A question of spending, reserves and higher taxes

Opinion

Hey there, time traveller!
This article was published 24/01/2025 (238 days ago), so information in it may no longer be current.

“Is there a standard that’s used, from a municipal standpoint, of how much reserves should be in comparison, say, to your operating budget or your capital program over the 10 years, or anything kind of in that regard?”

— Coun. Bruce Luebke (Ward 6)

“I don’t think the problem is that we don’t have enough money in reserves. I think the problem is we’re spending too much out of reserves in capital projects. We’re taking on too much in one year.”

— Coun. Shawn Berry (Ward 7)

That question by Coun. Bruce Luebke, and that statement by Coun. Shawn Berry, set the stage for what is likely to be the most consequential component of Brandon City Council’s budget deliberations, which begin this morning and are expected to conclude tomorrow afternoon. That is because the position that Luebke, Berry and their council colleagues take on the reserve issue will ultimately determine how large this year’s property tax increase will be.

For those who have not been following the issue, this year’s City of Brandon draft budget includes a plan to contribute $27.5 million toward the city’s financial reserves. Approximately $10.8 million of that contribution would come from property tax revenue collected from Brandonites, while the remainder would come from rate-funded utility reserves ($8.8 million), development charges ($680,914), along with contributions through sales of city and grants ($1.7 million from the accommodations tax, $3.4 million in gas tax revenue, nearly $350,000 in land and equipment sales, as well as other revenue sources).

Such a large contribution to reserves would ordinarily result in higher reserve balances for spending in future years, but that isn’t what this year’s draft budget proposes. To the contrary, the budget plans to deduct more from the reserves this year than would be contributed.

In particular, the draft budget includes almost $20 million in reserve-funded spending on the refurbishment of transit buses, the replacement of police vehicles, airport and fire equipment, and the replacement or enhancement of heavy-duty and off-road equipment.

If all of that proposed spending is approved by city council, the balance in the city’s general reserves will plunge from more than $47 million in 2024 to approximately $17.4 million this year. Over the past decade, the balance in the city’s general reserve account has never been lower than approximately $38 million, and has often exceeded $47 million.

Luebke and Berry have every reason to be concerned about such a significant drop in the general reserve balance, but they are approaching the issue from different directions. Luebke appears to be concerned that such a low balance in the general reserve may put the city at risk, in that it may be in a weakened position to respond to an unexpected crisis of some form.

The city’s director of finance, Troy Tripp, advised Luebke that there is no specific requirement that the general reserve always exceed a certain minimum level, but it is easy to see that a lower reserve does potentially impair the city’s financial flexibility.

From Berry’s perspective, city administration appears to be planning a reserve-funded spending spree at a time when council is forced to consider yet another large tax increase, and all that spending will leave the city with its lowest reserve balance in years. He wonders if some of the planned purchases can be delayed until next year. If they can, it could mean a lower tax increase this year.

The concerns raised by Luebke and Berry are reasonable and in the interest of Brandon taxpayers, who are already grappling with the financial trauma caused by last year’s hefty tax increase, combined with steep increases in water and sewer rates.

The councillors’ concerns may be valid, but that doesn’t mean they will alter the proposed budget or ultimately save taxpayers money. That’s because it takes six votes to pass any measure at the city council table, and it is far from clear that there are four other votes in favour of reducing the contribution to the general reserve account and/or cutting back on the planned spending.

For example, Coun. Kris Desjarlais (Ward 2) supports the draft budget and the further reduction of the reserve fund balance, arguing that the budget plan is consistent with recommendations in the 2024 MNP report. He relies on the report’s projection that following the plan will result in a healthy reserve balance in 2031.

That’s six years from now. Does our city council believe that Brandon taxpayers should keep paying more and more, based on the vague hope that the city will be on a firmer footing in 2031? Or, do they believe Brandonites expect their city council to sharpen their pencils and agree to a smaller tax increase that does not jeopardize city’s finances?

We should know the answer sometime tomorrow afternoon.