City of Powell River’s five-year financial plan, 2017 to 2021, is unsustainable.
Council’s inability to control expenditures and its obsession to focus on the holy grail of municipal politics, the amount of property tax increase, has resulted in a missed financial opportunity.
The current council entered office in 2015 with a very strong fiscal position: financial surplus of approximately $2 million and increases of property tax revenue of $1.1 million, or 7.3 percent, from 2014.
This financial position was significantly strong enough to prompt the city manager to issue the objective/promise to cap operational tax increases for the 2015 five-year financial planning period.
The positive financial position has been squandered due to poor financial management, generally, council’s inability to say no to any and all requests.
Here is the financial plan, 2017 to 2021, in summary: expenses exceed revenue, a debt-serving cost increase of 27 per cent for interest and 60 per cent for principal, reserves dropped $5 million and repayment to equipment reserves accounts deferred.
Examples of excess spending include: double-digit per cent increase in protective services to cover salary increase and additional staff for fire and police during a five-year period of zero population growth. Solid-waste collection costs are also climbing, the additional end costs undefined.
Then there is the folly of social programs, all of which consume money, but more importantly divert city staff resources from core responsibilities. It may even add to councils’ overall body of work.
Council’s reaction to the cost savings of proposed service reductions, including reduced hours at Powell River Recreation Complex, was not only disappointing due to councillor CaroleAnn Leishman’s adamant rejection of any service cuts, but more significant, councillors’ failure to ask about the impact it would have. Would complex users go without, or simply select a different time? Increasing hours of service, in a surplus-capacity environment, is not cost-effective.
The major budget issue as yet unresolved is the tax exemption for our major industrial sector (Catalyst Paper Corporation). Failure to achieve a $300,000 to $500,000 annual increase starting in 2018 could create a $2-million shortfall in the five-year plan. Herein lies the financial time bomb: rather than scrambling to find $500,000 in 2018, closure of the mill with a loss of 16 per cent of property tax revenue would be a financial catastrophe.
What are council’s financial sustainability plans for a smooth transition if the mill does ever close, and does the city have reserves for the very costly site-decommissioning, remediation and legal requirements?
Paul McMahon is a resident of Powell River.
