City of Fernie councillors will soon be deliberating on how to correct what was described as ‘long-standing issues’ with revenues, expenses, book-keeping and asset management when it comes to the city budget.
In a presentation to special meeting of council on Tuesday Mar. 16, financial contractor Linda Tynan estimated a $682,803 deficit in the preliminary 2021 budget, based on a ‘status quo’ budget that would maintain services and partnerships at the same levels as previous years.
The city has been undertaking a deep-dive, line-by-line assessment of it’s yearly budget, expenditures and revenues, and has uncovered systematic issues across the organization that have been compounding year-on-year due to incomplete reporting.
Tynan said that many issues with city finances were the result of long-standing issues that had not been caused in the last year, and recommended that in 2021 the city would need to focus on fundamentals in repairing those issues while working the city back from an operational deficit as a result of those practices. She said it was not possible to repair all the issues in the 2021 financial year, and the project would require multiple budgets worth of work.
Some issues that needed to be addressed were updating policies and enforcing financial reporting, as there were gaps in city financial records going back years, making it hard for elected officials and city managers to make informed decisions.
Notably, Tynan said that city had been operating in deficit for at least the past three years due to shortfalls in budgeting being covered by transferring funds from reserves, which compounded year-on-year as the tax level was not sufficient in keeping up with increasing costs in services and maintenance.
Additionally, shortfalls in revenues were made up of rising contractual obligations with third party providers (like the RCMP), and missing fundamentals in internal financial processes.
She recommended that going forward through 2021, the city would have to ‘stay the course’ and focus on fundamental core services and efforts to reign in the budget while considering any future projects.
With the $682,803 deficit based on a ‘status quo’ budget that maintains services as before, Tynan listed some ways to help being the city into line with the provincial requirement of a balanced budget.
Areas to ponder were reducing service levels – though Tynan said that this was a dangerous option given cuts in services rarely translated to those costs becoming savings, as other expenses and issues could arise from shortages in staff.
Another option was decreasing expenditures, but Tynan said that this was harder to tinker with as many contractual expenses couldn’t be changed. There were only some minor adjustments available under core municipal expenses.
A third area option was to consider transferring fewer funds into reserves, but given reserves are used to fund infrastructure renewal and many city facilities were aging, this could be effectively kicking the can down the road.
A fourth option was a review of municipal services – including – but not only – partnership agreements and grant funds for groups that operate in town.
The 2021 budget as proposed includes almost $450,000 in operating grants for partnership agreements – not including the Fernie and District Historical Society for the operation of the Museum, which had its operating grant cancelled last year due to financial mis-management. In previous years, the operating grant for the Museum has hovered around $53,000. The agreement is yet to be re-instated, but is an item of discussion.
Groups that receive funding through the city are the Chamber of Commerce to operate the Visitor Information Centre ($112,000 operating grant), the Senior Citizens Club of Fernie and District ($30,000 operating grant), the Fernie Heritage Library ($258,000 operating grant), and the Fernie and District Arts Council to operate the Arts Station ($45,372 operating grant).
While Tynan said the services operated by partner groups in the city were valuable, she said it was inevitable that if the city didn’t want to cut services and there was only so much the city could realistically raise taxes – “when push comes to shove” they would likely have a look at those agreements.
Finally, another option was a review of the annual taxation rate increase. Tynan said the 2020 tax rate of zero per cent was ‘unsustainable’. The zero per cent tax increase was approved for 2020 on the basis of the then-new calamity that is the ongoing COVID-19 pandemic.
Tynan said she believed the city would be able to operate in 2021 without a deficit based on the options available for review. When asked if the City of Fernie was an over-spender in regards to services compared to other municipalities, Tynan said that she didn’t believe the city was over-staffed or beset by ‘intentional inefficiencies’, but added that she didn’t believe that by managing finances better or demanding more from the organization there were many expenses that could be recovered
“Cost savings that we could perhaps see are just going to be better efficiencies, and not necessarily labour-related,” she said, adding the proviso that hers were just preliminary recommendations, and there was far more scope for deeper discussion based on more information and community feedback.
The city will consider the particulars around a proposed tax rate for 2021 at a Thursday Mar. 18 meeting. Community consultation will occur in coming weeks on the preliminary budget.
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