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.
Will we need to rename Crystal Gardens for cash?
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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I agree with a three-year horizon on budgets, but they cannot even get their annual budget correct, and from my view on how comparisons were made at the annual budget process … i.e. you could not readily compare actual with original budgets and tie down the effectiveness of the accuracy.
I recommend they apply a business application I used for many years: quarterly revisions to the annual budget showing, in effect, an annual latest forecast to the original budget, and reasons for any negative variance and action plans, if any, to bring over-costs or under-revenues to date back on target.
“Oh, but this will mean extra work and extra staff, so let’s not do it.” BS! With spreadsheets it is not a difficult task, but what is absolutely required is senior financial staff who understand EXACTLY what is going on in the organization, and through the city manager, push for corrective action, even if it means cutbacks on other costs.
You do not want to wait until March of the following year to discover you have had a sinkhole going on for 12 months.
This way you have a view on the annual results as an ongoing target and can be much more proactive. It needs a rethink of senior financial staff to spend more time on looking forward and let the underlings record the past.
In this mode they would be more involved in corrective interaction.
Until this type of (management) accounting is in use, I fear that three-year budgets would degenerate into a semi-useless number-crunching exercise accompanied by even more useless PowerPoint presentations expressing motherhood statements.
School District 61 covers Oak Bay, City of Victoria, View Royal, Esquimalt, and parts of Saanich. SD61 is 5th on the list of major employers in Greater Victoria listed in 2011 Victoria’s Vital Signs Provincial Government (12,226), VIHA, DND CFB Esquimalt,UVic (4,886), Thrifty Foods Inc (2,338), SD61 Greater Victoria 2,011). The City of Victoria is the 15th largest employer on this list (771). Even so, the city budget gets much more public scrutiny than the SD61 budget.