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City will face financial deficit of up to $1.6 million this year

Timothy Schafer
By Timothy Schafer
April 28th, 2020

The city is facing up to a $1.6-million financial deficit this year as a result of the response to Covid-19, but those costs won’t be borne on the backs of Nelson taxpayers.

The city’s chief financial officer, Colin McClure, recently painted a financial picture of how the city will fare as it navigates the effects of the virus and attempts to alleviate its impact on Nelsonites.

He informed city council, at a special meeting on Thursday, April 23, that the municipality would be facing a revenue shortfall between $830,000 and $1.2 million, depending on “the length of time and the nature of the restrictions remaining in place.”

In addition, a tax increase for the year has been scrapped — a move that will increase the deficit to $400,000 in the city’s preliminary 2020 budget.

Both moves create a financial deficit of nearly $1.6 million this year, McClure said.

“It is very challenging to project our revenues with all the uncertainty on the duration and extent of restrictions,” he said in a press release.

The city is expected to draw down its reserves by as much as $800,000 to balance the 2020 budget.  

At the special meeting council adopted a 25-point Economic Stimulus and Financial Stability Plan, which states no property tax increases this year, a general city staff hiring freeze and no wage increases for 2020, including city council salary increases.

There will also be no fee increases for Nelson Hydro for 2020 and no increase in the Nelson Hydro dividend to the city this year.

“This financial plan is built on a most likely scenario and maintains the city’s financial capacity to respond to the impact of a longer pandemic shutdown and the resulting economic fallout,” McCure iterated.

Other highlights of the financial stability plan include:

  • the flexibility for the replacement of critical positions and hiring if there are grant-funded positions;
  • minimizing travel, training, legal fees and other discretionary costs;
  • negotiating with benefits carrier to reduce dental and extended health premiums by $40,000 per month;
  • an allowance of $100,000 for recovery and wildfire response activities; and
  • a request to the province to fund the operating shortfall for transit.

— Source: City of Nelson

The plan’s cost containment strategies will result in financial savings of a net $700,000 to $830,000 depending on the length and severity of the pandemic, McClure explained, noting that the plan was contingent on working with all city employee groups to achieve savings.

Outside of the Gray Building walls of City Hall, the city has mounted an economic stimulus program that works in conjunction with other government program, as well as regional district and Columbia Basin Trust programs. 

“Initial feedback from our Business Outreach Project has been well received and has identified where our community needs additional support,” said Mayor John Dooley in a press release.

“While we have limited financial capacity to directly support our community, we believe we have found some creative ways to help out and stimulate the economy going forward.”

In terms of the economic stimulus and community support aspects of the plan, staff is currently working on the mechanics of these strategies and will release to the public this week, noted the press release on the project.

Financial plan and taxation points

  1. The 2020-2024 Financial Plan will be amended to reduce revenues by $830,000, operating expenditures by $800,000 and utilizes $530,000 in reserve funding. A zero per cent property tax increase for 2020 will be incorporated in the financial plan.
  2. The financial plan will be increased to add an allowance of $100,000 for recovery and wildfire response and recovery.
  3. A hiring freeze for 2020 will be implemented, except for replacement for critical positions and grant funded positions.
  4. Salaries will be frozen for 2020, including the current council CPI increase will be rolled back to 2019 amount effective May 1, 2020; the freeze for union employees will be contingent on negotiations with the appropriate Union; existing union contractual increases will be honoured.
  5. The dividend to the city from Nelson Hydro for 2020 will be frozen at the 2019 amount.
  6. The Nelson Hydro rate increase for 2020 will remain frozen at the 2019 amount.
  7. Funding to reserves from taxation will be deferred where possible for 2020 unless this would have a significant negative impact on the city’s sustainability and resiliency in the future.
  8. Council will request that the provincial or federal governments provide funding to cover the shortfall in fare revenue and operations for transit services provided through BC Transit.
  9. Expenditures, where the majority of the economic benefit is external to the Greater Nelson area will be deferred for 2020 (e.g. equipment replacement), unless critical to the operations of the city.
  10. All organizations that receive grants from the city and/or lease city facilities will be asked to first access other funding support (grants) prior to requesting support from the City of Nelson.

— Source: City of Nelson

Categories: General

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