Budget committee passes 2014 equipment reserve budget

Lisa
Lisa Goudy
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Brian Acker, director of financial services, answers a question about the 2014 equipment reserve budget at the March 17, 2014 budget committee meeting at city hall.

A new fire truck and new taxation software are two of the largest purchases in the 2014 equipment reserve budget.

On Monday, budget committee passed the equipment reserve budget as presented. The budget has $70,424 in increased costs spread over the operating, utility and capital budgets. The approved request is $2.93 million in equipment replacement.

“We depreciate every piece of equipment. Any new acquisition we have funding for within the equipment reserve, we accumulate monies within it from excess depreciation we have. So those are paid for,” said Brian Acker, director of financial services.

“It’s an ongoing charge. What that $70,000 is referring to is that ongoing charge that’s going up $70,000 and the rationale for that is that their replacement values have increased. There is some new equipment that we now have to provide funding for. So that’s being charged to our various budgets.”

Some of the new equipment includes a $60,000-mower, another asphalt patching truck at a cost of $270,000, a $550,000-fire truck, new $300,000-taxation software to replace the current 17-year-old software and a $100,000-para-transit van to replace the vehicle that is several years old.

Coun. Patrick Boyle asked about online network infrastructure and the storage area network.

“We’re going through the process of an IT master plan. We’re working with a consultant,” said Acker. “One of the advantages of having our network infrastructure up for renewal this year is that we will … have our IT master plan in the not too distant future so we’ll be in a position to use these funds.”

Funds in the equipment reserve budget generated $755,000 in interest earnings in 2013, which is equivalent to a 3.25 per cent return. In 2013, the amount of interest paid out of the reserve was reduced from the established rate of six per cent to five per cent to reflect the expected lower interest rates.

“One of the key concepts of the equipment reserve is to have a relatively stable interest rate and that’s why we did establish it originally at six per cent,” said Acker. “It is a longer term thing when you look at equipment replacement. Many of our items are 10 or 15 years out. So we’re hopeful that over that 10 or 15 year period we’re going to get back to seeing five per cent interest rates, if not a little bit more.”

But Coun. Brian Swanson said he doesn’t believe the equipment reserve budget is sustainable.

“If interest rates go up, so will the costs of equipment,” he said. “The basic premise of this reserve is wrong. It doesn’t work. If we get back to where we’re paying five per cent on our money, it’s because inflation has picked up big time.”

The budget was passed with Swanson opposed.

Follow Lisa Goudy on Twitter @lisagoudy.

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