Council has given preliminary approval to take their $3.5 million surplus and split it between asset management and a savings account for a new hospital.
During council’s committee of the whole meeting on April 9, more light was shed on how the town came to discover a $3.5 million surplus that accumulated after being collected from taxpayers since 2009 through the town double funding their post-employment benefit reserves. Also during the meeting, council gave initial approval to forward half the surplus (or $1.77 million) to the town’s lifecycle reserve fund, while forwarding the other $1.77 million to a hospital reserve fund.
Although, there was disagreement among councillors and the decision on how to allocate the money wasn’t unanimous.
“This is a difficult decision for us, but it’s a happy one to have to make,” said Mayor Yvonne Hamlin during Monday’s meeting.
The error that caused the surplus was first reported to councillors and the public in March. At that time, town treasurer Monica Quinlan explained that the town discovered in 2023 that they had been putting money away since 2009 both by recording a liability and contributing to a reserve fund for post-employment benefits in the event the municipality is ever dissolved.
The amount collected between 2009 and December 31, 2022 was $1,774,100 each in the liability account and the reserve account, that had been funded through taxes, for a total of $3.5 million collected.
Government financial statements are governed by Public Sector Accounting Board standards. Under these standards, post-employment benefits are to be provided to employees and their beneficiaries after the employee has retired, but before the employee reaches the age of 65. These benefits include health care and dental benefits as well as life insurance. The standards do not mandate that the liability be funded by a municipality.
The liability and town reserves that had been accumulating funds for this purpose are only eligible to be used if the municipality ever dissolves. Town employees who retire before 65 and pull on benefits until they reach 65 are funded through the municipal reserve.
At that time, councillors voted in favour of referring the issue back to staff to collect advice on different paths forward, to be presented to committee of the whole at a later date.
During a discussion on Monday, Quinlan provided further information on why the surplus happened, based on feedback she said she’d received from the public since the matter first came to light.
“I just want to be very clear that this adjustment was essentially re-allocating an accumulated surplus. There is not an implication of overtaxation of residents at all,” she said.
Quinlan explained that the funds that made up the employee benefit reserve were taken from year-end surpluses each year since 2009, and were not the result of any increase to taxation.
“It’s a surplus allocation from one reserve account to another,” she said.
Quinlan also explained that in 2009, Public Sector Accounting Board standards were changing, specifically when it came to how asset management was dealt with. Quinlan said that prior to 2009, asset management was not something on the radar of many municipalities.
“It is a choice to not fund (the employee benefit reserve). If I was here back then, I likely would not have funded it myself, but that doesn’t mean it’s wrong. It just means, it’s different,” she explained.
Coun. Kathy Jeffery questioned Quinlan’s assertion that this was a matter of transferring money from one reserve account to another.
“They were taxes paid, but were surplus that year,” said Jeffery, also clarifying there was no 2024 budget money allocated toward this purpose.
Councillors had a few options to consider for how to spend the remaining $1.7 million, with the staff recommendation being to put the funds into a general reserve fund until the completion of the community-based strategic plan. The suggestion didn't work for some councillors.
Deputy Mayor Tim Fryer noted that moving $1.7 million into the hospital reserve instead would bring the total town reserve for that purpose to $4 million, and moved a motion to that effect.
“Since a new hospital is viewed as – if not the top – one of the top tax-related priorities, taxpayers will know these contributions have been applied to help cover a worthy area of municipal requirement,” he said.
Fryer noted the costs of a new hospital are likely to be “excessive."
“Having the funds in hand when we’re determining how to proceed with our municipal partners will be a positive step forward,” he said.
Hamlin noted that although the hospital will be located in Collingwood, there are five municipalities it will serve. She said she felt the land donation for the hospital, of which the estimated value is $9 million, should be considered part of Collingwood’s share for the costs. The 30-acre parcel of land on Poplar Sideroad was donated by the landowner John di Poce.
“It’s our skin in the game for hospital redevelopment at this point,” she said.
Therefore, Hamlin said she was opposed to applying the $1.7 million to the hospital reserve, and preferred to vote in favour of holding the funds until the community-based strategic plan is completed and making a determination then.
“There’s no harm in waiting,” she said.
Jeffery noted that in her experience, the hospital will have to prove to the province that they have community support through buy-in from municipalities.
“I think by doing the $1.7 million now... our local share is going to be a lot more than that given the price increases of construction,” she said, noting that the town already has a community-based strategic plan and the one currently being worked on, is really for the next council to implement.
“We take our direction from the strategic plan that’s in place. We’ve been doing that all along with all our major decisions,” said Jeffery.
Hamlin took exception to Jeffery’s comments.
“I want to address the comment Coun. Jeffery made that was pooh-poohing the community-based strategic plan,” Hamlin started. “My own view is quite different. We are only one year and five months into a four-year term, and we’re just getting going in a big way.”
Council voted in favour of reallocating $1.7 million from the employee future benefit reserve to the lifecycle reserve fund.
Council voted against staff's recommendation to hold the other $1.7 million until the new community-based strategic plan is completed by a 6-3 vote, with Coun. Christopher Baines, Hamlin and Coun. Deb Doherty in favour.
On a vote to move the $1.7 million into the town’s hospital reserve, council voted in favour 7-2. Baines and Doherty were opposed.
The decision will need to be ratified at the next regular meeting of council before going into effect.
