What is the difference between a capital budget and an operating budget?
The capital budget allocates funds needed for the first year of a 10-year capital plan and multi-year projects beginning in 2019. It is how the Town pays for major projects such as streets; building and improving public facilities such as recreation facilities and parks; dealing with growth pressures; and new initiatives. The only projects approved by Council are those planned for 2019, multi-year projects beginning in 2019, or projects in need of additional funding in 2019. These costs are similar to how a household would prepare for building a new home or adding an addition to your home this year. This includes items like major equipment, buildings and infrastructure.
The operating budget shows the day-to-day costs of delivering programs and services and running Town facilities for the next year. These costs are similar to your everyday household expenses such as mortgage payments, repairs and maintenance, utilities or groceries. The operating budget considers things such as gas and fuel, heating and electricity bills along with employees to provide Town services. The annual operating budget provides a financial representation of the Town’s plans to deliver municipal services and programs.
How is the Town funding its 2019 Capital Budget?
The 2019 capital budget of $19M is being funded by funded by offsite levies (developer paid) and debt servicing of 8.9M, $5.5M will be funded by Town reserves and $4.6M will be funded from grants. In 2019 we will also have projects that are multi-year projects totalling $7.8M that council has approved. This means the total capital budget will be $26.8M. There are approximately $7.6M in projects that will carry forward from previous year approvals.
How is the capital budget structured?
The budget shows the total capital expenditures for 2019. It also outlines the funding sources for proposed capital projects including off site levies, reserves, grants and debt.
What are the top 5 major capital projects for 2019 in $Ms
Wastewater Treatment Plant $ 7.15
Affordable Housing $ 3.25
Zone3N/4N Reservoir Upgrade $ 2.15
Local Transit $ 1.4
Snow Dump Land and Development $ 1.00
How is debt used?
Using debt to finance capital spending is a practice most businesses and homeowners use. Debt financing is just like mortgages, vehicle loans, and other borrowing tools, that provide the financial capacity to allow borrowers to pay for significant investments over time, as use occurs, instead of saving to pay the entire amount up front.
If Council approves the capital budget in December, does that mean all projects listed are automatically approved?
Council approved a capital budget for 2019 that allows for current year and multi-year projects that are planned to start in 2019 and beyond; some require more than one year to complete. Projects shown beyond 2019 in the capital financial plan section are provided as forecasted and are accepted as information and will updated on an annual bases to ensure alignment with updated economic conditions and priorities.
What is the approval process for the 2019 budget and 10-year capital financial plan?
Each year in November, Council reviews the expenditure requirements for projects proposed in the capital budget. They consider the following options for each project:
- approve as proposed;
- change timing;
- change scope; or
- remove entirely
Council will approve the 2020-2028 Capital Plan forecast as information. This allows the flexibility for administration to adjust the priorities outlined in the plan based on community need and project funding and then present an updated plan.
How is the operating budget structured?
The operating budget shows the expenditures for 2019. We also have a forecast for the next four years (2020-2023) of anticipated operational expenditures.
How is the operating budget funded?
The operating or current budget is primarily funded from property taxes, though it can also include revenues received from:
- earnings on our investments
- senior government subsidies such as the provincial gas tax
- reserves and grants
- user fees and charges such as recreation fees, business licenses and building permits
- franchise fees
Why did the Town increase Franchise Fees?
The Province approved the Town’s request to increase Franchise Fees, effective January 1, 2019 and Council approved these recommendations. Franchise fees are charged to utility providers for the right to access Town land to provide the utility. The fees compensate the Town for direct costs, restrictions on planning and development due to utility rights of way, as well as inherent risks related to utility access.
January 1, 2017
Jan 1, 2019
January 1, 1975
Method C = cost of gas
Jan 1, 2019
Method A = cost to deliver the gas
What are the changes to municipal taxes in 2019?
The proposed changes include a 2% tax increase which equates to $3.75 per month for a typical dwelling with an assessed value of $450,000.
What are the changes to fees in 2019?
There is a proposed 3.88% average increase for water, sewer, storm and waste fees and a 3% increase for recreation fees and facility rentals.
10 Year Financial Plan
What is the 10-year Capital Financial Plan?
This is the second year the Town has completed a 10-year capital plan, which forecasts estimated future capital costs for 2020 to 2028. Our capital financial plan is similar to your household plan to prepare to save up to purchase a new vehicle or plan major home renovations in the future.
The estimates outlined in the capital financial plan are placeholder values for the funding expected to be required in each of the nine years. By creating this long-term plan, the Town can better manage finances to prepare for future expenses and tailor projects to meet the changing needs of the community.
Just like a household budget, the plan is a forecast of anticipated costs, which can alter based on trends. Impacts like grant funding, interest rates and inflation, economic conditions, rates of land consumption and growth will all be indicators that may require an adjustment to the plan. Council will still review and approve a yearly capital budget that will direct actual spending for that year.
How does the 10 year Capital Financial Plan help Okotoks prepare for the future?
The 2020-2028 Capital Financial Plan is about planning for the future ensuring we have a balance between the pressures of current service and growth. The capital plan will focus on investing in infrastructure in alignment with the Town’s strategic and sustainable priorities.
Having placeholders in the capital plan will allow us to understand the capital cost of infrastructure, the impacts of the capital budget on the operating budget, and plan for community amenities and potential grant and sponsorship opportunities.
What are the biggest budget challenges Okotoks is facing?
One of the key challenges that all Alberta municipalities are facing for future planning is the province’s decision to end the Municipal Sustainability Initiative (MSI) grant in 2021, which represents a significant funding source. The 2019 budget considers this future loss in revenue and the Town will be starting a grant review and developing a strategy to align off-site levies’ financial realities to ensure alternate funding opportunities are maximized.
If the 10 Year Capital Plan is approved does that mean that all the projects in the plan are automatically approved?
The projections in the 2020-2028 Capital Plan are intended as estimated placeholders and are not approved as part of the capital budget. These amounts are very preliminary and are used as a planning tool that shows order of magnitude, not budget specifics.
Watch for opportunities to provide feedback for the 2020 budget later in 2019 at www.okotoks.ca/consultation.