Taxes are a means for people to accomplish together what they cannot do individually. Water treatment and distribution, sewer treatment, paved roads, street lights, airport, cemetery – these and many more services are the result of collective action.
The annual budget is the most important decision that Council makes every year, because that is where they operationalize their priorities. It is policy into action. This process of draft budget review and debate is legislated to be held in meetings open to the public, with opportunity for the public to provide comments at an additional legislated public budget presentation.
In addition to levying taxes for their own purposes, municipalities also levy taxes for other public authorities. Each year Valemount levies and collects the taxes, then remits the revenue to the appropriate public authority such as the Regional District, School Taxes, Hospital District, etc. Figure 1 shows what percentage of the total collected is collected for both the Village and for other bodies.
Municipal Councils generally have three main choices at budget time, none of which are easy:
1. Increase taxes and maintain an existing level of service, or add further services
2. Maintain the existing tax rates (or reduce tax rates) and reduce services
3. Find other sources of revenue or find efficiencies
Just like your homes and businesses, external costs for the Village increase. Hydro costs, postal costs, insurance, permits and licenses, contractors, parts and equipment, training – these are all costs we cannot control. Delivery of many of the services also has little room for adjustment. Water and sewer infrastructure is in place and a reduction in licensing, certification and service is not allowed or possible. The airport must be maintained and cemetery services are essential.
This means that a Cost of Living Adjustment (COLA) to the taxes is required to maintain the same level of service. Council aims to provide good stewardship of Village funds while striking a balance keeping costs affordable, maintaining existing services and providing new services. Good fiscal stewardship involves ensuring that we have a balanced budget every year, that there are sufficient funds budgeted for the delivery of services, that there are sufficient funds budgeted as contingencies for unexpected expenses, and that reserves are built and maintained for infrastructure replacement.
To provide the contingencies for unexpected expenditures, the Village budget shows funds from surplus. We strive to not use those as recurring use of surplus funds is not a sustainable practice. In order to not dip into the surplus funds, we must be under the budgeted amount in a number of categories. Reviewing past budgets and financial statements reveals that we are typically under budget and have not withdrawn from surplus funds.
Money put in reserve for future capital expenditures demonstrates good fiscal management and preparedness. However, local government is also held to a principle of temporal fiscal equivalence, which states that payments should be matched to the time when benefits are received (in other words, financing through borrowing). In the first instance, you pay so that your children can benefit. In the second, the user of a service both pays and benefits. In reality, most capital projects will be paid for by some combination of reserve funding, grant funding and borrowed monies.