COVID-19 creates budgetary difficulties for City of Powell River

Pandemic results in loss of revenues

City of Powell River council wrestled with its financial plan in light of the COVID-19 pandemic.

At the March 26 city council meeting, chief financial officer (CFO) Adam Langenmaier reviewed the second draft of the 2020-2024 financial plan, which was introduced on February 27 but could not be completely reviewed because of a conflicting meeting time for some city councillors.

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Langenmaier said it is amazing how much has changed in one month since that meeting. He said he wanted to hear what council had to say.

Councillor Jim Palm said in light of the current situation, he was wondering how bad a shape the city’s finances are in.

Langenmaier said with regard to taxation, there could be changes in what the city collects. The biggest impact will be in fees and charges, such as fees for camping at Willingdon Beach campground, or at Powell River Recreation Complex, he added.

Langenmaier said that while those locations are closed, they are still incurring expenses.

“That’s where we might see some more challenges,” said Langenmaier. “We don’t have the revenue to match and offset those expenses.”

Palm asked if it was prudent for council to be considering a request on some kind of percentage cut across the board.

Langenmaier said he would like direction from council to look at options and scenarios where there are a lot of expenses the city might not be able to make this year because of what is going on.

“We need the information from our directors indicating this is something we won’t be able to get done because of what is happening,” said Langenmaier. “Let’s remove it from the budget then we can see, by matching or reducing expenses with an expectation of lower fees and charges, if we can get to a budget that is more representative of what we can actually get done, versus budgeting as if nothing has changed.”

Mayor Dave Formosa said he supports an across the board cut. He said the city has been raising taxes in recent years, but he remembers in the past where the city adjusted taxes, where taxes were kept to cost of living increases.

“We kept it there. As of late, we’ve crept up to five per cent,” said Formosa. “With COVID-19, we have to consider it will be here. As prudent business folks – this is a business with a social conscience, that’s what we run – we are not going to be receiving funds at the recreation complex, the south harbour and we’re not going to see numbers in the campsite this year.”

Formosa said he and the chief financial officer were told in a briefing by the medical health officer to be prepared for one to four months. He said he thinks that is based on China’s experience, where the government could order a lockdown and offenders would be arrested. Formosa said the duration could be even longer here.

“Our revenues are at risk,” said Formosa.

In addition, the city has to borrow $10 million for the liquid waste treatment plant.

“It’s a tough one,” added the mayor.

Councillor Rob Southcott said he has been trying to figure out what things would look like if the city doesn’t have the kind of revenues expected and added that it looks like the shortfall will be in the seven figures.

“It’s probably prudent, at least from a planning standpoint, to think in those terms,” said Southcott. “It makes me ask the question, what can we pull back on? Are there capital expenses we can pull back on in order to adjust for that? What can we cut back on without hurting people and what can we afford not to do in order to get through this crisis we are in?”

Langenmaier said the city does not have reserves to prop up the budget. He said it sounds like council wants some options.

Palm asked if in the budgeting process, each area had to be looked at, and have the city just hunker down for the next year or so.

Langenmaier said that is correct.

Councillor George Doubt said things are obviously going to change. He said he’s not a fan of looking at an entire city budget and saying let’s cut five per cent across the board because things that shouldn’t be cut could end up being cut.

“It needs a more careful view,” said Doubt. “In the long term, we have this committee that is looking at the finances of the city and that’s a lot of the work we are asking them to do. I would like Mr. Langenmaier to come back with any suggestions he might make on how to respond to decreases in revenue by decreasing expenditures, the next time we see a report. That obviously will take input from all of the city managers.”

Formosa said he thinks Langenmaier can do some fairly accurate guessing on fees and charges. Then, with the departmental directors, it will be a matter of what they don’t have to have, he added.

“I like the idea of the directors and CFO looking at it,” said Formosa.

Councillor Cindy Elliott said it is prudent to sort out what essential services are within city operations. She said the city could then sort out what it costs to run essential services.

“We’re not going to know how this is going to affect us until the pandemic restrictions are lifted, and then there’s the matter of everyone recovering from lack of activity,” said Elliott. “That could take quite a long time.”

Palm said as the mayor mentioned, council at one time attempted to base its tax increases on the cost of living.

“I know the public really appreciated that and people sitting around the council table really appreciated that,” said Palm. “What I’m worried about is our present ask of five per cent on the table, along with the cut in the flat tax, is going to hit people really hard because the landscape has changed. This town is different today than it was three weeks ago.

“For this year I think we have to do everything in our power to hold the line on any increases. When you are talking to the directors, I would really appreciate you working along that mindset that I don’t want to raise taxes five per cent. I want to hold the fort. Speaking on behalf of the public that has to pay the taxes, we ought to do everything in our power to hold the damage.”

Councillor Maggie Hathaway said the city provides services and most do not create revenue.

“We’re looking at severely cutting back services,” said Hathaway. “Along with that would come cutting back staff. We would have to be looking at laying off people. As a city, how much further ahead are we when people lose their jobs? I am concerned about that.”

Doubt said wants to see estimates of what kind of revenue losses might reasonably be expected and see if there are spending reductions that can be made to more or less balance it.

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