levy increase.

What does the Operating Budget look like?

Municipal Services per $1,000 in property taxes are broken down as follows:

  • Education ($60): this amount is collected by the municipality and paid to the school boards.
  • Sewage ($142): this amount is transferred to the sewage budget to provide and maintain sewage service.
  • General Government ($92): to oversee and manage legislative functions and support to Council.
  • Protective Services ($183): to provide emergency services such as Fire Department and Police Services such as the
  • Ontario Provincial Police municipal costs. Fire ($80), Police ($87), Other ($16)
  • Public Works ($195): to provide and maintain transportation, winter control, road maintenance, garbage and recycling collection and services.
  • Airport ($36): to provide air transportation services such as Medivac, passenger and freight services.
  • Health Services ($27): to provide support to health care recruitments, some hospital services and cemetery.
  • Social Services ($79): to provide services under the umbrella of Cochrane District Social Services Board, North Centennial Manor and Golden Age Centre.
  • Recreation and Culture ($112): to provide for the pool, arena, parks and playgrounds, ball parks, tennis courts, sliding hill, Moonbeam Ski Hill, library, museum, festivals and events.
  • Other ($74): to provide Building and Planning, Financial and Economic Development services.

What does the Capital Budget look like?

The Capital Budget is dedicated to one-time expenditures such as road construction, building and facility upgrades, and heavy equipment purchases (i.e. garbage truck, snow plow). When the municipality undertakes such projects, a capital levy is added to your tax bill if needed. The municipality does receive government funding for capital projects and the balance is taxed on to residents and businesses. This year, as a result of major cutbacks in municipal spending, Council recommended a 0% capital levy due to all capital projects being suspended for 2017.

The municipality must present a balanced budget, meaning that the bottom line represents the same amount of revenues and expenses. Your property tax bill will be calculated and reflected in the following manner:

  • Municipal Tax Levy: Recommended 0% increase for operations
  • Capital Levy: Recommended 0% increase for capital projects
  • Education Rate: Set by the Province, collected and paid out by the municipality
  • Sewage Rate: Estimated to remain the same as the 2016 rate

Understanding where your tax dollars are going is complex. Kapuskasing Council has made a commitment to its citizens to maintain relatively affordable taxes when considering all the variables such as assessment values, increasing costs of living and on the day-to-day operations. Council has made a significant move on curtailing expenses in the operating budget which include reduction of staff, evaluation of essential and non-essential services for cost savings, recommendation of a 0% municipal tax and capital levy, suspension of capital projects and an analysis of cost recoveries as well as an overall operational review.

The year 2017 will be a challenging year to balance the books as with these recommendations, the municipality still needs to recover funds to off-set an operational deficit of approximately $283,000 to present a balanced budget. This deficit will force the municipality to dip into reserves and re-examine operations to find cost-savings and efficiencies while minimizing impacts on service delivery.

Council will continue to work hard in tightening the belt over the course of the year and will assume the same position in 2018 in order to find more cost-savings in preparation for the projected increases in social services and other costs associated with municipal operations. The effects of this exercise will demonstrate more savings as we near the end of 2017 and over the course of 2018.

Mayor Alan Spacek recognizes that these measures are challenging but at the same time, it shows fiscal responsibility to the community. Municipalities are heavily legislated by the province which in some instances financial implications and downloading of responsibilities can be very costly to smaller communities such as ours.

“We acknowledge the support of the community and assure residents and business owners that we, the members of Council, are taking necessary measures to maintain quality services and minimize impacts on the community.”