Inspector: Glenn Pitman G. Pitman Consulting Inc

Transcription

1 Inspector: Glenn Pitman G. Pitman Consulting Inc

2 Background In March 2008, Mayor George Jendyk requested the Minister of Municipal Affairs, the Honourable Ray Danyluk, to conduct a dissolution study of the. The motion of town council requesting this dissolution study was passed by Town of Onoway council at the March 25, 2008 meeting. The Mayor of the and the Reeve of Lac Ste. Anne County were notified in mid-april 2008 that the Minister of Municipal Affairs would undertake a dissolution study to consider the financial, administrative, and service impacts of the becoming a hamlet in Lac Ste. Anne County. Ministry staff undertook the study throughout the summer of 2008 and held a public meeting and vote on dissolution on October 27, with an advanced poll being held on October 25, The result of the vote was 66% opposed to dissolution. On November 24, 2008 Minister Danyluk advised Mayor Jendyk the vote results and concluded that the residents of the did not support dissolution of the town at that time. The Minister further advised that feedback received during the public input phase of the dissolution study indicated concerns with the management and administration of the town s affairs. As a result of these concerns, the Minister decided to order an inspection into the management and operation of the. The authority for this inspection is in accord with Section 571 of the Municipal Government Act. The following report is the result of the inspection ordered by the Minister in November, Although a number of recommendations have been made, there was no evidence of any actions that would be deemed to be irregular, improper or improvident. G. Pitman Consulting Inc. 2

3 Methodology This inspection was undertaken by examining documents within the town office consisting of, but not limited to, the following: Town council meeting minutes Town Bylaw Registry 2008 Budget Audited financial statements Alberta Capital Finance Authority repayment schedule (2008-9) Strategic Plan 2007 Business Plan 2007 Accounts receivable as of date of this inspection Loan statement from the Onoway CIBC CAO service contracts Dissolution study material/report In addition, personal interviews were conducted with the Mayor and members of Town Council as well as Mr. Ted Latimer, Chair of the Citizen s Ratepayers Association for the. Interviews were undertaken with the Town Foreman, Mr. Con Hlady, and other town office employees, including the acting CAO Farrell O Malley. This inspection centred on concerns expressed by the Citizen s Ratepayers Association and public input obtained during the dissolution study, mainly overall management and administrative operation within the corporate town structure. Review was made of the financial status, business practices, decision making process, content of business information as it is presented to town council, and the review and verification of corporate records. The financial aspect of the municipality was reviewed as it related to budget preparation and approval, budget control compared to actual revenue and expenditures, reserve balances, debt application and limits, and long term financial planning. Overall, this inspection centred on corporate indicators which would demonstrate the viability of the municipality within the Province of Alberta as it functions within the legislative authority provided to it. G. Pitman Consulting Inc. 3

4 Findings Utility rate changes: One of the more controversial areas identified within the dissolution study was that of the large increase in utility rates made on March 1, It was stated that because of the rate increase, some local businesses were finding it very difficult to continue to do business within the Town. Local residents found their utility bills nearly doubling or more as a result of the new rates and still others did not understand why the increase was necessary. Town administration presented a utility rate report to the January 29, 2008 meeting of council which recommended a change in the overall structure of utility rates. The new rate structure represented a major change in philosophy for utility cost recovery and a substantial increase in utility rates (the rate for each cubic meter of water was to increase from $0.72 to $2.16; 3 times the previous rate; sewer rates also increased more than 3 times the previous rate). The report recommended future rates be based on full recovery of costs in areas of water treatment, transmission and distribution; wastewater collection and treatment; and solid waste management. Previous costs were based on a combination of flat service fees and consumption while the new proposed rates were to be based on a consumption formula and flat fee based on meter size. Figure 1, on the next page, shows comparisons between the previous rates, those applied as of March 2008, and the results of the increase on a sampling of actual utility bills. The rationale for the increase in rates was based on the necessity to recover sufficient revenues to not only cover the current operating costs but also anticipated future costs of utility upgrading and replacement. The new rate structure anticipated the Town being able to set operating dollars aside in specific reserve accounts each year to meet future capital costs as utility improvements were undertaken. In keeping with this philosophy, reserve allowances were placed in the 2008 operating budget of the Town in the following amounts (there were no corresponding reserve accounts in the 2007 budget): Water: Capital function contribution $ 22,000 Reserve Transfer $ 45,000 Wastewater: Reserve Transfer $ 65,000 A review of the actual revenues and expenses of utilities for 2008 show a total utility sales and user charge revenue of $693,066 against operating costs of $387,146; leaving $305,920 in excess revenue. Considering there was $132,000 utility reserve allowance budgeted for 2008 there is still an excess of funds acquired through utility rates of $173,920. This indicates utility rates established for 2008 were established higher than required to offset operating costs and budgeted reserve allowances. G. Pitman Consulting Inc. 4

5 Figure 1 Water Rates Rate Structure prior to March 1, 2008 Rate Structure as of March 1, 2008 Minimum monthly rate, including $15.75 Consumption Rate $ 2.16/m3 1,000 gal Plus flat rate based on following meter size: Additional cost over 1,000 gal $3.27/1,000 gal 5/8 $ =($0.72 m3) 3/4 $ $ ½ $ $ $ $ 1, Wastewater Rates Rate Structure prior to March 1, 2008 Rate Structure as of March 1, 2008 $10.50 Usage charge (Other Water Source) Usage charge (Town Water Source) Plus flat rate based on following meter size: Minimum monthly rate, including 1,000 gal (based on water consumption) Minimum monthly rate for sewer connection where source of water is other than Town water/1,000 gal Additional rate over min. 1,000 gal $15.00/month $ 2.08/m3 $ /8 $ $2.89/1,000 gal =($0.635 m3) 3/4 $ $ ½ $ $ $ $

6 Solid Waste Rates Rate Structure prior to March 1, 2008 Rate Structure as of March 1, 2008 Garbage and Organic Monthly Fee: Garbage and Organic Monthly Fee: 48 Gallon Cart $ Gallon Cart $ Gallon Cart $ Gallon Cart $ Gallon Cart $ Gallon Cart $ Commercial Property (without bin) $ 14.75/Cart Recycling Fee/Customer/Month $ 4.21 Industrial Property (without bin) $ 14.75/Cart Residential Property (without bin) $ 14.75/Cart Recycling Fee/Customer/Month $ 3.50/month Dumpsters (Based on Commission $ 58.00/Tonne Dumpsters (Based on Commission Rate Rate prior to March 1/08 Rate Rate as of March 1/08 $ Comparison of tax and utility bills for 2007 and 2008: Non-residential property Sample A 2007 Tax $8,133 % Change 2007 Utility Cost $3,523 % Change 2008 Tax $7, Utility Cost $3,290 Reduction $1,013-12% Change (233) -6.6% Sample B 2007 Tax $3,032 % Change 2007 Utility Cost $3,355 % Change 2008 Tax $2, Utility Cost $11,811 Reduction $ % Change $8, % 6

7 Sample C 2007 Tax $3,796 % Change 2007 Utility Cost $805 % Change 2008 Tax $3, Utility Cost $1,163 Reduction ($37) +1.0% Change $ % Sample D 2007 Tax $8,811 % Change 2007 Utility Cost $7,569 % Change 2008 Tax $8, Utility Cost $18,942 Reduction $ % Change $11, % Sample E 2007 Tax $1,584 % Change 2007 Utility Cost $1,627 % Change 2008 Tax $1, Utility Cost $3,422 Reduction $ % Change $1, % Residential property Sample A 2007 Tax $1,657 % Change 2007 Utility Cost $875 % Change 2008 Tax $1, Utility Cost $1,813 Reduction $ % Change $ % Sample B 2007 Tax $1,900 % Change 2007 Utility Cost $815 % Change 2008 Tax $1, Utility Cost $1,483 Reduction $ % Change $ % 7

8 Sample C 2007 Tax $2,425 % Change 2007 Utility Cost $731 % Change 2008 Tax $1, Utility Cost $1,104 Reduction $ % Change $ % Sample D 2007 Tax $2,853 % Change 2007 Utility Cost $877 % Change 2008 Tax $2, Utility Cost $1,725 Reduction $ % Change $ % Sample E 2007 Tax $1,043 % Change 2007 Utility Cost $585 % Change 2008 Tax $ Utility Cost $975 Reduction $ % Change $ % (As can be seen from the above sample tax and utility bills comparing the years 2007 and 2008, there was, in most cases, a reduction in property taxes and an increase in utility bills. The theory behind the increase in utility bills was to have a correspondingly decrease in the taxes. While there was a decrease in taxes, the amount of the decrease did not offset the increase in utility billing. This was due to the fact that the amount of utility costs previously subsidized by the municipal tax levy was far less than the amount of the 2008 utility budget upon which the new utility rates were based.) G. Pitman Consulting Inc. 8

9 The effects on individual monthly utility charges were seen by some customers as excessively high and objections to the new rate structure were presented to council by the Citizen s Ratepayers Association shortly after the new rates came into effect. Explanations were later provided to the community that these changes were a result of accounting changes to more clearly track and account for the realistic costs of providing utility services. The new rates included allowances for planned replacement, upgrading, and expansion to the utility systems within the Town. Onoway was attempting to follow the examples of other municipalities within the province in taking this approach to their cost accounting. The overall cost recovery philosophy was one also being urged by Alberta Environment. The administration report submitted to council in January 2008, recommending council consider the establishment of the new rate structure, did not appear to have been supported by any independent engineering review to substantiate the recommended rate increase, including the amounts required to be set aside in reserve funds for the replacement or upgrading of the existing utility systems. Normal practice in situations where municipalities wish to revise utility rates is to have an engineering assessment of the existing utility collection, treatment, transmission, and distribution systems. Following such an assessment a revision of the rate structure is undertaken to ensure any revised rates capture all components required for a viable utility system. This does not appear to have been the case in the most recent amendments to the utility rates in the. In 2003 Associated Engineering completed a utility system analysis. The report titled: Water Distribution System and Wastewater Collection System Analysis provides an outline of the requirements for system upgrades over future years. In this report, cost projections were included and may have been used by administration in determining the most recent revised utility rates; however, since the engineering report was completed in 2003, cost associated with the report would be out of date and would require updating prior to being used to justify any revisions to the utility rates. There is no evidence that any cost adjustments were undertaken prior to new 2008 utility rates being considered by council. While it is commendable for the town to recover operating and capital costs of its utility systems, it is also the responsibility of town council to ensure rates are based on a defensible foundation in case a challenge is made by a utility customer. Every utility customer has a right to receive an explanation as to the charges included in rates they are to pay. In the case of Onoway s utility charges, it would appear that explanations for the calculation of the utility rates would be difficult to defend. Without calculating future improvements or repairs required based on current construction costs, it is very difficult to justify amounts budgeted each year for capital and/or reserve purposes. G. Pitman Consulting Inc. 9

10 Recommendation 1: a) That the have the Associated Engineering report of 2003 updated to include current cost estimates; and further, engage the services of an experienced utility rate analyst to establish utility rates in keeping with operational and future capital costing; and b) Once new utility rates have been established by the above review, council amend its utility rate bylaw to reflect any new proposed rates. G. Pitman Consulting Inc. 10

11 GENERAL GOVERNANCE Organizational Structure Municipal Inspection The following chart depicts the current organizational structure of the Town of Onoway as specified within the policy manual of the Town. Town Council CAO Public Works Coordinator Corporate Services Co-ord Leadhand Financial Services Co-ord Public Works Maintenance (2) Administraive Services Co-ordinator Municipal Clerk/Reception Utility/Payroll Co-ordinator The above administration structure is considered to be adequate and workable and individual workloads are considered equitable and sufficient for the town given its size and task expectations. The exception to the above chart is currently all the office support staff report directly to the CAO as the town has no Corporate Services Coordinator hired at the time of this inspection. The position is expected to be filled in due course. An additional administrative responsibility found within the is that of the contractual administrative responsibilities to three Summer Villages. The Summer Villages of Sunrise Beach, Silver Sands, and Southview have contracted with the for the provision of administrative services. This commitment, by the town, requires the town office staff to ensure the daily administration of each Summer Village is kept up to date and there is staff available to oversee the Summer Villages operations. G. Pitman Consulting Inc. 11

12 The current contractual commitment to each Summer Village is to provide a maximum of 10 hours/week of secretarial support and 7 hours of weekly management including dealing with taxation, preparation and attendance at council meetings, development of minutes, accounting, financial reporting, audit, assessment and legal issues. This commitment is equivalent to 1.5 staff positions for the Town. The current contracts, initially signed in December 2007, allow for extensions of the contract to take place and each contract has been extended each year with the current expiry date of April. It is expected a further extension to the end of will be negotiated later in April. The value of each contract is as follows: Summer Village of Southview Summer Village of Sunrise Beach Summer Village of Silver Sands $2,108.33/month $3,125.00/month $4,175.00/month This equates to annual total revenue of $112,900 representing a significant source of revenue to offset the overall cost of administration. Strategic Planning The town has undertaken strategic planning exercises in the past and their most current plan is dated November Interviews with the mayor and members of council revealed that each member of council understands the importance of having a strategic plan in place and there is every indication that a new plan will be developed once a new CAO has been appointed. One criticism of past plans, as identified during council interviews, is that council has been reticent in regular follow up to its strategic plans thus rendering them less effective than they should have been. Future strategic plans of the town should be developed in such a manner as to provide periodic updates and discussion on the status of each action item within the plan. It should be the responsibility of the CAO to ensure follow up items are placed on the agenda of council meetings at least once each quarter. Recommendation 2: That council ensure the development of a strategic plan each year and that once a plan is adopted by council it is reviewed regularly to ensure the plan is kept current and action steps are being acted upon by staff and council. G. Pitman Consulting Inc. 12

13 Procedural Bylaw The current procedural bylaw of the Town can be considered to be up to date as it was last reviewed and amended in September of The bylaw contains procedures to be followed by council in the preparation of the agenda and the conduct of all council meetings. The content of the bylaw is considered to be sufficient in its purpose of setting out general guidelines for council to follow in its meetings. Policy Manual The town s policy manual appears to be up to date and is categorized into the following sections: Legislative Administrative Personnel and Employment Protective and Enforcement Public Works Water and Sewer Risk management Planning and Development A review of the policy manual indicates that policies have been amended on an asneeded basis and the number of policies has been kept relevant and to a minimum in number. Minute/Bylaw Review Although the minutes of the town were found to be up to date, regularly approved, and signed by the Presiding Officer and the Designated Officer, they were considered to be lacking in detail when it came to subject matter and backup information. While it is acknowledged minutes should be written without comment or opinion and should not contain individual opinions, quotes, or the recorder s interpretation of business conducted at the meetings, there is a danger of keeping minutes of meetings too brief. Minutes that are very brief leave the reader at a loss as to what the particular business item contained. This is the case in the minutes of the. While the minutes should not contain extraneous material the s minutes provide very little reference to the business matter before council prior to the motion being recorded and decided upon. The reader of the minutes is left with very little information about what and why a matter appeared before council. In order to grasp the full understanding of the business conducted by council it is necessary to search town files to gather the necessary background materials to fully appreciate the business item dealt with by council. G. Pitman Consulting Inc. 13

14 An example of this brevity is the 2008 organizational meeting held October 14, The minutes record the following motion That council make the committee appointments as agreed. There is no listing of committees or appointment in the minute book for easy reference. The reader is at a loss as to the committees referred to and the membership approved. The approval of the 2008 capital and operating budgets is another example where approval of the budgets have been recorded in the minute book but no reference is made to the amount of the budget and no copy of the budget is attached to the minutes. A search of office files is required to locate the actual budget documents and still there is no proof that the budget documents, once located, are the actual budgets approved by council. Another example of lack of information being recorded in the minutes is motion # 443/08 which states council approves the 2008 Christmas bonuses to administration. There is no reference to which administrative staff will receive the bonus, the amount of the bonus, or when it will be given. Open ended motions like this leave council and administration open to criticism and defenceless if challenged by a ratepayer or auditor. Other examples noted during the inspection pertained to contract approval where no reference is contained in the minutes of contract terms or amounts. Such details should be disclosed in the motion authorizing the commitments being approved by council. With the current practice of recording minutes, documents presented at a council meeting could become misplaced, or worse, altered after the meeting concludes and future reference to the specific document presented at a meeting could be obstructed. Recommendation 3: 1. A short paragraph introducing the business item should be included in the minutes in order to provide the reader an introduction to the business being considered; 2. Council must ensure all motions considered by council contain pertinent information details such as costs, terms, conditions, etc. so as to provide sufficient historical background as a reference point for ratepayers, auditors, and administration; and 3. Council should ensure that all items being considered by council have sufficient backup material presented to ensure proper support and reference after the meeting has ended. Additionally, an original agenda package containing all items presented at a council meeting should be kept as a backup reference and supporting documentation to council minutes. G. Pitman Consulting Inc. 14

15 While all minutes have been properly signed by the Presiding Officer and the Designated Officer, individual pages of the minutes have not been initialled. In order to minimize the potential of individual pages in the minute book being changed or altered after approved, it is a good practice to ensure each page of the minutes is initialled by those signing the approved minutes. Recommendation 4: In addition to signing the last page of the approved minutes, the Presiding Officer and Designated Officer should initial all pages of the minutes to ensure accuracy of approved minutes. Negative Motions: There were examples found in the minutes of negative motions being made and voted on (e.g. June 23/08 Motion # 209; and October 27 Motion # 331). Negative motions should not be accepted by the Presiding Officer nor considered by council. Firstly, there is no reason to make a motion in the negative. All motions are considered action items authorizing something to be undertaken. If nothing is to be acted upon or undertaken, the question of Is a motion required? should be asked. Secondly, if a negative motion is accepted by the chair and the resulting vote is defeated or a tie vote results, the question needs to be asked Is a defeated negative motion to be considered being passed in the positive? Since the answer to this question can lead to uncertainty and debate, it is best not to open such a debate by considering a negative motion in the first place. Recommendation 5: The procedural bylaw of the council should be amended to include a section stating no negative motions will be accepted by the chair at any meeting of council. Actions Inconsistent with Procedural Bylaw: The Town s procedural bylaw # states council shall establish the day and time on which regular council meetings should commence and shall be set by resolution at the town s organizational meeting. This was not done at the 2008 organizational meeting. Council subsequently set meeting dates and place for meetings for the months of December and January and again for meetings in March; however, these resolutions were not made at the organizational meeting in October as stipulated within the Town s Procedural Bylaw. G. Pitman Consulting Inc. 15

16 Recommendation 6: In order to comply with the town s Procedural Bylaw# , council must establish regular meeting times and place by resolution. It is further recommended this item be placed on the agenda of all future organizational meetings and compliance with the Town Procedural Bylaw be adhered to. Bylaw # Amendment of Statutory Bylaws: The public hearing for the consideration of Bylaw # Land Use Bylaw, was conducted prior to council giving the bylaw 1 st reading. While holding a public hearing prior to 1 st reading is a permitted process, consideration could be given to modifying the practice whereby any amendment to a statutory plan/bylaw is given 1 st reading prior to the holding of a public hearing. Providing 1 st reading prior to the public hearing ensures the public knows specifically what the bylaw is stating and what amendments are being considered. The process of 1 st reading places a bylaw on record and provides a specific document to which the public can refer. Holding a public hearing on a draft bylaw which has not been presented for 1 st reading could mislead the public into addressing items at the public hearing which are not even being considered within the bylaw. Recommendation 7: Council consider modifying the practice of conducting a required public hearing prior to providing 1 st reading of a bylaw, especially a statutory bylaw. Resignation of Councillor Harrison: Councillor Harrison resigned his position as councillor on June 15/08. The resignation was submitted to the CAO but there was no record in the council minutes of the resignation being received at the June 23rd meeting. In accordance with Section 161 (4) of the Municipal Government Act, the CAO must report the resignation at the first meeting of council after receipt of the resignation. Verbal Reports being recorded in Minutes: On several occasions the minutes record verbal reports as being presented to council by members of council and the CAO. After each report is submitted a motion is recorded as accepting the report as information. Since these are verbal reports there is no record of the contents either in the minutes or in the files of the town. If reports are going to be provided to council, by members of council or the CAO, they should be in writing. If something is not significant enough to report to council in writing, then it probably is not significant enough to record in the minutes of the meeting. G. Pitman Consulting Inc. 16

17 Recommendation 8: Reports presented to regular or special meetings of council should be in writing, duly noted within the minutes, and the written reports filed in the town office for future reference. If verbal reports are made at a council meeting then the pertinent contents of the reports should be recorded in the minutes; otherwise, there is no need to make reference to a report in the minutes. Recording Secretary: It has been the practice in the Town to have the CAO take and prepare the minutes of council meetings. While this practice may reduce the cost of council meetings, by not having to pay a recording secretary, it is very difficult for the CAO to properly record minutes while at the same time present items to council for consideration and be expected to take part in any discussion. It is evident in reviewing the minutes there have been inconsistencies in the preparation of the minutes over the past number of months as different CAOs have transcribed minutes using different formats and styles. The minutes of the town generally cannot be considered to be a good representation of council business and steps should be taken to ensure minutes are properly recorded in a consistent format. Recommendation 9: Council consider appointing a recording secretary for its meetings, someone who is not the CAO and is capable of recording minutes in accord with proper procedure as recommended by Alberta Municipal Affairs. G. Pitman Consulting Inc. 17

18 Interim CAO Position The has had difficulty in securing the services of a permanent CAO over the past year. With the resignation of the full time CAO on May 30/08 the town entered into contractual arrangements with two individuals who have provided interim CAO services on a very part time basis. With the resignation of Ryan Bard the end of May, council entered into a service contract with Mr. Bard effective June 1 to October 31, This service contract was to provide, in addition to interim CAO services, specific services pertaining to the recruitment of the next CAO; preparing an analysis of taxes, off site levies, and developer incentives; preparing a plan for future recreational walking trails; developing a plan for a community wide WiFi service; planning for the acquisition of the Onoway Elementary School; and assisting in the transition change-over with the new CAO. For these services, the contract stipulated the payment of fees as follows: Entering into the contract - $30,000 Upon delivery of specific services-listed above - 20,000 Interim CAO Service - 2,000/month Total contract compensation - $60,000 The contact also provided for the reimbursement of expenses related to the carrying out of these contractual requirements however no dollar limit was stipulated. The cost breakdown of payments under this contract amount to: Contract Fees - $60,000 Expenses - $5,185 GST - $3,045 Total Contract Cost - $68,230 Another service contract was entered into with Mr. Bard as of September 9, 2008, effective from August 5 to October 31, for providing on-site CAO Services; this contract is in addition to the above noted contract. Terms of this contract were: $2,100 per week for 17.5 hrs service plus $100 per hour should services be required over the 17.5 hrs per week, plus expenses (no limited amount stipulated). A breakdown of costs for this contract amounted to: Contract Fees $29,600 Expenses $3,525 GST $1,677 Total Contract Costs $34,802 The total of the above contracts constitute CAO services for a five (5) month period (June October) and total $103,032. In addition to the contract fees paid to this consultant, an additional $57,683 was paid in salary to Mr Bard from January 1 to his resignation on May 30/08. G. Pitman Consulting Inc. 18

19 Since November 3, 2008 the town has had a contract for Interim CAO Services with another contractor. The terms of this contract are: $3,120 per 24 hour week, plus $140 per hour for additional 11 hours per week and $155 per hour for any hours over 35 hours per week. An additional $8,000 will be paid under this contract for recruitment of a CAO once the decision had been made on the issue of corporate dissolution. To the end of December 2008, the Town paid out $37,852 in fees under this latest contract. Overall, since June of 2008 the has paid over $150,000 for contract services of an interim CAO. For the full year of 2008 the total costs for CAO services by way of salaries and contract services amounted to close to $200,000. It appears that these costs could be considered very high, if not excessive, for the services rendered for this period of time. Council should have been more aware of the cost of providing interim CAO services and realize that they could possibly have had services obtained elsewhere at fees considerably less than those paid throughout G. Pitman Consulting Inc. 19

20 FINANCIAL OVERVIEW Annual Audit Reports Municipal Inspection Included with the annual audit of the Town s financial activities, an auditor s communication letter is prepared and submitted to the town for its information and action. Upon review of the past auditor s letters ( ) it appears that several concerns have been repeated each year indicating little or no action has been taken by the town s administration and/or council to rectify the concerns identified. Communication letters of this nature should be presented to council each year and council should hold its administration accountable to ensure such recommendations are acted upon and practices changed to meet the recommendations. Some of the recommendations deal with the need for follow up on grant applications and others pertain to internal control practices. Attention to these items is imperative. Recommendation 10: Council needs to review the auditor s communication letter annually with their auditor and administration to ensure all recommendations are dealt with in an expedient manner. Recommendations identified in the 2008 audit letter need to be attended to immediately. Utility Account Receivables A review of the outstanding receivables for utility accounts revealed that as of the date of this inspection (March, ) there were only three (3) utility accounts with outstanding balances of more that 60 days; these accounts totalled approximately $ This represents a very good collection rate and shows diligence on the part of town staff responsible for the management and collection of utility receivables. It should be noted that utility accounts in arrears are regularly transferred to the respective tax accounts and this reduces the outstanding utility receivables. Tax Account Receivables It appears that tax receivables are being managed in accordance with the Tax Recovery processes prescribed by the Province. There is a difficulty in reconciling outstanding taxes due to the Town s computer software which combines utilities and taxes together once outstanding utility bills are transferred to the respective tax accounts. Once the transfer of utility accounts in made (monthly) there is no easy method to determine the exact amount of property taxes outstanding. G. Pitman Consulting Inc. 20

21 In addition to attempting to reconcile outstanding taxes, this inspector attempted to reconcile general accounts receivable with the same result; not being able to fully reconcile the outstanding accounts due to the inability of the present software system to provide proper reporting formats. It appears that the office staff are keeping control of outstanding receivables but it is very difficult for them to provide current details with the existing software being used by the Town. Recommendation 11: The give serious consideration in upgrading their existing computer accounting software, one which will allow for a more efficient reconciliation of their financial position on a regular basis. Taxable Assessment and Taxation Over the past five years ( ) taxable property assessment has increased over 163% while tax revenues from taxable assessment have increased 38.9%. Tax rates for the same period have changed considerably as can be seen in the following charts. Improved residential property tax rates decreased significantly in 2008 whereas vacant residential property tax, although decreased, has remained higher over the past five years. It must be noted that council did refund half the tax levy on vacant property after they established the 2008 tax rate. G. Pitman Consulting Inc. 21

22 The following charts outline the changes in tax rates over the past five years ( ). The reduction in Improved Residential Property could be considered significant in 2008 when compared to the other property classifications. Changes in Tax Rates Since 2004 Improved Residential Property % % -66.4% % Tax Rate Changes in Tax Rates Since 2004 Vacant Property % -10.0% Tax Rate 0.0% +13.6% G. Pitman Consulting Inc. 22

23 % Changes in Tax Rates Since 2004 Non-Residential Property Tax Rate % % +14.1% -1.08% Tax rates for non-residential property have remained relatively constant when compared to residential and vacant property tax rates. Proper financial planning will help minimize fluctuations of significance in tax rates and council should give serious consideration to planning multi-year budgets for both operating and capital budgets in an effort to keep tax rates constant over time. Tax Split between Residential and Non-residential Properties A review of the division between the residential and non-residential properties indicates that the 2004 assessment of residential properties represented 66% of total assessment while taxes levied on residential properties represented 61% of total taxes. In 2008, assessment of residential properties represented 80% of total assessment while taxes levied on the same properties represented 54% of total taxes. A closer review of this trend indicates that until this past year there was a consistent increase in residential tax levies in proportion to the change in assessment. In 2008 this trend changed significantly due somewhat to the separation of the utility costs from the tax levy. The following chart outlines the changes occurring between the tax split of the residential and non-residential properties. This clearly shows the changes made in the split from 61% and 39% in 2004 to 54% and 46% in G. Pitman Consulting Inc. 23

24 Comparison of Assessment and Tax Levies Residential Vs Non-Residential 80% 70% 60% 50% 40% 30% 20% 10% 0% Residential Tax Non-Residential Tax Res-Assessment Non-Res Assessment 80% 70% 60% 50% 40% 30% 20% 10% 0% Tax Levy Vs. Assessment ,000,000 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000, , , , , , , ,000 - Res-Assessment Residential Levy Non-res Assessment Non-residential Levy The above charts reflect the changes in assessments of residential and nonresidential properties to that of tax levies pertaining to each type of assessment. G. Pitman Consulting Inc. 24

25 As these charts indicate, while on the one hand, the assessment of residential properties has increased substantially in the later years, the taxes levied on those properties have not increased proportionally. Non-residential property tax, on the other hand, has kept pace proportionally with the increase in assessment. Some of the decrease in residential tax is due to the reduction of utility costs from the tax levy; however, the result of that change should be shown in both residential and non-residential tax levy. It is possible to draw the conclusion that residential property owners have been granted a reduction in tax levy disproportional to nonresidential property owners. The next chart indicates the association of total tax levy with the total taxable assessment base. This shows the reduction in tax levy made in 2008 as a result of changes to utility accounting. Assessment Vs. Tax Levy 120,000,000 1,200, ,000,000 1,000,000 80,000, ,000 60,000, ,000 40,000, ,000 20,000, , As sessment Tax Levy The concerns of the business owners in Onoway over the high costs of taxes and utility rates may be justified when viewing the above charts and observing the reality of the tax levies over the past year combined with the changes in utility costs as stated earlier in this report. Recommendation 12: Council should review the present philosophy behind the establishment of the tax rates for resident and non-resident property owners in an attempt to structure a more fair distribution of tax revenues within the Town. G. Pitman Consulting Inc. 25

26 Capital Debt and Future Financial Position At the time of this inspection the owed the following by way of borrowing for long-term capital projects: CIBC Onoway Grader Purchase $17,499 (Monthly payments of $1, plus interest Due May 1/10) Alberta Capital Finance Authority $2,250,000 (Semi-annual payments of $76,782.87, including interest, Due Sept 15, 2033) The Town is in the process of completing major capital projects which will affect its present financial position as those projects are completed. There are also outstanding grant dollars owing the town which will be reconciled as the capital projects are finalized. The following summary shows the current position of the projects and the final commitments of the town (taken from a report presented to Town council April 6/09): 52 Street Water Main Project complete; O/S engineering costs approx. $5,000; Water Main Replacement Project complete; O/S engineering costs approx. $5,000; Sanitary Trunk Sewer Project progressing; O/S construction costs and engineering costs estimated to be a total of $438,690; Pump Station Upgrade Project complete; O/S construction progress claim and engineering costs estimated at $67,200; Storm Sewer Extension Project completed. Total costs associated with the above projects: $515,890. Through information provided by the town it appears the capital projects will be completed in at a total cost of approximately $4,147,000; this will be approximately $250,000 less than originally estimated when the project was budgeted. Once all grant funding requirements are complete, the town should have at least $250,000 to apply to the outstanding loan to the Alberta Municipal Finance Authority, thus reducing the town s overall debt. According to the 2008 audit, the town s current borrowing limit is $820,738 as of December 31, Any amount the town is able to repay on the $2.25 Million debenture as a result of excess funds from the current capital project will allow the town s borrowing limit to be increased accordingly. G. Pitman Consulting Inc. 26

27 Summary The has experienced uncertain times over the past year. The decision to change the accounting of the utility operations resulting in a large increase in utility rates, the decision to request the Minister of Municipal Affairs to undertake a dissolution study, and the resignation of the CAO all in the first five months of 2008 placed considerable pressure on the town council. The decision to undertake an inspection of the town as a result of public concerns expressed through the dissolution study also called the leadership of the town into question. Through all this, the Mayor and Council members have continued to operate the municipality by making decisions that have seen not only the daily activities of the town continue but also undertake major capital projects for the Town of Onoway. Decisions pertaining to the change in utility rates and the service contracts with the former CAO could have been made with more due diligence in mind; the results of which have caused the town council to receive understandable criticism from the ratepayers over the past year. This inspection has resulted in recommendations being made which, when carried through, will assist council in the future. Once a full time CAO is appointed council should be able to rely on the experienced advice they receive and this too will assist in the future decision making ability of town council. The present financial position of the town can be considered manageable provided long term financial planning is implemented and followed. Tax and utility rate strategies need to be reviewed and re-thought in light of the reality of decisions made over the past year. It is not too late to re-visit the utility rate philosophy, acquire up-to-date cost data and calculate rates that will meet operating and future capital expenditures. Tax levies as they pertain to residential and non-residential properties also require a review and a philosophy which can be explained to all ratepayers in light of a long term financial plan for the town. Overall, it is believed that through this inspection recommendations have been made which will assist the town in the long term. Through diligent planning and consistent decision making, the should be strengthened as a municipality within the Province of Alberta. G. Pitman Consulting Inc. 27