The City of Victoria has released its draft financial statements for 2011. My conclusions:
- Aside from property taxes, revenues are not keeping pace with expenditures.
- City debt is up $6.2 million, or 12%, from $50.9 million in 2010 to $57.1 million in 2011.
- Unrestricted City reserves are at unacceptable levels, according to comments by the City’s external auditor.
- City budgeting and actuals for individual sources of revenue and expenditures are showing significant inconsistency. The City is having a difficult time coming up with robust budgets for individual areas, resulting in having to shift huge sums of money to come close to overall budget figures. For example, general government expenses were 25% over budget, and revenues associated with penalties and interest were 57% over budget.
Most would agree the City’s financial position is not good. For two years in a row, during council budget discussions, the term “unsustainable” has been used. This year, the director of finance warned that in order to keep tax increases in a realistic range, some tough decisions will need to be made, starting no later than next year.
There are those on Council who would like to start dealing with the City’s financial challenges today. Councillor Lisa Helps should be congratulated for proposing to move to a three-year budgeting cycle. Unfortunately, most of the old guard on Council would prefer to put off the tough decisions for another year, as they have done for far too long.
Some on Council and in City administration want to focus on increasing revenues, by doing such things as selling off City properties, extending pay-parking hours and selling naming rights to City facilities. These are all short-term solutions to a long-term problem, and ultimately are counterproductive to preserving our City’s fabric. The only significant impact on City revenues will be turning around the continuing decline of Victoria’s economic engine, our downtown core. Unfortunately, this will take time and have little impact on the City’s bottom line in the short or immediate term.
The truth is, City expenditures need to be closely examined. Our City has been spending money it doesn’t have on luxuries it can’t afford, like its communications and sustainability departments, whose combined budgets account for almost $1.8 million — departments that other municipal governments of similar size do not have. If this trend continues, property owners will need to accept unprecedented increases in property taxes and/or essential city services and infrastructure will need to be sacrificed.
— Paul Brown
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