A municipality must first pass a budget before they set their tax rates. Why is this? First they have to decide what core services they intend to provide, and review what the costs of those services are. Additional costs for capital upgrades, etc. are then added to the budget.
Council then reviews where the revenue to cover the budgeted expenses will be coming from, sometimes reducing expense lines to reduce the revenue required.
Revenues can come from many additional sources such as:
user-pay fees (for activities and programs to help reduce the tax payer burden and cover some expenses for the facilities the events/activities take place in).
municipal reserves (often these are dedicated reserves for things like infrastructure upgrades or capital purchases).
the Federal and Provincial governments (in the form of grants-in-lieu of taxes and revenue sharing).
other forms of revenue such as rent/lease agreements, grants, etc.
Because a large portion of the municipal revenue to pay for expenses comes from the other levels of government, the Town will generally wait until the federal and provincial budgets have been released before it finalizes its own budget. If a large change to the anticipated amounts we will receive occurs in a federal or provincial budget, it will directly effect our budget. Council must decide whether to reduce expenses (and often services) in that year, increase funds, pull from reserves or increase the tax rate to cover the difference.