Year-end audit showed municipality with near-seven-figure surplus, cash and reserves increasing, debt decreasing—then came COVID

RELATED: Editorial—Back in the black, and loving it

Pelham CAO David Cribbs’ call to the Voice last week was a pleasant but unexpected surprise in the midst of the pandemic.

His message? The Town’s Corporate Services Department had reported a net tax-supported operating surplus for the year ended December 31, 2019 of $962,338.

Revenues exceeded budget by $413,511, which is approximately 2.5% of the 2019 budgeted tax-supported revenues. Tax-supported expenditures were approximately $575,061, or 3.4% lower than budgeted.

The Building Department is supported by building permits, and its operations had a surplus of $253,205. Revenues exceeded budget by $212,760, or 42.5%.

“Finishing 2019 a million bucks in the black is a major accomplishment,” said Cribbs.

“This was done in the context of the new financial policies approved by council on debt, reserves and use of cash.”

“It’s proof positive that a primary objective of both the council and the community has been achieved. If it weren’t for the coronavirus, I would literally order a cake and balloons— this is party-worthy.”

Cribbs directed the spotlight to staff.

“Town Treasurer Teresa Quinlin and Deputy Treasurer Charlotte Tunikaitis are the ones who took the lead in these undertakings, and each has performed huge amounts of work. These staff, both professional accountants, have the capacity to make arcane accounting issues accessible to a wider audience.”

Given her opportunity to do so, Quinlin launched right in.

“It has been a very good year for the Town to end up in a large positive surplus. This is a result of the hard work done by staff and also the volunteers on our committees. It has been very effective having experts on our committees providing input. It’s a great collaboration.”

She explained that the reason there is an operating budget surplus of $962,338 and a consolidated financial statement surplus of $6,098,731, is that the budget is prepared on a “modified cash basis,” to ensure the Town collects enough tax revenue to cover its cash needs.

The budget is presented in the financial statements in accordance with Public Sector Accounting Standards, and there is a note in the financial statements that reconciles the approved budget to the budget presentation in the statements. In addition, there are some items which are not included in the budget, including amortization and the gain on disposal of land and assets held for sale.


On an annual basis, the Town prepares a balanced budget, so that revenues and expenses equal each other. Where were the actual savings last year? Supplemental tax revenue exceeded the budget by $156,800—a bit of extra incoming cash as growth exceeded expectations. As well, the Town took out a debenture of $4 million (a loan certificate, backed by credit rather than specified assets), and repayments were lower than forecast by $115,000.

Two other notable savings included $42,000 through conversion of some streetlights to LEDs, and $69,000 in salary/benefit savings due to vacancies and other organizational changes.

Transit revenues were slightly below budget, although ridership in 2019 was approximately 17% higher than the prior year.

There were significant savings achieved at the community centre. The biggest economies were in utilities, where hydro billings alone were almost $279,000 lower than anticipated.

“This was a result of the research and work done by our Utility Sustainability Committee,” said Quinlin. “They really focused on our hydro rates, and all the infrastructure at the community centre. Plus, the MCC revenues were over $170,000 higher than budgeted, which speaks to the huge usage of the facility. It has been absolutely incredible the number of people and tournaments that actually went through the building.”

Quinlin asserted that there are wait-lists for both youth and seniors programs. She noted that the MCC is a designated Seniors’ Hub. Federal and provincial grants also contributed to the increase in revenues at the centre.

Three new committees were established by council to address MCC operations—User Group, Hospitality, and Utility Sustainability.

“They all worked to make the centre more profitable,” said Quinlin. “I’ve got to say that it’s almost unheard of for a facility of that size to actually cut costs and increase revenue in its first year of operation. It is really something to celebrate.”

Additional savings will be achieved in the near future, Quinlin said, when the arenas get a refrigeration upgrade, converting to a system that uses cold water rather than hot to maintain the ice.

“The refit will pay for itself in the first year of operation, and thereafter we’ll have continuous savings.”

A recent Ontario Recreation Facilities Association audit heaped praise on the MCC.

“They told us, with regard to facilities, this building is one of the nicest facilities in the province,” said Quinlin.

She also wanted to highlight two aspects that have been of ongoing taxpayer concern—cash balances and debt balances.

By the end of December, the Town’s cash balance has increased by some 500 percent—from $1.3 million in 2018 to $7.8 million in 2019.

“It’s been a priority for the Town to replenish its cash balances. It’s wonderful to be able to transfer $862,000 of the surplus to the reserves, and allocate $133,800 towards COVID-19 contingency.”

Quinlin said that new policies, including a reserve and reserve fund policy, and a capital financing and debt management policy, will help guide staff and council to maintain adequate reserves and reserve funds to replace and rehabilitate major capital assets, and also to provide for new capital assets that have been identified in the long-term capital plan.

Other highlights? A new Finance and Audit Committee was established in 2019, which includes two non-staff chartered professional accountants (CPAs) in its membership. As well, council approved two budgets in 2019, one for that year, and the budget for 2020.

Quinlin was perhaps most pleased that the Town’s net debt has decreased from some $41 million to under $33 million.

“We’re moving in the right direction, and have established really good policies to help guide council and staff on reserve funds and debt reduction,” she said.

Sadly, it’s not all good news. COVID-19 will play a big role in 2020 revenues, as presented in a May 19 report to council. If restrictions are still in place by June 30, the negative impact on the budget will approach $409,000. Should Pelham be in lockdown until the end of December, the anticipated loss will be close to $850,000.

Quinlin said that all the municipalities in Niagara Region are working together with the Region to lobby higher levels of government for supplementary funding.

In a statement released on Friday, May 22, the Town identified the most significant drivers of the projected deficit as:

Lost recreation revenues from the Meridian Community Centre, which are partially offset by program/service delivery cost savings, including the temporary layoff of staff.

Lost development revenues.

Lost tax and water interest and penalty revenues.

Lost park operation revenues.

The Town is projecting that operating budgets will be negatively impacted by COVID-19 regardless of how long the situation lasts throughout the year.

“Given the amount of uncertainty around timelines and availability of funding sources, said the CAO, “it is difficult at this time to quantify the full impact of individual items as well as the overall impact on the Town. As the COVID-19 pandemic impacts are quite fluid, staff will continue to monitor its financial impacts and report back to council on a regular basis.”


SIDEBAR: Deep into the weeds with Pelham’s 2019 financial statements