How we Reduced your Taxes while Increasing our Surplus

2009-02-19

By now, most of you know that 96% of Hampstead residents had a 1% tax decrease this year and that our surplus has grown four-fold to $1,000,000 from the $321,000 that we inherited at the time of the demerger. Our taxes were reduced due to several factors. These included a reduction in non-essential expenditures, an appropriation of $250,000 from our accumulated surplus which had been $1.25 million prior to the appropriation, and due to an increase in our tax base from new homes and major renovations. As Hampstead is becoming more and more attractive as a place to live and build a home, we have also benefited from higher welcome tax revenues.

Our surplus has increased for several reasons. One is the tight control of overtime. We only allow overtime for snow removal/clearing/salting to make our streets safe and for water main breaks or other similar emergencies. Another reason is that our long term investments have resulted in savings in operational expenses (see below for examples). Finally, as our town becomes more attractive (smooth roads, beautification of Fleet and the Finchley Circle, etc.) and as we increase the number of events for adults and children, new families move in, which increases welcome tax revenues and our tax base.

In this newsletter I want to share my financial philosophies because they are the underlying reason for our financial success.

Long Term Debt for Long Life Assets – We borrow to fix our infrastructure and for assets (vehicles, facilities, etc.) that will last a long time. Some critics say this is mortgaging our future and forcing our children to pay for our wasteful ways. This is totally false. Why should residents who may move out of town in a few years pay for a road that will last 25 years? If an asset will last 10, 15, 20 or more years, we take a loan that will be repaid over the life of the asset. This way the current residents pay for what they enjoy each year. This is fair and responsible.

Investments that yield Annual Savings - As much as possible we invest in things that yield annual savings. For example, new roads do not need pothole repairs. Water mains that have been replaced do not break, therefore, homes are not flooded and we do not pay expensive damage claims. New vehicles mean that we have fewer costly repairs.

No Over Taxing – I believe that Hampstead normally needs a financial cushion of about $1,000,000 for unexpected operational expenses. Past administrations put large contingencies in the budget. These were mostly unused and the surplus kept growing. It was essentially all used up just prior to the forced mergers. In my view, we should have a combined surplus and contingency of $1,000,000 and no more. So when our surplus climbed above $1,000,000 I advocated using the excess to reduce taxes and to have a small contingency in the 2009 budget. As your Mayor, I promise that I will not over tax just for the sake of building a surplus.


Facilities that pay for themselves – My philosophy is to try to introduce excellent facilities that pay for themselves. We added one new facility, the dog run, and we made sure that it would be self-sustaining. Dog license fees were set at a reasonable level which, nevertheless, was enough to ensure that the annual debt repayment and maintenance costs would be covered.

Residents should have access to what they pay for – Our tennis courts and the improvements (new lights, patio area) that we have made to them are subsidized by general tax revenues so I felt that even residents who wanted to play one or two times a season should be able to do so. Consequently, I introduced day passes for our residents who wanted to play without getting a season pass.

Residents should pay for what they use – Last year we were able to drop the local tax by 2% because we raised the consumption water tax tariff to a level that fully covers our costs. This action allowed all residents to lower their overall tax by conserving water and this is exactly what happened. It is fairer than having everyone pay for the wasteful ways of a minority.

Always take free money – We were the only town that took the Quebec government’s interest- free loan. We will save about $3.3 million in interest over the life of the loan.


Sincerely,


Dr. Bill Steinberg
Mayor, Town of Hampstead