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Council starts budget process

First look reveals almost three-quarters of a million dollars deficit

Preliminary budget figures indicate the City of Powell River is facing a deficit of nearly $735,000.

Dave Douglas, the city’s director of financial services, presented a draft 2012 financial plan at a committee-of-the-whole budget meeting on February 16. A first look at early figures shows a deficit of $734,549. “We need a starting point, and that’s what this is here for,” he said. He and Stan Westby, the city’s chief administrative officer, have been talking to department heads, Douglas said, and looking at the $734,000. “We’ll be coming back to council with a detailed report,” he said. “We do know we have to make a few revenue adjustments and we know there’s a few expense adjustments we have to make.”

Councillor Chris McNaughton said the figure was an accumulation of cost-of-living increases, which include everything from fuel to wage hikes, and both the interest and principle on capital project borrowing.

Douglas pointed out the debt interest payments in the general operating fund increased by about $680,000. “We really tried to keep increases in operating costs to a minimum,” he said. “There was a big focus from staff on that.”

Raising enough revenue to cover the deficit would translate into an eight to 10 cent increase in residential taxes.

Earlier in the meeting, Douglas asked council for direction on how it wants to handle the tax ratio between business and residential classes. The provincial average for this ratio has been close to three-to-one. The previous council wanted staff to target this ratio. Currently it is 3.6-to-one. To achieve a ratio close to the provincial average, the city would either not increase business taxes or increase them at a lesser percentage than the residential class.

The recommendation to work toward the goal of average provincial taxation ratio levels for business was referred to a council meeting for debate and a vote.

Mayor Dave Formosa said he wanted to see if it were possible to convert short-term borrowing for the south harbour reconfiguration project to long-term borrowing. “I think it’s prudent that we have that conversation with the bank of the city and find out what our options are, based on the economic circumstances we find ourselves in,” he said. “I’m not saying we would do it, but if the community would allow us, if we needed to refinance, because we’re choking ourselves.”

He also said he wanted to have a bylaw created that would roll back any tax increases that were brought in to service debt after the loan was paid off. “If there’s need for new money, ask the people for new money at the time,” he said. “But what happens is we increase for this project, increase for that project, and you just get fat. It’s time to tighten the buckle.”

Douglas said he had discussions with the Municipal Finance Authority representatives about going from short-term to long-term borrowing and they were not receptive to the idea. “They were not too open to that process of borrowing short-term to get the project done, then going out to long-term referendum, because, at the time, you’re not really fronting the issue to the public,” he said. “They were very hesitant to go there. They didn’t like the conversation too much, actually.”

At the end of the discussion, the committee directed staff to bring those two matters back to another budget meeting.

Other recommendations that will go to council include reducing the flat tax this year by five per cent of the 2011 rate. The committee also directed staff to prepare a second budget scenario that incorporates reduced major industry taxes, in the event Catalyst Paper Corporation shuts down its operations in Powell River.

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