A service review has found that the City of Powell River is not in a financially sustainable situation, if it continues on its current course.
The review titled City of Powell River’s General Operations, Service Delivery and Organizational Review, conducted by the Helios Group and released by the city on March 8, determined there is not currently enough surplus from operations to adequately fund infrastructure renewal or replenish reserves.
The gap between operating revenue and expenses has been gradually shrinking over the past decade from a high level of between $3 and $4 million in the early 2000s to a current “crunch” of only $2 million in 2009 and just under $1 million in 2010.
In the past three years, operating expenses have grown by a combined total of 22 per cent, while revenues have grown by only six per cent.
“It is crucial that the city find a way to return to dramatically increase its operating surplus or risk an inability to adequately fund future maintenance of capital and reserve,” the report stated.
The report also points out the local economy and the city’s taxation base are still “highly dependent” on Catalyst Paper Corporation’s Powell River division. The community would be “heavily affected” by the mill’s closure. The report states 400 direct jobs, along with an additional 400 to 600 direct or indirect jobs, would be the equivalent of about 15 per cent of Powell River’s current employment.
As well, the mill’s closure would have “enormous secondary effects” on the local economy. A loss of approximately 1,000 jobs (16.2 per cent) would increase local unemployment to record highs of more than 25 per cent. “Loss in major employment opportunities would result in a population decrease from the city, exacerbating the economic impact and driving down property values, as well as tax revenues collected from residential, commercial and industrial sectors.”
The report states that there is a need to reduce costs. It does not recommend increasing residential and business taxes to maintain existing expenditure levels, pointing out there is lack of public support for a continued tax shift. “Budget shortfalls should be made up from reduced operating expenses,” it states.
After analyzing the city’s organizational structure, the consultants highlighted nine key findings that they feel are critical for consideration. Top among them are the needs to reduce costs and for a mentality shift toward a leaner organization.
The consultants have numerous recommendations for reducing costs, including: reduction in management; improved management and staff efficiency in parks and recreation, operations, engineering and administration; and potentially reducing discretionary service levels, for example in recreation and transit.
One of the major findings was an inefficient organizational structure within public works. The consultants found that the four-tier management structure—manager, coordinator, supervisor, staff—was unwieldy. “The coordinator position is inappropriate due to significant managerial responsibilities. There is internal confusion as to whom to deal with within the structure.”
As well, there is a lack of management oversight between engineering, operations and development, because there is no city engineer position to oversee these departments, leading to “challenges and difficulties in communication, decision making and direction.”
While the city has a strong, progressive management structure on paper, it has moved away from that structure in practice. “Lack of a senior city engineer has resulted in too many direct reports to the [chief administrative officer] and a lack of a strong, balanced senior management team.”
After reviewing management and staff wages and comparing them with other communities, the consultants found that Powell River’s compensation levels are well within the average level of peer communities. However, they recommended that management time in lieu for overtime should be eliminated or fixed and capped. “Current overtime policies are unlimited and heavily utilized. This differs substantially from management policies in other municipalities.”
Compared to other benchmarking peer communities and municipal organizations in general, Powell River currently contracts out or shares very few key services, choosing instead to offer these services in-house. The report recommends developing a business case for outsourcing operating activities as a target for future labour negotiations and listed areas where services could be contracted out.
The report recommends exploring sharing services with the Powell River Regional District, Tla’Amin (Sliammon) First Nation, School District 47 and the private sector. “The city and council have been examining multiple opportunities for partnership with industry, most notably partnering on land development and co-treatment of liquid waste,” the report states. “A summary assessment of these opportunities shows a significant potential for benefit to the city, either through revenue increases or cost reductions. These opportunities should continue to be actively pursued in order to improve financial sustainability.”
The report also states that the city and regional district could realize significant joint savings and service level maintenance through either amalgamation or sharing of services. It uses the example of the Northern Rockies Regional Municipality, which amalgamated the Northern Rockies Regional District and the town of Fort Nelson.
The consultants also identified some governance challenges, including the need to improve the development and adherence to long-term and strategic plans. “In the absence of long-term plans, the corporation lacks vision, impacting the ability to conduct prioritization with respect to efforts and resources.”
As well, the role of councillors in acting as agents for the city should be “strongly defined to ensure timely and appropriate flow of communication to both management staff and council as a whole.” There’s also a recommendation to eliminate the portfolio model in favour of an enhanced committee structure and to assign ownership and accountability for the city’s business concept plan to either staff or an external resource, such as Powell River Regional Economic Development Society.
Finally, the consultants recommended that a number of business processes should be streamlined and modernized, including: the maintenance impacts for capital projects; purchasing and accounts payable; duplicate records management activities; budgeting process; and monitoring grants and applications.
Overall, the efficiencies would reduce costs by about $730,000, the report states, while recognizing there will be some one-time cost impacts to achieve the savings.
Mayor Dave Formosa told the Peak that the review is a good document and council is happy with it. “It’s very clear that we have to create a new culture of living within our means,” he said.
The report recommends creating a change management team, consisting of the chief administrative officer, city clerk, director of finance and manager of human resources, to steward the process of change.
Formosa said council needs to put together a committee, to go through the report in detail, using the resources the city has, such as management, union and the public, to help implement the report. “Their job will be to tackle implementation. We’re hoping to work with management and the union through this process and let them use their creative ideas, juices and thoughts.”
Formosa said he doesn’t want to start laying staff off or firing employees. “Maybe we can reorganize ourselves and get these savings,” he said. “I’m fighting hard to help save jobs at Catalyst and in the forest industry. I want to help save jobs within our own organization. I want those people earning pay cheques and spending and paying taxes as well.”
There was debate about whether the document was what council had asked for, since its focus was on the organizational structure of the city. “We thought there would be more core service review,” Formosa said. “The author found enough meat and enough time for $70,000 looking at our organization. What it tells me and others is that we might need part two.”
The provincial government provided the funds for the service review. Formosa has written a letter to the provincial government asking that when the new office of the auditor general for local government is operational, it use the city as a pilot and do a service review. “We believe that’s what the office is supposed to do.”
Councillors received an initial report in October 2011, which contained detailed information about individuals. That document was revised to exclude personal information and a version was created for the public. Formosa said other than the removal of personal information, the two documents are the same.
Council then gave the public document to management and the union, for accuracy purposes. “Frankly, after management looked at it, there wasn’t one change,” he said. “Same with the union. No changes.”
Council passed two motions about the service review at a special council meeting on March 8. The first motion was to receive and release the document to the public.
The second motion was to establish a select committee for the purpose of making recommendations to council on the implementation of the review. The committee will consist of: Formosa, councillors Maggie Hathaway, Myrna Leishman and Chris McNaughton, the chief administrative officer, city clerk, director of financial services, manager of human resources, three members of CUPE (Canadian Union of Public Employees), one member of the International Association of Fire Fighters and three members of the public to be appointed by council.
Before the committee convenes, council will establish terms of reference for it.
To read the city’s press release about the review, click here.
To read the Helios report, click here.
