Capital and Operating Budget

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Capital Budget

The capital budget includes major infrastructure projects such as roads, vehicles/equipment, parks, sidewalks, trails, streetlights, playgrounds and buildings. It includes both the development of new, and the maintenance/rehabilitation of existing infrastructure.

 
Capital Projects

The Infrastructure & Asset Management team is responsible for the planning, design and construction of all new road, bridge, building, and park and trail projects for the Town of Ajax.

View 2023 Town of Ajax Capital Projects

Operating Budget

The operating budget covers day-to-day spending on services such as roads maintenance, community centres, parks and sportsfields maintenance, fire emergency services and community development. Approximately 70% of the funds for the operating budget come from property taxes. The balance comes from a variety of sources such as from user and permit fees and licences.

 
Understanding the Budget

For more information about the budget process and common terms please refer to Understanding the Budget Process. The document includes common budget and forecast terms, how the Town plans for its financial future, FAQ's, important plans and studies, how taxes are calculated and the budgeting and forecasting process of the Capital Budget, Operating Budget and General Levy Forecast content below.

 

 Common Budget and Forecast Terms

Common Budget and Forecast Terms

Overview of the Town's Budget/Forecast Process

A continuous, often complex 12 month process, budgets and forecasts draw information and direction from a wide range of sources. The budget is not an isolated event; rather it is an ongoing integrated process that translates the Town’s services, service levels, policies, public input and plans into a single, consolidated financial road map.

The following chart summarizes the key events and dates in the budget/forecast process:

Budget Timeline

How is the Budget Determined?

Inform the Budget

How the Budget is Determined chart

 
What Makes up the Town's Budget 

The Town’s budget consists of the following six components:

1. Operating Budget  

The operating budget includes all of the expenditures (e.g., wages/benefits, supplies, contracted services, utilities, etc.) required to deliver day to day Town services. It also includes the non-tax revenues that we receive (e.g., ice rentals, interest income, planning and development fees, etc.).

The operating budget for the Town consists of 7 departments, over 195 separate business units and more than 3,500 individual line accounts. The operating budget is prepared based on existing service levels which are then adjusted for the cost of supporting new growth in the Town (i.e., providing services to the new homes and businesses) and legislative requirements

Two significant expenditures in the operating budget are general levy funded Reserve/Reserve Fund Allocations and Long Term Debt Payments, which together make up approximately 13% of the net operating budget.

The amount to be raised from taxation is based on the approved Net Operating Budget, which is calculated as the Gross Operating Expenditures less Operating Revenues/Recoveries received from non-tax sources (such as user fees, fines, interest income etc.)

Gross Operating Expenditures less Operating Revenues/Recoveries received from non-tax sources

2. Capital Budget/Long Range Capital Forecast

The budget and forecast include one-time expenditures for major projects (often referred to as “infrastructure”) such as roads, vehicles/equipment, parks, trails, playgrounds and buildings; as well as studies and information technology. It includes both the development of new and the maintenance/rehabilitation of existing infrastructure.

The budget covers a one-year period (the upcoming budget year) while the long range capital forecast covers the following nine-year period. The ten years of the forecast period are reviewed and revised annually as part of the budget process.  

  • The funding for capital projects comes from a wide range of different sources, with the most common ones listed below:
  • Development Charges
  • Casino Ajax Revenues
  • Elexicon Investment Interest and Dividends
  • Reserves and Reserve Funds
  • Debenture Debt
  • Canada Community-Building Fund
  • Other grants, donations and external funding sources

 

3. Business Cases

Requests for new staffing, projects and other initiatives proposed by staff are documented in Business Cases for consideration by Council through the annual budget process.

Costs may include salaries/benefits for new full time or part time staff required to maintain existing service levels, comply with Provincial and other legislation, undertake new initiatives, or add new services, etc.

It may also include other costs and revenues associated with the expansion of existing programs or undertaking new initiatives and services.

 

4. Library Grant

The Ajax Public Library operates independent of the Town of Ajax, however the grant provided by the Town to the Library accounts for approximately 93% of the Library’s annual operating budget. One member of Council sits on the Library Board and participate in the Board’s decision making processes. The Board provides reports to Ajax Council as required throughout the year and provides their annual grant request as part of the Town’s budget process.

 

5. Other Taxation Revenue

These revenues reduce the general levy amount that must be raised by property taxes. It includes:

  • Supplementary taxes, which are taxation revenues raised during the year from new homes and businesses as they are assessed and added to the tax rolls.
  • Payments in Lieu of Taxation (PIL), Linear Properties (Railway Lines and Hydro Corridors) and Taxable (Shared PIL) properties which are payments received from other governmental bodies that are not required to pay property taxes, but make payments to the Town to offset the cost of services they receive.
How Tax Rates are calculated

The following is a simplified explanation of the complicated process of calculating property tax rates:

Step 1: Calculate the Net Operating Budget

Step 1: Calculate the Net Operating Budget

Step 2: Calculate Amount to be Raised by Taxation

Step 2: Calculate Amount to be Raised by Taxation

 

Step 3: Update Tax Ratios

All property classes have a defined ratio, relative to the Residential class which is set at 1.000. By comparison, the ratio for the Commercial class is 1.4500. Tax policy refers to changing (usually lowering) a non-residential ratio, which transfers the tax burden to other property classes, primarily to the Residential class. Tax policy decisions are the responsibility of the Region of Durham, in consultation with the area municipalities.

Step 4: Tax Rate Calculation

Step 4: Tax Rate Calculation

Step 5: Your Property Tax Calculation

Step 5: Your Property Tax Calculation

 
How Reassessment Affects the Town's Budget

While assessment is the responsibility of the Municipal Property Assessment Corporation (MPAC), the rules and regulations about assessment are set by the Province of Ontario. Reassessments are completed every four years, with assessment increases phased in equally over the four year period.

Impact on Town – The Town does not get any additional tax revenue as a result of reassessment (i.e., it is revenue neutral). The first step each year is to lower the existing Town tax rate to reflect the fact that the Town now has a higher assessment base.

Impact on Individual Taxpayer – Taxpayers may see an assessment related increase or decrease, depending on their assessment increase relative to the Town and Region averages. The Province has mandated that assessment related increases be phased-in equally over four years, while assessment related decreases are granted immediately.

The most recent reassessment was completed in 2016.  Due to the pandemic, the reassessment scheduled for 2020 was postponed and no new reassessment date has been determined at this time. 

How the Town Estimates the Projected Annual Surplus or Deficit

The Operating Budget Forecast is an estimate of the total operating expenditures and revenues for the current budget year. The difference between the forecast and the budget results is an estimated operating budget surplus or deficit for the current year.

This Forecast serves a number of short and long term financial planning purposes including:

  • Preliminary identification of trends, issues, etc., that may need to be incorporated into the following year’s operating budget 
  • If an operating surplus (revenues are greater than expenditures) is projected, the forecast provides an estimated amount available for transfer to capital reserves, which can be an important revenue source for the upcoming Capital Budget and Long Range Capital Forecast
  • If an operating deficit (expenditures are greater than revenues) is expected, strategies will be developed to address the shortfall, usually by transferring funds from the Stabilization Reserve.  If the funds in the reserve are not sufficient to cover the deficit, the remaining amount must be added to the next year’s tax levy.
Services

 How the Town distributes taxes wire diagram

Region of Durham Services

Frequently Asked Questions

Why are the property taxes on a similar home in Toronto (e.g. same square footage, number of bathrooms, lot size, etc.) often much lower than a house in Ajax?

There are three main reasons for this difference, not only between Ajax but between other GTA municipalities as well:

  1. Special Provincial Funding – since amalgamation in 1998, the Province has given the City of Toronto millions of dollars in special grants and loans, funding which was not provided to any other municipality in Ontario.
  2. Toronto Business Taxes Subsidize Residential Taxes – Toronto has historically taxed their businesses at much higher rates than other jurisdictions, which allows Toronto to keep residential taxes lower. A commercial business in Toronto pays 3.2 times more in taxes than a homeowner, while in Durham Region that same business only pays 1.5 times more.
  3. Special Taxing Powers – The Province has granted Toronto the authority to charge special taxes or levies (e.g. land transfer tax), which also allows them to keep their residential property taxes lower.
Why are municipal tax rate increases often higher than the rate of inflation?

When people talk about inflation, they are usually referring to Statistics Canada’s Consumer Price Index (CPI), a theoretical “shopping basket” of consumer goods. Unfortunately, CPI does not reflect the cost increases that all municipalities face for expenditures such as contracted goods/services, utility costs for streetlights and large facilities, insurance, building materials, asphalt, concrete, etc.

The Town calculates its own Municipal Price Index (MPI) which reflects the cost of the goods and services used by the Town to deliver services. This MPI is used to assess user fee increases and ensure that inflationary changes are reflective of the ‘basket of goods’ used specifically by municipalities and includes costs related to service delivery, maintenance of municipal infrastructure, public safety, regulatory and legislative requirements.

What specific budget pressures is the Town facing?

While each budget year brings a new set of issues, there are four main challenges impacting both current and future budgets:

  1. Continuing Growth - While providing services to new homes and businesses does come with a cost, growth does provide a number of revenues that help minimize tax increases. These revenues include assessment growth, supplementary taxes, development charges and planning & development fees.
  2. Existing Infrastructure - The Town has a vast network of existing roads, trails, sidewalks, buildings, playgrounds, parks, streetlights, etc. and that network is added to each year as new development occurs. It is essential that the Town spend the funds necessary to keep these assets in good repair and to avoid higher maintenance costs in the future.
  3. New Town Facilities – Audley Recreation Centre Phase two, Pat Bayly Square and Paradise Park are examples of important new community spaces that have been constructed recently. The operating cost of new facilities can make it difficult to maintain tax increases below the rate of inflation.
  4. Legislative Impacts – A number of legislation requirements continue to impact the Town’s Operating Budget including: Bill 148 Fair Workplaces, Better Jobs Act, increase in minimum wage, updates to the rate frameworks for both Workplace Safety & Insurance Board (WSIB) the Canada Pension Plan (CPP) and implementation of Asset Management reporting requirements. The impact of these legislative impacts significantly impact the operating budget. For example, in 2018 the budget impact of Bill 148 was $703,500 with $266,000 additional costs incurred in 2019.
  5. Increasing Costs – Some costs increases are within the Town’s control but many are not. Inflation on goods and contracted services, recent challenges such as the COVID-19 public health emergency and climate change, can drive up the cost of the service delivery and capital projects.
What are User Fees? 
Many services offered to residents are available equally to all and these would be included as part of your property taxes. Examples include Fire protection, snow plowing of roads, grass cutting in parks etc. User fees are the rates charged for the delivery of products or services to residents that are optional and offered on a fee for service basis. Examples include rental of meeting rooms, purchase of a permit, enrollment in a day camp program etc.
Do user fees cover the costs of the service? 
No this is not always possible. Although these fees are reviewed annually and compared against other areas and similar municipalities, staff balance the recovering of charges and ensuring that programs and services are offered to the public in an affordable and responsible manner.
Do Development Charges cover the entire cost of the capital projects required for new development?
No. But we are getting closer. Provincial legislation, specifically the Development Charges Act, requires municipalities to contribute to certain development projects. Other legislative requirements can further increase the amount a municipality must contribute. While recent legislative changes have broadened the scope of project costs that can be recovered through Development Charges, certain capital items such as administration buildings and the acquisition of parkland, are exempt and must be 100% paid for by taxpayers.
Why do my total taxes sometimes increase more than the Town’s tax rate increase?

The Town only controls 31% of the total tax bill, with the Region responsible for 55% and the final 14% controlled by the Province for education. If the Region and/or Provincial increases are higher than the Town’s, then your total increase will be higher than the Town’s increase.

Also, a reassessment related increase (where the value of your property is increasing at a faster rate than the average for the whole municipality) may cause your total tax increase to be higher.

How is Ajax using the Canada Community Building Fund (previously Federal Gas Tax) funding they get from the Federal government? 
In 2005, all municipalities signed an agreement in order to receive the Federal Gas Tax fund which was updated in April 2014 and is in place until 2023. The government recently changed the name of this grant to the Canada Community Building Fund. To date, Ajax has used the money to make the new Fire Headquarters/Training Facility, Operations & Environmental Services Operations Centre and the Audley Recreation Centre, green, energy efficient LEED certified buildings. The Town is focusing CCBF funds towards capital expenditures for road resurfacing/reconstruction, energy efficiency (e.g. LED Lighting), storm water quality, storm water management pond maintenance, Sportsfield and Recreation capacity, non- DC portion of Transportation and Recreation services, and Asset Management.
 What external announcements or potential changes may impact the Town’s budget?

The Town’s two major non-property tax revenues, revenues from Slots at Casino Ajax and Elexicon investment income are subject to potential changes.

Slots Revenues – In 2018, the Town’s budget included $7,687,500 for slots revenue. The majority of the slots revenue is dedicated to reserves that fund the construction and maintenance of infrastructure. In March 2018, the provincial government and OLG announced that Pickering would host a new Casino, which opened in July 2021. In 2020, Covid caused the closure of the Casino and as a result, revenues dropped to $1,728,830 Closures have persisted into 2021 and a significant decline in revenues is expected in 2021 and beyond. 

View the Town of Ajax Casino Ajax Revenues document.

Where does the Town get the revenue for the General (Tax) Levy Budget?

See following chart, 2021 Operating Revenues by Source:

2021 Operating Revenues by Source.

How does the Town spend their portion of the tax bill?

How does the Town spend their portion of the tax bill?

Operating Budget (31%)

Breakdown of Operating Budget by department

How to Have Your Say!

To effectively and efficiently deliver services to the community, public input, feedback, comments, suggestions are essential. There are numerous ways for Ajax residents to get involved:

  • Ongoing correspondence and interaction with Mayor and Council
  • Contact, correspondence, discussions with Town staff
  • Public Forums
  • Regularly scheduled Council and Community Affairs and Planning meetings
  • Quality system customer feedback
  • The Town's public engagement forum, In My Opinion (IMO) Hub
  • Customer Polling