KANANASKIS COUNTRY – Kananaskis Improvement District (KID) council is opting to reduce some amortization expenses by 50 per cent in its 2023 operating budget and remove others altogether, reducing what was previously proposed as an eight per cent tax increase to five per cent in its first year.
A reduced amortization expense of $104,356 for the 2023 operating budget – a reduction of $50,735 from 2022 – was recommended by administration to remove redundant tangible capital asset categories and reduce amortized amounts calculated to assets by specific category, noting where assets may have capacity for provincial capital grant transfers to support repair and replacement.
“This is the first step in a much bigger process of really nailing down our capital assets, understanding what’s there, what we need in the future and how we’re going to pay for them,” said KID chair Melanie Gnyp at a Jan. 24 council meeting. “This just isn’t an area that we’ve done a lot of digging in the past … But this is kind of front-end stuff because we have to pass a budget at some point.”
Council passed an interim 2023 operating budget at its last council meeting on Dec. 13, allowing further time for debate and for administration to explore amortization impacts to the 2023-25 budget, in addition to receiving updated property assessments which will help dictate residential and non-residential tax rates.
Amortization is the process of spreading the cost of an asset over its useful life. By reducing amortization costs by 50 per cent in the areas of buildings ($1,193), machinery and equipment ($19,913) and vehicles ($25,264), council would see a reduction of $23,185 in operating expenditures in 2023.
“These items are often specific assets that we do have the ability to cover through provincial transfers, through grants from MSI (Municipal Sustainability Initiative) and CCBF (Canada Community-Building Fund) type grants,” said CAO Keiran Dowling.
The rationale for the 50 per cent reduction includes the funding capacity for repair and replacement of the items within the categories remaining linked to current and future provincial grants and is suggested with the formula for future provincial grants calculated at a 50-50 matching algorithm.
While council voted unanimously in favour of the reduction, Coun. Darren Enns said he wished there was more certainty regarding how much provincial funding KID might receive in the future.
“That’s the big question mark for us,” he said. “We’re kind of taking a guess or an estimate with an approach where we reduce amortization.”
Coun. Claude Faerden said he felt comfortable with the reduction taking historical considerations into account and funding that KID has acquired in the past.
“Approving this for 2023 at least, with the reduction of half – I think that’s in line with sound thinking … and it doesn’t feel too risky to say that,” he said.
Dowling said while there is an assumption on the outcomes of what the provincial government might produce for the replacement of MSI to the Local Government Fiscal Framework and how that will be calculated for KID, projected estimates support the reduction.
The adjustment also removes site improvements ($5,274), water and sewer ($27,713), and garbage machinery and equipment ($1,862) from KID’s tangible capital assets in 2023.
Removing these categories from amortization, according to administration, offers an appropriate link to assets requiring future consideration of council while also offering a $23,185 reduction in operating expenditures.
“The majority of the assets listed in water and sewer are of a nature that no longer really requires KID to amortize more because they’re not really assets that we would need to replace or repair in a significant magnitude,” said Dowling, noting the same for garbage machinery and equipment and site improvements.
Council also directed administration to work with the budget and audit committee to verify operating contributions for taxation stabilization prior to the approval of the general municipal tax rate.
Contributions toward stabilization could be drawn from operating contingency, the disaster and emergency fund, or operating reserves. It was previously recommended that $150,000 of tax relief be provided for ratepayers through contingency operating reserves in 2023, with $150,000 proposed for 2024.
The idea is to ease the burden on KID’s tax base, but also gradually “off-ramp” the municipality’s financial support coming out of the COVID-19 pandemic. Operating contributions were to be $150,000 over three years, for a total of $450,000 between 2022 and 2024.
If the same amortization reductions are applied to 2024 and 2025, the tax rate will increase by four per cent in 2024 and by 17 per cent in 2025, when taxation relief is expected to end.
“The large increase is due to that $150,000 not being applied to the operating contributions as well as a slight increase in the total amortization due to a Quint firetruck being procured,” said Dowling.
Administration and the budget and audit committee will consider a revised draft of the 2023-25 operating budget based on the decision of council to bring forward for debate at a future meeting.
The Local Journalism Initiative is funded by the Government of Canada. The position covers Îyârhe (Stoney) Nakoda First Nation and Kananaskis Country.
