“The county is coming to the City for 7.7 per cent more than last year, and that’s a substantial amount of funding. When I asked questions about that, the primary cause is an increase in long-term-care costs.” – Mayor Jeff Lehman
It began with a question about how a possible $65-million COVID-related municipal revenue loss could turn into a $6.3-million surplus by the end of September, and then veered into musings as to whether a possible year-end surplus might be used to offset future property tax increases, before settling into a caution about not counting one’s chickens before they hatch.
Welcome to the seemingly complex world of planning for the business of Barrie.
The occasion was a discussion at general committee last week about the status of the City’s business plan, as of Sept. 30; the director of finance and treasurer, Craig Millar, is required to produce quarterly update memos, and an end-of-year report that compares actual results to the budget passed at the beginning of the year.
As of Sept. 30, the City’s revenues were $12.5 million lower than what had been expected in the 2020 pre-COVID budget, largely the result of declines due to COVID-19 measures, like cancelled City services. That loss, however, was offset by $18.8 million in deferred spending, leaving a tax-supported surplus, as of the 30th, of the aforementioned $6.3 million.
The possibility of a year-end surplus got some members of committee wondering if that money could be used to offset any increase in property taxes that may be coming in 2021. Millar responded by explaining that in all likelihood, the surplus as of Sept. 30 will turn into a deficit of $2 million, or perhaps a break-even situation, by the end of the year, once all the reckoning is done.
“While it (was) $6.3 million at the end of September, the number is coming down. For example, we know we are going to have about a $1-million parking deficit, (and) we know the county is going to require anywhere from $600,000 to $1 million more from the City this year to pay our (additional) costs of long-term care,” the director said.
“As we get towards the end of the year, I anticipate, as the report suggests, we will be closer to breaking even or in a deficit position.”
Projects that were put on hold because of COVID-19 are coming back online, and that will further cut into the current surplus, he said, adding that salary reductions – people laid off – and reduced services contributed significantly to the overall impact.
Millar was asked about the earlier projected $65-million loss, and how that transformed into the $6.3-million surplus, or a possible break-even scenario by the end of the year. It mostly came down to a case of what we knew then, and what we know now. The $65 million was not a deficit, rather it was a worst-case scenario as to what could happen to City revenues.
“At the time COVID hit way back in March, we didn’t know who was going to pay their property taxes, who was going to pay their wastewater bills, so at that time … experts were suggesting that we could see up to 25 per cent of people and businesses not paying,” he said.
“That $65 million was a forecasted receivable that we were seeing; by the end of the year if (25) per cent of folks didn’t pay, we could be at that level. That was before any stimulus money was announced, so fortunately it hasn’t materialized. In fact, we have seen a pretty robust return on people paying their taxes on time. So, from a cashflow standpoint, that was the lens we were looking (through).”
The City also received $9.1 million from phase one of the Safe Restart program; second phase funding may be accessible if COVID-19 operating costs and pressures exceed the first allocation. The year-end break-even or $2-million deficit projections exclude the funds from Safe Restart.
“I anticipate that once we allocate those funds to COVID-related costs and revenues, that by the end of the year we will have some form of a surplus. It will be less than ($6.3) million, but it will be offset by some of the … money that we got,” said Millar.
Major Jeff Lehman cautioned committee that additional costs coming the City’s way, such as a long-term-care bill from the county (which manages such services for the region) will cut into any surplus that might arise from including the Safe Restart funding.
“The county is coming to the City for 7.7 per cent more than last year, and that’s a substantial amount of funding. When I asked questions about that, the primary cause is an increase in long-term-care costs; I think all of us who have watched what has happened during COVID can understand why the county wants to spend more on staffing and long-term care,” he said.
“It’s a substantial bill for the City … when asked how the City could pay for this, they said Safe Restart funding.”
The mayor continued that he supports efforts to improve conditions in long-term-care homes, including “picking up a wage bill,” but said there is a cost to that.
“And if the province isn’t going to pay it, then the county and the City and the City of Orillia are going to pay it … maybe don’t count your chickens, because I think there is going to be a year-end reckoning and a 2021 for COVID that we don’t fully know yet.”