Councillor Wayne Olson sounds clarion call on replenishing reserves, reining-in spending
As a retired chartered accountant, Ward 1 Councillor Wayne Olson knows his way around financial documents. And the ones he has reviewed recently, regarding Pelham’s fiscal projections, have him plenty worried.
On Monday November 9, Olson participated in a Special Committee of the Whole meeting via video conference, in which the 2021 Capital Budget was presented for discussion. The report was prepared by Treasurer and Corporate Services Director Teresa Quinlin, and Public Works Director Jason Marr. It included capital requests for over $9 million, of which some $6.3 million was earmarked for road reconstruction. Potentially offsetting this amount were $4.6 million in grant requests.
Olson spoke with the Voice about what he characterized as a troubling deterioration of the Town’s finances over the past decade, attributed, in part, to “some uncoordinated and undisciplined spending.”
Most Pelhamites recognize that the $36 million-plus Meridian Community Centre (MCC) has been the millstone of recent municipal debt. The Town currently owes some $33.4 million in debentures (loans given on unsecured credit), although has no plans to add to this figure.
“Right now, we are essentially living paycheque to paycheque,” said Olson. “Everything’s coming out of the tax levy. Nothing’s being paid out of the reserves, because the reserves are pretty much depleted. Our level of risk is very high.”
Pelham reserves currently sit at around $3.6 million dollars.
Olson’s view, which he said is shared by most of his fellow councillors, is that there needs to be a sound business case for all budget items.
An example is tree trimming. Subcontractors have been hired in the past to handle most of that task in Pelham. But in the draft budget for 2021, there is $190,000 requested for an aerial truck with a hydraulic lift to trim trees. A frivolous purchase, perhaps? Not according to staffers at Town Hall, who crunched the numbers and figure that the purchase will save taxpayers $70,000 per year.
“The business case for that purchase came to council, and some hard questions were asked,” said Olson. “Will current Public Works staffers be handling this job, or will a new employee need to be hired? Will they receive the necessary training and certification? What are the liabilities, the insurance necessities? All of this had to be considered. And the business case was successfully made for the aerial lift forestry truck.”
In my opinion, our Fire Chief has done a great job, and we just won a ‘gold’ award for our communications
A less supportable expense, proposed by Councillor Lisa Haun, is $20,000 for an emergency management review. (Haun is a freelance emergency management consultant.) Olson questions whether the taxpayer would get good value from the expenditure.
“In my opinion, our Fire Chief has done a great job, and we just won a ‘gold’ award for our communications.”
Assets which Olson believes should be reviewed include the Niagara Central Dorothy Rungeling Airport, and the Niagara Peninsula Energy Incorporated (NPEI) hydro company, both of which Pelham shares ownership or oversight with neighbouring municipalities.
The net book value of NPEI is about $5.4 million dollars for the Pelham shares, said Olson, but they could potentially fetch six to eight million. As far as the airport is concerned, Pelham owns a minority share of about 18%, while Welland owns 50%, and Wainfleet and Port Colborne also have a share. Olson estimates that the carrying costs are $20,000 to $40,000 a year for Pelham, with only a handful of people benefiting from the use of the airport.
“There’s really no practical need for that airport at all,” said Olson.
He conceded that the decision to sell may be financially untenable if long-term leases need to be broken, and penalties are invoked. But he feels that the airport bleeds tens of thousands of dollars annually from Pelham coffers, for very little return.
Olson’s concern for Pelham’s finances should not be taken as an accusation of incompetence or dereliction of duty on the part of Town staffers, he said, asserting that he has been impressed by the calibre and commitment of staff since he joined council.
“What I’m arguing is that we’re a slave to the debt right now, and that determines the entire agenda. We’ve got to make sure these costs are not baked into future budgets, because then they become structural, and it’s very hard to get rid of them.”
My basic message is that we should be taking advantage of liquidating some assets to get the reserves built back up
Olson said that measures taken so far to build up the reserves have basically been containment efforts.
“We don’t have a recovery plan yet,” he said. “My basic message is that we should be taking advantage of liquidating some assets to get the reserves built back up.”
What really alarms Olson are the implications of spending a few years down the road.
Reading from page 52 of the capital budget document, Olson quoted, “In order to complete the capital projects in the capital forecast within the specified years, and meet the phased-in targets while keeping debt levels as outlined in the debt section, the Town would need to increase the tax levy by approximately $1 million per year from 2022-2025.”
What this means, he said, is that there is potential for several years of 12% tax increases to homeowners —4% to 6% in normal increases, plus another 6% in what would effectively be special levies.
“I try and look at the positive things. There were some really good ideas that came forward from the capital budget meeting…Public Works Director Jason Marr in particular had some innovative ideas for culverts and water mains which I think should be investigated…we should be able to save some money there.”
Pelham CAO David Cribbs said that the budget meeting was very much in line with his experiences from other municipalities.
“Staff came up with a draft budget that accurately reflects what we understand the priorities to be, and requested the amount of money we think is necessary to run the corporation and to meet the community needs,” he said.
The capital budget includes approximately $840,000 for two splash pads, and $145,000 for playing field lights at the baseball diamond at Centennial Park. Cribbs said that operating costs for splash pads are a lot lower than for swimming pools, and with young families they often have a higher utilization rate. And there has been significant local support for the playing field lighting.
(It should be noted that the splash pads are dependent on successful grant applications, which would defray part of their cost.)
Pelham does not have an asset management plan in place yet, but Cribbs said that one should be delivered by July of next year.
“Until that’s in place, these are all sort of educated guesses. We know it’s a big number, but the accuracy should increase dramatically when we have a populated asset management plan.”
Cribbs admits that Pelham is carrying more debt than any of the 12 Niagara sub-municipalities.
“It wasn’t true five years ago,” he said, “and is directly related to the MCC. So it’s not that Pelham was historically challenged or undertaxed…it’s the result of a single, very substantial, asset. And to be fair, I can’t point to one of Ontario’s 444 municipalities that doesn’t have a challenge with meeting its asset and infrastructure needs into the future.”
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