Budget dollars at work
A municipal budget is a policy and planning document that outlines our City’s priorities. Balancing those priorities is a challenging undertaking because we need to identify what we need to do now to keep providing essential municipal services to our residents and plan on what we need to do in the future while balancing affordability and tax competitiveness.
How the budget process works
Each year, Council determines what levels of funding for services should come from the various sources of revenue.
Budget meetings are held between October and April each year. Typically, the tax supported capital budget and rate budgets are presented first, followed by the tax supported operating budget later in the cycle.
Each Department presents their own tax operating budget and business plans.
During this process, Councillors have an opportunity to ask questions and seek clarification from staff. Public delegations appear before Council as well.
Meetings are also held to focus on budgets submitted from related boards, agencies and committees requiring Council approval. This includes Hamilton Police Services, Hamilton Public Library, various conservation authorities and volunteer sub-committees.
Maintaining accountability and transparency throughout the budget
City council meetings are accessible to the public. Budget documents and presentations are available on the City’s website. During the year, the City submits reports to Council on variances in expenditures and revenues from budget.
Independent auditors will audit the annual financial statements prepared by management. Additionally, an annual financial information return (FIR) is submitted to the Ministry of Municipal Affairs. The FIR is a legislatively required data collection tool to collect financial and statistical information to compare across municipalities.
The City of Hamilton’s budgets work in conjunction with multi-year business planning. Staff closely monitor and report key metrics on visual dashboards, allowing Council to keep a pulse on performance through the Trust and Confidence Report. All of these pieces come together to support the City’s strategic plan.
Frequently Asked Questions
A Municipal Budget is a plan for how dollars are used, invested or earned over a given time period. It is also a policy and planning document that outlines the City’s priorities. Decisions made as part of budget development help determine funding for the programs and services that maintain resident’s quality of life.
For every dollar the City spends:
- 50% comes from property taxes
- 22% comes from Grant & Subsidies
- 12% comes for Rate Revenue (water, wastewater and stormwater)
- 12% comes from User Fees
- 4% comes from Reserves
There are three main components to the City’s annual budget:
- The Tax Supported Operating budget: The tax supported operating budget is a plan for the day-to-day operations at the City of Hamilton, including employee salaries, materials and supplies, contractual services and financing of capital projects.
The tax supported operating budget is largely funded by property tax dollars and user fees, which include charges for recreation programs, transit, infractions, permits and licensing.
- The Tax Supported Capital budget: The tax supported capital budget is the long-term plan for the construction or purchase and financing of the City’s capital assets. Examples of capital assets include infrastructure, land, buildings, machinery and equipment.
Forms of funding include grants, development charges, gas tax, reserves debt and contributions from the operating budget.
- Rate Supported Operating and Capital Budget: The rate supported operating budget is the annual plan for the day-to-day operations of the City’s services and financing of capital projects supported from water, wastewater and stormwater user rates.
The Rate Supported Capital Budget is a long-term plan for the purchase or construction and financing of water, waste water and stormwater capital assets.
Forms of funding include grants, development charges, debt, reserves and contributions from the operating budget.
Ontario legislation states that municipalities must have a balanced budget. Under legislation, municipalities cannot finance operations with debt.
Reserves and reserve funds are similar to a savings account where funds are set aside for future capital needs.
The City’s reserves can be broken down into two categories:
Non-Obligatory (Discretionary): Non-Obligatory reserves are based on Council direction and are used to finance future expenditures designated by Council. They are comprised of the tax supported and rate supported reserves and the Hamilton Future Fund.
Obligatory: Obligatory reserves are funds that are required by the province to be segregated for a specific purpose. They are comprised of development charge reserves, federal & provincial gas reserves, parkland dedication reserves and building permit reserves.
Federal gas tax reserves are available to support local infrastructure priorities in specific project categories.
Provincial gas tax reserves are used to fund public transit infrastructure and operations.
The City’s current credit rating from Standard and Poors Global Ratings in October 2020 is AA+ with stable outlook. The rating agency expects that during the COVID-19 pandemic and recovery, the City of Hamilton’s creditworthiness is supported by higher levels of government and prudent financial management. Hamilton’s recovery is aided by our economic diversification. Fiscal performance is expected to be resilient due to pandemic-related restrictions and mitigation measures. S&P Global Ratings mention the City’s strong management, strong fiscal performance, low debt and high liquidity as key rating strengths supporting its ‘AA+’ rating.
Governed by the Municipal Act, the City of Hamilton has the ability to invest surplus funds not immediately required for its purposes in Short & Long-Term Investments. For example, the City invests money in the reserves fund until it is required for future obligations.
The primary objectives for all City investment activities are to ensure the safety of principal, maintain adequate liquidity to meet the City’s cash needs, and to earn investment income.