Council turns to rainy day money in budget decision

JOHN MOORHOUSE Wednesday, April 22, 2009

Penticton city council adopted its 2009 budget Monday night, but nobody is breaking out the champagne. Instead, councillors see the current economic downturn as time to break into the city‘s “rainy day” funds. The budget decision, which confirms the previously announced 2.37 per cent tax increase, comes after almost four months of deliberations and consultation with the public and city staff. As part of the budget cuts, 11 city workers were laid off. Penticton residents also face a 15 per cent increase in water rates (up $55 for an average residential consumer), sewer rates will climb by 10 per cent, and electrical rates are up 4.6 per cent. City treasurer Doug Leahy warned that funding sources must be found next year for $1.8 million included in this year‘s budget from one-time sources, including $500,000 from the deferral of construction of a new Carmi electrical substation. “For the 2010 budget, these funds must be found within the budget or taxes will have to be raised accordingly. This equates to an approximate eight per cent tax increase,” Leahy stated in a report to council.

The budget includes the transfer of $640,000 from the city‘s accumulated surplus account. Leahy said the surplus is projected to drop to about $995,000 by the end of 2009 -- well below the surplus and reserve policy which calls for a minimum balance of 10 per cent of total operating expenses, roughly equal to $1.8 million. “Having a surplus set at the recommended minimum level provides the city greater flexibility to finance expenditures,” he said. “At $995,000 our flexibility is reduced.” However, Coun. John Vassilaki said the city will be able to utilize its casino and electrical surplus funds in 2010, much of which had been allocated to the South Okanagan Events Centre. “I hope that this approximate $3 million will somewhat alleviate the tax burden on Penticton in the future,” he said. Mayor Dan Ashton acknowledged it has been a difficult budget process during a challenging economic time. He said the city‘s general operating budget has increased an average of 8.2 per cent a year since 2002. However, he said non-tax revenues have dried up substantially. “How do you get that money back? Well, you either pull your horns in… or we go out to the people (for more taxes),” he said. Ashton doubted council wants to increase taxes and likened contingency funds to bank savings accounts. “There‘s a time and a need sometimes when you have to dip into it. That‘s what they‘re there for,” he said. “We‘ve been saving for rainy days and it‘s been shown that this is one of the rainiest days this city, province, country and the world has had in an awful long time.” Council voted 5-1 in favour of adopting the budget. Coun. Garry Litke was the only council member opposed.