In an earlier opinion piece, I threw out the notion that in Ontario, municipalities are not allowed to run operational deficits.
They’re not. It’s as simple as that. I didn’t make it up, agree or disagree, I just stated that fact as it currently stands. Check out the Municipal Act 2001 if you wish.
It’s something that is obviously concerning if you live in Renfrew, pay property tax in Renfrew, and follow Renfrew news — such as it may be, and it ain’t much, unless you enjoy dollops of self-serving platitudes and accept them as “news” — so I can certainly see and understand some degree of anxiousness around someone coming along and telling you that the corporation that you fund — the municipality — isn’t allowed to carry a deficit term over term. Because you know that, if deficits aren’t allowed, that shortfall will have to be made up somewhere. And that you, as the primary source of income for that municipality, may — will — be called upon to make up a big chunk of that shortfall. In other words, through no fault of your own, you’ll be required to pony up to make right the egregious mistakes or lack of rigour that has led to that deficit situation in the first place.
And by deficit, let me be clear. We’re not talking about slipping into maroon territory here, where you you slide gently from black ink to red ink on the balance sheet. We’re talking full-on red, dark red, the ugliest colour of ink possible when we’re talking about money, especially if it’s your money.
There are plenty of reasons and factors at play that would have a municipality flirt with a deficit, and these sorts of things happen all the time in all kinds of municipalities. So when such minor deficits present themselves, the fix to get to a balanced budget isn’t usually a big deal. Often, municipalities will project a budget deficit knowing that they already have a plan to make the books right in the next budget year, meaning that, well, it was all part of a considered plan. It’s sort of like buying anything using credit, where hopefully you have a reasonable plan to pay it off. You bought the thing because you knew you could pay for it in a reasonable amount of time, except for municipalities, that reasonable amount of time is one year. That’s because municipal deficits need to be made right the very next budget year.
It’s late November of 2024. The Town of Renfrew needs to pass a municipal budget for the year 2025. That means that in a few short months, that 2025 budget will be passed, and it further means that there will be items in it that will be there to specifically tackle the budget deficit left over from the previous year. And the previous fiscal year(s), budget-wise, and deficit-wise, has/have been nothing short of breath-robbing.
So all the people out there who feel they’re too busy to read beyond a single short paragraph are going to be suddenly hit with a whammy that they didn’t see coming, mostly because they didn’t choose to pay any attention to it. It’s almost like a head-in-sand syndrome, where bad or inconvenient news will just go away if you ignore it long enough.
It’s not going away. And you will pay. And you won’t be happy. And you shouldn’t be.
Your property taxes are going up, that much is certain. Property taxes always go up, sure, but they don’t usually go up in the manner that they’re about to. But I won’t define that here, because this is well into my ninth paragraph, and there’s nobody here to read this, except for maybe my four loyal followers down in the United States, and maybe that guy in Greece. God bless you five, by the way. Apparently I do it for you.
This doesn’t just impact your property tax bottom line, it also impacts the value of your property, and the asking/selling price of your property. I know this from personal experience, that potential home buyers will niggle and haggle over all sorts of things, making you feel like a picked-over carcass when you finally agree to terms after leaving the family collie in the deal, along with your natural gas barbecue and that beautiful bathroom mirror that you bought especially for your wife, who is now long gone, along with the collie. And no, the wife wasn’t part of the real estate deal, in case you’re wondering. I know where to draw the line.
So if you’re a potential home-buyer, do you think something as mundane as property taxes might come up? Holy smokes, folks, we’re talking about people who are insisting you throw the family goldfish into the deal. That property tax business comes up in the first 30 seconds after they notice your property is even for sale. Would it be a deal-breaker? I don’t know, ask your goldfish about that.
For the record, there are two types of budget deficits a municipality may encounter.
The first has to do with the municipal operations, or the day-to-day budget requirements, usually in the form salaries, utilities, services, that sort of thing. However much this costs, those operational items cannot exceed what the municipality takes in from its revenue sources, like property taxes, user fees, government grants, that sort of thing. This is operational debt, and it must be addressed the next fiscal year.
The other form of deficit comes from capital debt, the kind that pops up when big infrastructure projects are undertaken. You know, like Ma-Te-Way, just to reach for an example. Municipalities can borrow money — which costs money — to finance big projects like roads, sewers, water treatment, perhaps recreational palaces exalting radio stations and their owners, etc, but that borrowing is very strictly regulated by something called the Annual Repayment Limit, or ARL, a thing that makes sure that a municipality’s payment obligations remain within a certain percentage of that same municipality’s revenues. This is something that’s required as per the Ministry of Municipal Affairs and Housing.
Debt can be recovered in a number of ways: (a) increase those property taxes and user fees (b) reduce services and construction projects, (c) plundering reserves, that is if your municipality has any, and (d) all of (a) through (c).
Now don’t panic, at least not yet. There are mitigating circumstances, or emergency situations where the province can come riding in to the rescue to provide special funding or even grants to help with the shortfall. Stuff like earthquakes, hurricanes, and pandemics make that list. I’m not sure if incompetence or alleged malfeasance does, but you can always hope.
One way or another, you’ll know April 1, 2025, which is the beginning of the new fiscal year, and has nothing to do with what that date is usually associated with, but I fear the connection between the two will be too difficult for many to ignore. And the people of Renfrew will find out organically, when their new tax assessments arrive, and they notice in black-and-white what a significant kick in the pants looks like to their own bottom line. And if you rent in Renfrew, don’t get too smug. Your landlord is about to take one in the teeth, and you have to know where he/she/other is going to go right-off-the-bat to make that hurt go away, or at least not hurt as much.
I don’t revel in news like this. I don’t intend to traffic in bad news, I just report on it. If it were up to me, it would be different, but aside from my American and Greek friends — at least I hope they are, one shouldn’t assume — nobody’s going to listen to anything I have to say anyways. But this is going to happen whether people read my stuff or not.
Sitting here watching this, and many other things unfold, and not say anything? That just doesn’t seem right. And as inconvenient as it may be, and as awkward as it may be for some more than others, I go ahead and do it anyway, making no friends along the way.
When I see a bunch of people playing street hockey with a car approaching, I’m gonna yell “car!” When I see I tree falling, I’m gonna yell “timber!” Well, maybe not timber, but something. Like anyone else, if danger is coming my way, it’s nice to get a bit of a heads-up so I can at least attempt to get myself clear, if I can, or if I choose to.
But awkward or not, convenient or not, at least I know what’s coming, rather than being blind-sided. Pain is pain, and it hurts either way. Maybe I just feel I’d rather be prepared for it, and that such advance awareness might mitigate the effects upon my psyche. Maybe give me some time to think through the ramifications, or the possible consequences.
That tax notification is going to be short and sweet. Black and white. Not long-winded or preachy. The folks receiving those notifications will read them. It’ll take seconds, just the way they like it.
Except, after about ten seconds, they won’t like it.
NEWSMAGRENFREW 