2017 Budget: Coderre-Desrochers administration continues responsible and strict management of Montréal finances

MONTRÉAL, Nov. 30, 2016 /CNW Telbec/ - The Mayor of Montréal, Denis Coderre, and the Chairman of the Montréal Executive Committee responsible for finances, Pierre Desrochers, today presented Montréal's 2017 Operating Budget. Considering an increase of $116.8 million of the amounts allocated to upfront payment of capital investments, and excluding the increase of $35.6 million for public transportation and a non-recurring amount of $12 million for the elections, the operating charges show a decrease of 0.5% or $24.2 million. The 2017 Budget stands at $5,201.7 million, up 2.8% or $140.5 million compared to the 2016 Budget with the lowest increase of tax charges in the last eight years.

"Since the presentation of our first budget in 2014, and until the presentation of the 2017 Budget, our main concern was to clean up city finances through rigorous control of municipal spending. This was achieved while also limiting the increase of residential and non-residential tax charges to the anticipated inflation rate, as per our commitment. Our financial recovery plan enables us to free up large sums to be used to rebuild the city and improve the quality of life of residents. Today, the 2017 Budget is in perfect agreement with our administration's principles that have been in effect since the previous budgets," said Mayor Coderre.

"Again this year, to limit the 2017 budget increase to $140.5 million, our administration continued to make significant efforts to control expenditure, by optimizing central department resources and continuing the Five-Year Staff Reduction Plan. The Budget provides for anticipated savings of $69.2 million for all the pension plans resulting from the Act to foster the financial health and sustainability of municipal defined benefit pension plans and the positive results achieved by pension plan assets since 2013. The 2017 Budget absorbs significant variations for certain expenditure items or a $120 million increase of upfront payments of capital assets; $20 million increase of the gross debt service; a $35.6 million increase of contributions for public transportation, including $25.8 million for the regular contribution to the Société de transport de Montréal, and $13.5 million representing additional credit transfers for the boroughs. Added to these increases for central departments are credits of $59.2 million for new priorities, including election expenditures," said the Chairman of the Executive Committee, Pierre Desrochers.

Municipal taxation

Total tax charges – residential properties 
The increase of tax charges under city council responsibility is set at 1.8% on average for residential properties. However, taking into account the variation of local taxes, the increase of total tax charges is 1.7% on average.

"The 1.7% increase of total tax charges for residential properties is the lowest of the past eight years. Once again, we are delivering on our commitment to limit the increase to the inflation rate, which according to projections will be 1.8% in 2017 for the Montréal region," said Mayor Coderre.

For example, the 1.7% increase for residential properties results in a $59 increase of the tax account of a residential property of average value.

The tax account of residential taxpayers may decrease or increase in varying proportions, due in part to the increase of the property's assessed value compared to the increase in value of other properties in Montréal, the variation of borough taxes relating to services and investments and variation of the historic debt, by sector. For more information on the variation of charges, please consult the Table titled:  "Variation of total fiscal charges between 2016 and 2017, by borough", including the effect of the variation of borough service taxes. The information applies to residential and non-residential properties.

Total tax charges – non-residential properties
For non-residential properties, the increase of total tax charges is limited to 0.9%. This measure, which was introduced last year, was appreciated by the business community.

"The decision to slightly increase the tax charges applicable to non-residential properties reflects our desire to promote economic development and follow the recommendation of the working group on non-residential taxation and economic development. This measure will cost approximately $18 million in non-collected tax revenue. This cost is financed through budgetary efforts by our administration to reduce expenditures," said Pierre Desrochers. 

Other recommendations by the working committee have already been implemented, including ongoing efforts to reduce municipal spending and rehabilitate the urban infrastructure. Others, including financial support for merchants affected by major repairs, or the application of a reduced differentiated rate on the first portion of a non-residential property value require that new responsibilities be given to Montréal by the Québec government.

"In the long term, we are confident that the future Loi sur la métropole will give us new tools to promote economic development, said Mayor Coderre.

BOROUGHS

Borough taxation
The boroughs are responsible for indexing their services tax to ensure total indexation of their budget. In 2017, the borough councils overall have decreased their services tax by 1.0%. These decisions that belong to each of the councils have the effect of reducing total tax charges of residential properties by 0.1%. These decisions have no overall significant impact on non-residential properties.

Boroughs
The budget for the boroughs stands at $861.6 million, an increase of $2.8 million or 0.3% compared to 2016. The $9.3 million growth of revenue in the boroughs is one of the elements that have contributed to the net increase of $2.8 million. This includes a $6.6 million increase of borough revenues, a $1.4 million increase of borough tax revenues as well as an increase of the use of borough surpluses valued at $1.3 million. Add to this the management of vacant positions (- $13.7), adjustment of benefits (- $8.3 million), other adjustments totalling $2 million, as well as $13.5 million for central transfers to boroughs.

Borough financing reform
The borough financing reform introduced by the administration two years ago continues in 2017. An additional $13.5 million was added to the borough budgets, including indexation of budget allocations transferred from the central city totalling $7.8 million.

URBAN AGGLOMERATION

For 2017, the urban agglomeration quota shares, which take into account the new agreement with the related municipalities and downtown regarding drinking water, will increase by 0.1% compared to the 2016 budget.

"There is stability in financing expenditures under urban agglomeration responsibility with quota shares totalling $2,249.2 million, an increase of 0.1% compared to the 2106 Budget," said Mayor Coderre.

SUMMARY OF MONTRÉAL'S 2017 BUDGET

"The current financial context does not leave much leeway for a series of major transformations in a number of fields. Today, approximately 70% of Montréal's income is derived from taxation and we have always supported a type of development that takes into account the ability to pay of Montréal taxpayers. Since our first budget in 2014, our key concern has always been to straighten out city finances through strict control over municipal expenditures," said Pierre Desrochers.

Expenditures by object
Overall remuneration represents 44.2% of the 2017 Budget's operating expenditures compared to 46.4% in the 2016 Budget and 48.7% in the 2015 Budget. In 2014, overall remuneration represented a little more than half (51.2%) of the city's operating expenditures. The gross debt service represents 17.1 % of operating expenditures. This proportion is comparable to last year's. The other expenditures represent 38.7% of total expenditures compared to 36.4% in 2016. These "other expenditures" include several objects such as contributions to organizations (14.8%), including contributions to public transportation, professional services, technical services and others (7.6%), as well as durable and non-durable goods (5.1%).

Central departments
The budget of central departments stands at $2,457.7 million, a decrease of $4.5 million or - 0.2%. Excluding election expenditures, the decrease would stand at $20.5 million.

Central departments indexed and adjusted salaries for a total of $24.6 million, financed new needs valued at $43.2 million and made various adjustments totalling $4.2 million. In addition to assuming the non-indexation of certain credits other than those related to remuneration, central departments also completed a plan to optimize resources (- $32.4 million), applied the Five-Year Staff Reduction Plan (- $11.8 million),  managed vacant positions (- $16.6 million) and adjusted benefits (- $31.7 million).

"All these efforts combined helped decrease central department expenditures by 0.2% or $4.5 million compared to the 2016 Budget. At the operational level, the city carried out a corporate grouping of its fleet of vehicles for maintenance purposes. It did the same for snow-removal contracts to maximize city actions and reduce operating costs in the long term," said Pierre Desrochers.

Upfront capital payments
The 2017 Budget includes a total amount of $321.4 million for upfront payment of capital assets. This represents a significant increase when compared to the $204.6 million included in the 2016 Budget. The amount of $321.4 million includes an additional $120 million or $40 million more than what was included in the upfront capital payment strategy devised by Montréal.

"This increase enables the city to maintain borrowing below the level set by the city's debt management policy. By paying upfront an increasing portion of its capital assets, Montréal avoids putting undue debt pressure on future generations," said Pierre Desrochers.

As demonstrated by recent network auscultation reports, the state of degradation of the Montréal water and road infrastructure requires specific attention. Over the next 10 years, Montréal will be required to carry out maintenance and rehabilitation work on approximately 5,100 km of roads and water and sewer lines.

"This is why we must pick up the work and investment pace, as reflected in the Three-Year Capital Works Program 2017-2019. It is also why next year and until 2024, the upfront payment program should increase by $80 million annually. This strategy to increase upfront payments will help support a cumulative amount of $480 million over the first three years of implementation or $40 million in 2015, $160 million in 2016 and $280 million in 2017. The city is in a position to allocate increasing amounts to the upfront payment program, mainly due to savings in municipal spending," added Denis Coderre.

Overall remuneration
Overall remuneration is the most important expenditure item. In the 2017 Budget, overall remuneration posts a decrease of $51.5 million, from $2,350.8 million in 2016 to $2,299.3 million in 2017. Planned workforce management over the years and anticipated savings with regard to pension plans explain this 2.2% decrease.

Pension plans
The net charge is $236.7 million in 2017 compared to $305.8 million in 2016 or a decrease of $69.2 million. The healthy returns of pension fund assets from 2013 to 2015, together with the effects of Bill 15 (Act to foster the financial health and sustainability of municipal defined benefit pension plans) enable us to anticipate savings of $69.2 million for all the components of the pension plans.

Five-Year Staff Reduction Plan
The 2017 Budget calls for a reduction of 99.3 person years as a result of the Five-Year Staff Reduction Plan for savings of $11.8 million. Montréal meets the Plan's initial guidelines, which involved eliminating one out of every two jobs associated with a departure (retirement or other). The net reduction is not as significant as was expected, because a reduction of the number of municipal employee departures has occurred since 2014. Also, the new challenges facing the city led the administration to create more positions than originally planned for 2017. Despite this fact, the total city workforce and amounts allocated to remuneration are decreasing.

The central departments and the boroughs have made efforts to reduce the workforce. In the boroughs, the Five-Year Staff Reduction Plan and reinvesting savings have helped achieve a balanced budget.

Job creation
The budget provides for the creation of jobs to meet new needs and implement the administration's priorities.

"We are announcing the creation of 55 jobs at the Service de police de la Ville de Montréal to meet the vigilance program and the new challenges faced by a major police department, which include radicalization, vulnerable clienteles, etc. This budget also provides for the creation of jobs related to water and sewer pipe repair, snow-removal management, animal management, libraries, road network repair and urban mobility management. Thanks to financing agreements with outside partners, the city budget provides for the creation of 25 jobs to accompany the Caisse de dépôt et placement du Québec – Infra (CDPQI) as part of the Réseau électrique métropolitain, 22 positions for urban technical network projects as part of the municipal consent process, as well as two positions for the Turcot Project," said Pierre Desrochers.

Among the 206 jobs created in the operating budget, 91 or 44% benefit the boroughs directly.

Public transportation
Additional credits of $35.6 million are earmarked for financing public transportation, up 7% compared to the 2016 Budget or almost four times more than the 2017 anticipated consumer price index growth. These additional credits include an increase of $25.8 million over the regular contribution to the Société de transports de Montréal, which totals $455.6 million. Also, there is an additional amount of $9.5 million as a contribution to the Programme d'aide aux immobilisations en transport of the Société de financement des infrastructures locales du Québec, as well as $0.3 million for the Agence métropolitaine de transport.

Roads
The budget includes $138.4 million for municipal roadways, of which $95.7 will go toward borough budgets.

Snow removal
The 2017 Budget provides for $157.6 million for snow removal, a decrease of 3.5% ($5.8 million) compared to 2016. This can be explained by consolidating snow-removal contracts and the optimization program.

Management of residual materials
The 2017 Budget provides for $155.8 million for managing residual materials, a decrease of $4.8 million. This includes an additional budget of $0.6 million to continue the strategy to implement the food waste collection. The reduction in the budget is due in part to a decrease in the number of tonnes of household waste taken to landfills and lower contract costs resulting from grouping, as part of the borough financing reform.

Public security
Approximately $1 billion is earmarked for public security, including $637.2 million for the Service de police de la Ville de Montréal and $328.2 million for the Service de sécurité incendie de Montréal. These amounts include $5.4 million for the Agenda de vigilance, which will help the police department adapt to the new challenges faced by a major police department: radicalization, vulnerable clienteles, etc.

Cultural and recreational activities
The 2017 Budget provides for $548.1 million for cultural and recreational activities and parks, up $13.5 million, including:

• $69 million for Space for Life (Biodôme, Botanical Garden, Insectarium and Planétarium Rio Tinto Alcan)
• $14.5 million for the Conseil des arts de Montréal, up $0.5 million compared to 2016
• $7.5 million for the Pointe-à-Callière, Cité d'archéologie et d'histoire de Montréal, an increase of $1.5 million compared to 2016, including the financing of two new pavilions, Fort de Ville-Marie and the Collector Sewer Pavilion
• $1.5 million to redevelop the Complexe environnemental de Saint-Michel into a park, a project that is part of the Montréal's 375th anniversary legacies.

Formula E racing
A contribution of $4 million is earmarked for the presentation of Formula E racing, the only full-electric car racing championship in the world.

Policy on children
The 2017 Budget includes $5 million to implement the Policy on children, which affirms Montréal's determination to help children develop by strengthening intervention and support, especially in disadvantaged neighbourhoods.

Montréal's 375th anniversary
An $11 million contribution will be paid to the Société des celebrations du 375^e anniversaire de Montréal, in addition to $24 million included in the 2015 and 2016 budgets.

2017 municipal election
The 2017 Budget includes $16 million for holding the municipal elections. This is a non-recurring amount of $12 million that adds to the $4 million that is budgeted annually for this purpose. Financing for this additional $12 million comes from the use of corporate surpluses earmarked for the election that was cumulated over the past three years.

"With the 2017 Budget, we realize the progress that was achieved over the past three years. Montréal is in far better financial position today than it was when we took over at city hall in November 2013. The year 2017 marks the end of our administration's first mandate. This Budget is meant as a balance sheet of all the work that was accomplished and paves the way for the future. We are aware that Montréal still has huge challenges to face, but if the past 375 years have taught us something, it is that nothing can stop us," said Mayor Denis Coderre.

SOURCE Ville de Montréal - Cabinet du maire et du comité exécutif

Source : Marc-André Gosselin, Attaché de presse, Cabinet du maire te du comité exécutif, 514 290-1194; Information : Gonzalo Nunez, Relationniste, Service des communications, 514 868-1127