The Municipality of Grey Highlands is feeling the effects of the slumping economy.

Grey Highlands council at its regular meeting Monday morning received a year-to-date budget update from CAO/Treasurer Kelley Coulter. The municipality is halfway through its budget year and the report highlighted how the municipal budget is performing.

The budget report was not glowing news for members of council. Coulter said the municipality’s budget is tracking into a deficit at the midway point of the year. Coulter said currently the budget is showing a $58,461 deficit.

The CAO/Treasurer said the majority of that number - $36,000 - comes from the winter control/snow removal budget being higher than normal in the early part of the year. However, Coulter also warned council that other areas of the budget were suffering due to the slumping economy.

The report informed council that the increase in fuel prices has cost the municipality $38,277 extra in 2008. The municipality’s Building Department is slumping to this point in the year and revenue in that area is off by $29,932. Grey Highlands has also had extra appeals to the Ontario Municipal Board this year costing and extra $35,442. In addition, the tender for gravel maintenance came in $27,694.

Coulter also reported that Grey Highlands would also face increased costs to fill some staff vacancies. She said she expects extra expenses of $30,000 to recruit a Director of Public Works and a Corporate Services Manager.

In her report Coulter recommended to council that all departments in Grey Highlands cease all discretionary funding due to the financial situation for the municipality. The CAO also recommended that the municipality apply a reserve fund of just over $26,000 to help cover off the deficit recorded so far in the building department.

Members of council were relatively mute on the contents of the budget report. Councillor Stewart Halliday questioned why it was necessary to make the reserve transfer into the operating budget so early in the year.

Coulter said the recommendation was coming forward early to ensure the situation was taken care of immediately. She added that making the transfer now is an opportunity to clean up that reserve account that has been on the books for several years.

Deputy Mayor Dave Fawcett said he preferred to make reserve transfers later in the year when the entire financial picture is clear.

“I think it is premature. I would be more comfortable to do it in November/December,” he said.

Mayor Brian Mullin and Councillor Lynn Silverton both thanked Coulter and municipal staff for keeping council up-to-date on the status of the budget. Mullin said having proper information was the key to council making good financial decisions.

“We have to recognize the position we’re in. Things are very tight right now. We’re going to end up with a possible deficit this year is we don’t control our expenses,” said Mullin. “It’s good to have this information because we can take action now,” he said.

The mayor also warned council that the current budget situation is a reminder that any midyear spending changes were going to have to be considered very carefully.

“Any changes we make to the budget now will have an impact. We have to be aware of that,” he said.