Town of Orangeville council kicked off its 2010 municipal budget deliberations Monday with Treasurer Bill McKennan outlining the state of the town finances and urging the town to concentrate more on building up its cash reserves.

The prevailing mantra in Orangeville in recent years is to keep property tax increases to a bare minimum, or have none at all, and if accomplishing this means dipping into reserves, so be it.

The treasurer's presentation indicated, however, that such thinking may be a recipe for short-term gain and long-term pain.

Mr. McKennan's evaluations on Monday acknowledged that times are tough, but also stated that the fiscal situation in Orangeville is not as bleak as many may perceive. In his presentation, he made per-capita inferences which compared Orangeville to nine other Ontario municipalities.

For example, to achieve the 2009 net tax levy per capita of $1,124 for every man, woman and child in the town, the total town and county tax levy was divided by the Orangeville population of about 29,000.

The same formula is applied to determine the debt per capita, which Mr. McKennan reported to be $718.

He presented a graph indicating that the town's debt, currently about $26 million, is lower on a per capita basis than the nine-town average of $819. Mr. McKennan said in an interview Tuesday that the local debt level is "very manageable. It's one of the lowest in Ontario."

On the other hand, the same graph showed the municipalities of Fort Erie and Aurora as having significantly lower per capita debt than Orangeville. Fort Erie, he explained, is the beneficiary of revenue from race-track slots. Aurora, though, owes its lack of debt to a commitment to consistently building up reserves. "Because they built their reserves, they didn't need to borrow."

On Monday, he spoke of preparing a budget that is investment- as well as expenditure-driven. A property tax increase of one percentage point, he said, would result in $220,000 extra in revenues that could be directed to reserves.

Pointing out that reserves are there for planned capital expenditures, Mr. McKennan used a home analogy to describe the reasons for having money on hand to perform infrastructure work.

"When you own a house, you can always defer the maintenance. Then again, you can pay to seal that window frame now, or wait until it's rotted out and pay for a whole new window."

While conventional wisdom says that raising taxes and borrowing money at the same time is potential political suicide, Mr. McKennan said in Tuesday's interview there could be an advantage to doing just that.

The Bank of Canada has acknowledged that interest rates are at artificially low levels right now. Money could be borrowed at these rates and be fixed for a period of years. Reserves, on the other hand, can fluctuate with the town's "overnight" rate and there will be a higher interest return as interest rates inevitably rise.

To accentuate the point, Mr. McKennan presented two more graphs on Monday. One indicated that Orangeville had the lowest discretionary reserves per capita at $110. (Discretionary reserves are funds that can be used for whatever the town deems important; as opposed to provincially regulated obligatory reserves, which are earmarked for specific purposes.)

Because of this, the other graph showed Orangeville realizing about $25,000 in interest earnings. In 2007, when the reserves were more plentiful, the earnings were over $480,000.

A 1% property tax increase, in dollar terms, would work out to roughly $23 per year for an average residential ratepayer.

Mr. McKennan's presentation was welcomed by Councillor Scott Wilson, who has been somewhat of a maverick when it comes to budget deliberations. While others campaigned for no rate increase, he has called for increases in order to sustain and build reserves.

The treasurer's presentation "showed that Orangeville is not in poor shape. We are not overtaxed nor overburdened," he said in an interview. "But our reserves are pitifully low. We have to address that."

Mr. McKennan says the Town has some $300 million in assets, ranging from buildings down to lamp posts and trash cans. "We've got to protect and enhance these assets."

This would obviously require funding, leading to Mr. Wilson's contention that "council's duty is to responsibly manage finances and assets." A policy of no tax increases "year after year is not responsible. We will always need to fulfill capital requirements and we will need to have the funds available."

Mr. Wilson said that the town should set a target to achieve, over a specified number of years, reserves that are equal to the municipal tax levy. In other words, if the town is taking in $20 million in tax revenue, it should aim for having $20 million in reserves.

For Mr. McKennan, it boils down to a question residents will have to ask themselves.

"We have to ask ourselves is, simply, do we want to keep or improve upon the services we have now?"