The hidden tax-“Franchise Fees”

Most residents in most municipalities do not even know about the hidden tax known as “Franchise Fees” in fact some municipalities even go to the ridiculous extreme of trying to claim it is not a tax. The quote below was copied from one of these municipalities. Thanks to an awareness created within our municipality over the last two years, the residents of the Crowsnest Pass are not fooled by this sly trick. This “Fee” as become an alternate revenue source used by politicians to create an illusion that taxes are not being raised by a significant amount when in reality they are just taking the money out of your left pocket instead of our right one.

"Are franchise fees a tax? No. Franchise fees are simply the cost utility and cable providers incur for being allowed to place their facilities in the public's right-of-way. Franchise fees are considered a cost of doing business. Franchise fees are an important component of a diversified revenue stream for municipalities."

In 2010 the Municipality of Crowsnest Pass collected $295,551 in Franchise fees this number jumped to $374,288 in 2011, $569,749 in 2012 and was originally budgeted to go to $906,694 in 2013 until the huge out cry by the public. Which led to council having a change of heart and only increasing it to $682,000 for 2013.

2011 increased by $79,000

2012 increased by $196,000

2013 increased by $112,000

2010-2013 increased by $387,000

That is correct in total the “Franchise Fee” increased by $387,000 over those three years a whooping 130 % if these same dollars had been generated by increasing taxes, it would have required additional tax increases of 1.25% in 2011, 2.9% in 2012 and 1.75% in 2013.

Without the public out cry previously mentioned the Franchise Fee would have risen by another $225,000 in 2013 the equivalent of another 3.5% tax increase.

It would be very interesting to hear what position candidates for the upcoming election will take  on Franchise Fees, would they agree that they have gone up more than enough in the last three years? and commit to not increasing them for the next four years?    


Note: Cost of administration $4325 per day

Making the numbers work. Option 1, 2 or 3

The following options were presented by administration to council, Option 2 was approved by a vote of 4-3 (Saindon, Gallant and Saje) opposed. First reading was passed Tuesday night and second and third reading will be done Monday 2pm April 22 Special Council Meeting


Option 1: Administration has reviewed the 2013 Operating Budget and provided budgetary reductions to achieve an additional 4% reduction or $ 295,000 decrease in the following areas:
• $ 5,000 reduction to Senior’s Tax Rebate- with assessments similar to 2008 there would be fewer owners qualifying.
• $ 100,0000 reduction to York Creek Capital Project Reserve
• $ 15,000 reduction to Rum Runner Days
• $ 10,000 reduction in Cemetery Expansion
• $ 52,000 reduction in Float and Banners
• $ 57,500 reduction for Albert Stella Memorial Arena
• $ 1,000 for the Centennial Building-Painting exterior
• $ 8,000 reduction for the Passberg Pit
• $ 45,000 reduction for Gravel and Gravel Haul
• $ 25,000 reduction in Sewer Cameraing
• $ 38,250 addition for the Town Rounder
• $ 14,750 reduction in Travel and General Supplies

Option 2: Provides for a tax increase for negative growth of $ 102,000.00 (residential 3.8% and non-residential 4.9%) combined with a budget decrease of $ 193,000. The $ 193,000 proposed decrease could come from the following areas:
• $ 5,000 reduction to Senior’s Tax Rebate- with assessments similar to 2008 there would be fewer owners qualifying.
• $ 100,0000 reduction to York Creek Capital Project Reserve
• $ 10,000 reduction in Cemetery Expansion
• $ 52,000 reduction in Float and Banners
• $ 1,000 for the Centennial Building-Painting exterior
• $ 23,500 reduction for Gravel and Gravel Haul
• $ 25,000 reduction in Sewer Cameraing
• $ 38,250 addition for the Town Rounder
• $ 14,750 reduction in Travel and General Supplies

Option 3: Provides for a $ 193,000 budget reduction (in the areas noted in option 2) and a transfer from MRSR in the amount of $102,000.

Fire-Rescue costs in the Crowsnest Pass- Or making the numbers work

Thanks to Transparency CNP (link available on right hand side) I have taken all the Budget numbers for the Fire and Rescue Department for 2012. Then attempted to provide the numbers for 2013 using assumptions listed below.
First of all any costs that were specific to buildings and their up keep I have used 75% of the costs from 2012 has we are now running three buildings instead of four.
Any costs associated with personnel I have used 56% of what we allowed in 2012 based on there being fifty  personnel instead of the previous  ninety.
Then any costs that were specific to the previous Rescue station I have eliminated except for notes that you will see below the figures shown.

Fire/Rescue	2012		2013
Catergory
Salaried Personnel	$43,637		$220,000		Note 1
Honorariums/Wages	$71,372		$90,000		Note 2
Building Maintenance	$12,000		$9,000		1 FH closed
Benefit Costs	$34,346		$93,000		Note 3
Building Maint Benefit costs	$2,536		$1,902		1 FH closed
Meals + Lodgings	$1,000		$560		56%
Memberships + Registrations	$1,775		$994		56%
Freight + Express	$750		$750
Emergency Response System	$2,880		$2,880
Phone + Answering Service	$11,250		$11,250
Travel	$1,000		$560		56%
Advertising	$500		$500
Goodwill	$1,000		$1,000
Subscripitions + Publications	$3,093		$3,093
Training	$13,310		$37,500		Note 4
Contracted Services	$99,660		$144,000		Note 5
Building Repairs	$4,000		$3,000		1 FH Closed
Mach + Equip Repairs	$7,500		$5,625		1 FH Closed
Radio Equip	$2,300		$1,725		1 FH Closed
Tire Repairs	$100		$75		1 FH Closed
Licenses + Permits	$16,972		$12,729		1 FH Closed
General Insurance	$30,400		$22,800		1 FH Closed
Supplies	$10,600		$7,950		1 FH Closed
Clothing Expense	$27,860		$15,602		56%
Postage Photo copier	$100		$75		1 FH Closed
Gas + Oil	$4,300		$3,225		1 FH Closed
Mach + Vech Parts	$16,000		$12,000		1 FH Closed
Building Maint Materials	$4,500		$3,375		1 FH Closed
Utilities Elec W S G	$12,946		$9,710		1 FH Closed
Utilities Gas	$24,639		$18,479		1 FH Closed
Interest on LTD	$12,340		$12,340
Rescue Squad
Honorariums/Wages	$23,043		$0		Included above
Build Maint Wages	$3,000		$0		Moved
Benefit Costs	$5,000		$0		Included above
Building Maint Benefit costs	$634		$0		Moved
Group Insurance Plan	$2,300		$2,300
Memberships + Registrations	$1,425		$1,425
Freight + Express	$100		$100
Telephone + Answering Service	$3,064		$0		Included above
Contracted Services	$1,000		$0
Foothills Regional Service	$22,300		$22,300
Mach + Equip Repairs	$1,000		$1,000
Radio Equip	$500		$500
Licenses + Permits	$3,943		$3,943
General Insurance	$7,000		$0		Moved
Supplies	$2,650		$0		Moved
Clothing Expense	$9,400		$0		Included above
Postage Photo copier	$50		$0		Included above
Gas + Oil	$3,000		$3,000
Mach + Vech Parts	$4,000		$4,000
Build Maint Materials	$1,000		$0		Moved
Utilties E W S G	$1,600		$0		Moved
Interest on LTD	$4,095		$4,095
Uncollectable accounts	$2,000		$2,000
Total	$576,770		$790,362
Revenue: Note 6
Fire Depts Cost Recovery	$17,000		$17,000
Firesmart Grant Program	$50,000		$50,000
FSEPP Emergency Preparedness	$4,000		$4,000
Rescue Squad Cost Recovery	$30,000		$30,000
Total	$101,000		$101,000
Costs minus Revenues	$475,770		$689,362
Operating Cost for 2013	$437,237
Note 1: Salaried Personnel used one third of Directors salary $40,000 $95,000 for Fire Chief and $85,000 for Deputy Fire Chief Total of $220,000 Note 2: Honorariums/Wages Used $500 a month per captain (3) $75 per member per month to be on call, (50) and an average of (150) calls per year at (6) people showing up for (2) hours at $15 per hour. Note 3: Used 30% for benefits on Salaries,Honorariums and Wages same has 2012. Note 4: Training allowed (1) hour per week per member (50) at $15 per hour times (50) weeks. Note 5: Contracted costs I allowed for (3) full time Firemen at $6,000 per month each for (8) months. Note 6: I assumed same revenues as 2012. The number they are showing for 2013 is $437,000 my numbers come to $689,000. We all know numbers can be juggled, for example where you assign your Director's dollars can have an impact of 10-30% on a department's budget. Anybody that feels my numbers are out of whack, or feels I have used the wrong assumptions give me a call at 403 563 4128 I would be more than glad to change them. When the numbers come out for the Municipalities year end audit I will take the numbers from the 2012 budget for Wages/Benefits etc and show my readers how they created a surplus for 2012.

The Shell Game-Municipal Finances 101

Back during the deliberations on the municipal  budget for 2011. It was determined that the need existed for more administrators in the municipal office so money was placed in the budget to fill those position. The organizational chart comes out with a Manager of Corporate Services in place. By April of 2012 the position is filled, by July the position is vacant so following a logic path one would assume that this being such a priority to have this position in place, that very quickly it would be filled. Well it was not now the shell game begins, in our case it’s called making the numbers work. This position was probably somewhere in the $70,000 a year range so the fact that it was only filled for three months now means that $55,000 of those dollars are available to help make the year end look good.

Monday night I go to the Municipal open house and part two of the shell game is played, despite the fact that this job was created by this council over a year ago and had such a high priority that it was only filled for three months. They now show the job has being eliminated which get this reflects as a $70,000 savings for the 2013 budget.

Then they show two CUPE positions being eliminated for an additional savings of $100,000 a year, a warehouse position and the additional HR clerk position they created not that long ago, why create positions to turn around and eliminate them?

The next shell game is beinging for this year they are showing $70,000 in wages and $10,000 in other costs for a Economic Development Officer to be put in place from May 1 to the end of the year. It is now Feb 12 does anybody believe that you are going to be able to find an Economic Development office by May 1? It is probably very unrealistic but again it will be money that can be shuffled from one shell to another for 2013. 

A victory for the taxpayers of the Crowsnest Pass, standing up and making a difference.

Finally 2500 names on a petition, taxpayers standing up all over the Crowsnest Pass is making a difference. 

One of the most controversial methods of picking the tax payers pockets next year was going to be a $336,000 increase to the amount of Franchise Fees that we the residents of the Crowsnest Pass have no choice to pay unless you can live without Gas or Power. Even when the Municipality presented their “Fact Sheet” at an approximate cost of $10,000 in the local media back in November, they had the Franchise Fees rising from 20% to 35% for gas and from 14% to 20% for power. This on top of the fact that the revenue being generated by these Franchise Fees had already jumped from $295,000 in 2010 to $570,000 in 2012, the further increases would have taken that number to $907,000 next year.

To my shock the “Facts” have changed up on opening the local paper last night, I see that the Municipality is now advertising the Franchise Fees are only increasing from 20% to 25% for gas and from 14% to 16% for power. This means instead of the Franchise Fee Revenue jumping from $295,000 in 2010 to $907,000 in 2013 it will only jump to $682,000 next year an increase of  231% in three years instead of the 308% previously proposed. I know we should not be dancing in the streets over this but it is a partial victory in that $225,000 less will be taken out of our pockets next year.

On top of that at last week’s G+P meeting the CAO clarified that there will be, has the Mayor stated in his last newsletter a $500,000 savings in the Fire Departments. This savings will come about by them not taking that money and purchasing the much-discussed Quint Ladder Truck. Now I know some people may look at this skeptically and think games are being played with numbers here, somebody said to me yesterday so if I propose to buy a $150,000 Hummer that I don’t need then I come to my senses and back off on buying it did I really save $150,000?

Two things here first of all Council/administration are going to look heroes here with the 2012 budget, $250,000 not spent on the Quint this year, $600,000 not spent on demolishing the Crowsnest Centre and all the savings they have incurred by not filling various positions in a timely fashion. (We will talk about this more in a future post)

Second, do I think this would have happened without the petition without people finally speaking up? Not a chance.

You would almost think Municipal  Affairs was coming in to do an investigation!  

     

Rum Runner Days Getting the numbers

Barring another deferral Tuesday night (Nov 6) the public is finally going to have the numbers made available on what Rum Runner Days weekend cost us.
Just for a reminder and comparison purposes below are the numbers Councillor Saindon sent me back in the spring.

It will be very interesting to see how the final numbers come out and where council goes from here for next year.

With revenues of $160,500 and costs of $151,720.

Where does the revenue come from?

$16,000 cash on hand

$25,000 municipal soft costs

$50,000 Municipal contribution

$2,500 Carnival rides

$3,000 Business Licenses

$6,000 Vendor permits

$10,000 Camping

$1,500 Friday Night wine and arts

$2,000 Lions Club

$15,000 Saturday night concert

$2,500 Saturday night food and beverage

$15,000 Merchandise Sales

$2,500 Show and Shine revenue

$9,500 Parking and Shuttle Revenue

Total revenue $160,500

Where is the money spent?

$19,200 Municipal Staff costs

$6,600 Municipal Office

$3,000 Advertising

$3,500 Website design/modifications

$2,000 Promotion

$1,500 Wine and art night

$8,500 Saturday night concert

$3,000 Gazebo Park Entertainment

$3,500 Kids Show

$13,500 Stage Rental

$4,000 Show and Shine merchandise

$20,000 Merchandise Purchase Costs

$12,500 Washroom rentals

$4,000 Waste pickup and disposal

$1,500 Security Fencing

$2,500 Tent and Accessories

$20,000 Rcmp Policing

$15,000 Regional Peace Officers/Sheriff

$1,920 Bus Rentals

$1,500 Donation to Boys and Girls club

$1,500 Donation to Coleman Society

$1,500 Donation to Kanaskis Rodeo Assoc

$1,500 Donation to Quad Squad

Total Expenses $151,720

Making the numbers work, Crowsnest Pass style.

Lot’s of people keep asking me I see all these new municipal trucks running around, new consultants coming in every week, it seems like we are spending money like crazy. Is the municipality going to spend us into a big hole?

The short answer to that is No they are not, not for now any way.

The long answer, in politics timing is everything. When the end of 2012 rolls around the books will be prepared, the auditors will come in one beautiful Tuesday evening in March or April, administration and the auditors will sit down in front of council and gleefully announce a surplus of say $300,000 everybody will go home in the best of spirits. Knowing there will not be another financial statement until after the next election, no problem that in 2013 the operational budget will increase by $844,000.

So how do they make the numbers work for 2012? You create wiggle room.

Step 1 underestimate revenue, if you look at the audited financial statements for the last three years in the two categories Property Tax, User Fees and sales of goods those make up roughly 75% of the municipalities internal revenue. Revenue in those areas has exceeded budget by any where from $236,000 to $692,000 each year for an average of $395,000.

Step 2 this is a very effective area to create flexibility in your budget especially when you are going through a lot of turn over or creating new positions in your organization. This year the municipality had all kinds of turn over in staff. So here is how it works, you place dollars into your budget for positions, even though you know that those positions may not be filled for the year instant wiggle room we have had a lot this year.

I will lay them out for you and yes I know my numbers will not be 100% because I am not privy to the salaries of the administrative positions but I will take my best shot based on my six years of experience on council;

Manager of Corporate Services-Salary $60,000-$5000 per month-vacant for seven months, savings $35,000.    

Director of Planning/Public Works-Salary $120,000- $10,000 per month-vacant for one month, savings $10,000.

Fire Chief-Salary $105,000-$8750 per month-vacant for eight months, savings of $70,000.

Manager of Operational Services $90,000-$7,500 per month-vacant for three months, savings of $22,500.

First Peace Officer $65,000 per year-lets assume only budgeted for seven months-$38,000-$5400 per month, vacant for one month, savings of $5,400.

Second Peace Officer $65,000 per year-lets assume only budgeted for seven months-$38,000-$5400 per month, vacant for two months, savings of $10,800.

Building Inspector $58,000 per year-$4,800 per month, vacant for one month, savings of $4,800.

Mechanic $68,000 per year-$5,700 per month, vacant for two months, savings of $11,400.

Electrician $75,000 per year-$6,300 per month, vacant for four months, savings of $25,200.

Accounting $65,000 per year-$5,400 per month, vacant for three months, savings of $16,200

Second Accounting $65,000  per year-$5,400 per month, vacant for two months, savings of $10,800.

If you add up all of the savings in each one of those positions, you come up with a total of $222,100 then remember for every dollar in wages the municipality spends they allow 25% on top to cover the cost of benefits so that number now becomes $277,625. Now I understand that some of these savings may have been off set by additional overtime but it will not be anywhere near this total.  

So easy lets create a surplus this year under estimate revenues and build room in the Wages and Salaries area.

The key question then becomes what happens when you have a year where revenues are close to budget, and all of these positions are filled for the full twelve months? It will not matter to this council because that financial statement will not be seen until five months after the next election!