Thursday, February 22, 2018 - 2:45 PM

Capital Budget 2018

Capital Budget 2018 logo

On February 28, during Committee of the Whole, Council will review the City’s annual capital budget plan for 2018.

What is a capital budget and how does this budget differ from the City’s other budget plans?
Municipalities have two main types of budgets, operating and capital. Capital budgets are generally intended for larger projects and purchases. Capital budgets are usually used to purchase or construct things like a piece of property, a building or a piece of equipment. Operating budgets cover the day-to-day expenses, including such things as salaries, rent, utilities or purchases that aren’t intended to last, like advertising for instance.

Think about your household budget: capital investments include your house, your car or perhaps major renovations to your property while your operating budget includes your groceries, heat bill and other smaller purchases like clothing or gas. Imagine you need to buy a new dishwasher. This is a fixed asset but it isn’t a large purchase like a house or a car, so which budget does it come from?

In the City’s budget these types of projects and purchases are called ‘capital out of revenue’. On an annual basis the City of St. John’s approves a capital budget by early spring, after the annual budget has been approved. During the budget announcement, an amount of money is allocated for this purpose and staff work to identify projects and purchases that are required during that budget year.

Large capital projects, such as Paul Reynolds Community Centre or a major water and sewer upgrade like the one on Water Street, are funded through cost-shared agreements with the province and the federal government and they usually take many years to complete. The City will borrow its share of the money and pay the amount back over a number of years. This is an expense in the operating budget – just like a mortgage payment made on a house. Just like in a household, the costs to service a loan with monthly payments such as interest have to be accounted for as part of annual, operating budgets.
Where does the money come from?
The City has four ‘pots’ of funding for specific types of projects:

The Gas Tax Allocation is a source of funding provided to provinces and territories who in turn flow this funding to their municipalities to support local infrastructure priorities. Several years ago, Council decided to allocate the Gas Tax Fund to the replacement of the H.G.R. Mews Recreation Centre. We’ve been saving that money for this significant investment. For 2018, we are adding about $4.6 million to the monies in the bank to pay for that project.

The Fleet Acquisition Fund is used to upgrade and replace the City’s vehicle fleet. This year, we have $3.6 million in the Fleet Acquisition Fund which will be used to purchase new equipment and vehicles such as sanders, garbage trucks, sidewalk plows, and ride-on mowers. The goal is to maintain the fleet so that it isn’t so old that it costs more to maintain a piece of equipment than it would to buy a new one.

The water tax allocation of capital monies is for work exclusively on our water system and is funded through the water tax. Our annual capital budget funded by the water tax is $3.22 million for 2018 and includes water meter upgrades, an automatic meter reading system, water main improvements, a remote monitoring system to aid in management of the water supply, and ongoing filter tank coating and repairs at Winsor Lake.

The fourth pot of funding is the largest amount which is not targeted for any specific type of project but is used to fund a large assortment of projects. For 2018, the general amount is $11.8 million, and the projects identified by staff in this fund require Council support and approval.

Three-Year Operating Budget Plan
It is important to note that the City of St. John’s budget is not year to year but over a three-year period. By developing budget plans over a longer term, the City is better able to predict and plan expenses and to manage public resources more effectively. The 2018 capital plan is the last year in a three year strategy announced in 2016. From year to year, priorities shift slightly, emergency situations arise and sometimes committed work does not get started when anticipated.

Senior staff have met on numerous occasions to identify capital needs city-wide. This review and assessment has produced a ranked listing of projects which will be discussed during the Committee of the Whole (COTW) meeting on February 28, 2018. Members of the public are invited to attend the COTW. You can also share your thoughts on these and other priorities by contacting your Councillor directly.

On Monday, February 26, the agenda for the COTW will be posted here and it will include a detailed list of the recommended projects and others for consideration. The plan is to present and approve a final list at the regularly scheduled Council meeting on Monday, March 5, 2018.