Alarm bells ringing on City of Penticton finances

City of Penticton appeals $1.89 million retroactive pay to firefighters.

Mayor Andrew Jakubeit admits he is unsure how the $1.89 million in retroactive pay already distributed to firefighters would be returned if an arbitrator sides with the City of Penticton.

“I’m not sure,” he said, adding that maybe it is more about putting weight on the local conditions to what the new rates would be in negotiations. “If the arbitration was overturned and how that gets applied, I guess that is a new problem to worry about and we would cross that bridge when we got there I guess.”

On again, off again negotiations since 2009 came down to a final decision by an arbitrator in July that awarded Penticton firefighters about a 16 per cent wage increase, siding that parity in wage increases elsewhere in the province for firefighters should apply for the Penticton fire department.

The City of Penticton council endorsed the decision to file an appeal at an in camera meeting on Oct. 5. That appeal was filed to the BC Supreme Court on Oct. 16 stating the arbitrator’s decision was an “unreasonable award.”

Just 14 days later, on Oct. 29, the Western News interviewed the mayor asking questions about the retroactive payments. During the interview Jakubeit was asked if the arbitration deal and contract was done and implemented with nothing more to do on it, and the mayor responded it was. The Western News was also told at the time by Gillian Kenny, manager of human resources for the city, that “we just finished our last (retroactive) payment,” which came from a reserve fund set up over the years of negotiations.

On Thursday, when Jakubeit was questioned on why he did not come forward with the information that the city was appealing the decision, he claimed not to have intended to be deliberately misleading., saying “perhaps I misunderstood the question” and apologized if he “wasn’t as clear” or didn’t repeat the question back so he understood.

When asked why the city is pursuing the appeal in light of other higher profile lawsuits they are involved in, or have lost, Jakubeit said they are looking to relieve cost pressures in the future.

“I think the under-riding factor, and our concern is again the sustainability of that award if every year we are at three per cent or higher, that impacts our operating budget significantly,” he said.

According to court documents filed on Oct. 16, the city cited poor financial circumstances and the wage increases negotiated with other city employees as factors dismissed by the arbitrator.

Evidence put before the arbitrator included the economic situation of the city, and that Penticton’s long term debt doubled in 2008 as did the financing of it. In 2010 it was 300 per cent higher than average long-term debt levels of comparative cities.

The court documents state a portion of the debt stemmed from the construction and operation of the South Okanagan Events Centre and its ongoing operation costs that have been higher than anticipated.

The appeal also states that “much of what the city has accomplished is threatened by its deteriorating financial health.” Penticton’s operating costs are 10 to 95 per cent higher than peer municipalities. While long term debt has grown by 600 per cent, the population has only increased one to two per cent per year.

“Penticton is facing a long-term financial challenge. While its underlying revenue streams are stable and strong, much of the long-term debt will require 10 to 20 years to retire. Therefore the challenge is to control and restrain spending, focus on debt reduction and ultimately free city revenue from the long-term debt burden.”

Despite a decline in property values, Penticton has been forced to increase the burden of tax significantly. From 1999 to 2008 Penticton residents saw a 41.2 per cent increase in tax rates. The documents state the city reduced the municipal tax rate by .05 per cent in 2011 and no tax increases in 2012 and 2013, followed by small increases in the two following years.

When asked again if the decision was overturned what would happen to the retroactive pay, Jakubeit did offer a potential outcome.

“If the BC Supreme Court in doing the reviews say the arbitrator improperly applied elements of the legislation and it shouldn’t have been three per cent it should be two per cent, or whatever that number is, then potentially there would be a clawback over the course of the year,” he said. “Obviously with current members its a lot easier than with someone who retired a year ago. Those logistics are something the court or HR would figure out.”

According to Vancouver lawyer David Sutherland, the appeal after the award has been paid out is “unusual.” He said rather than an appeal, the employer would typically seek a stay of the award from the arbitrator, the Labour Relations Board or the court.

Speaking on behalf of the firefighters union local 1399, vice president Jared Holmes said they are restricted at this point on what they can say because it is still before the courts.

“We are staying positive about it and we do remain respectful of the process and our focus is on the relationships in the future,” said Holmes. “We are confident we will still move forward with good relations with the city working towards a new contract.”

-With files from Steve Kidd

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