The City of Penticton’s 2011 budget is almost complete and it might result in a minimal tax cut.
Nine weeks after beginning the at times arduous process, Penticton council completed its efforts to eliminate the municipality’s burgeoning $868,000 budgetary shortfall Monday afternoon.
With the final fiscal decisions still to be calculated and accounted for, the city’s chief financial officer Doug Leahy was unable to give a exact final number on where the budget sits.
However, with over $1 million worth of adjustments already made to the budget in the first 10 deliberation meetings, some on council were already discussing the possibility of a tax break this year, likely less than one per cent.
The process followed last year’s elimination of 30 union and management positions at the city.
Throughout several civic programs, plans, budgets and services were either reduced significantly (many by 50 per cent) or eliminated altogether, while most of the city’s discretionary grants to various organizations were cut by five per cent.
All city department managers were instructed to hold the line or to find ways of reducing spending, as was Global Spectrum and the Penticton Public Library, which has been operating at 2009 levels.
As well, outside of the deliberations, fees and charges across the city were increased by five per cent to help boost revenues, including the conversion of City Hall’s free parking lots to paid ones.
The two biggest budgetary adjustments were made to the facilities operations budget, which was reduced by $200,000, and to transfers made to the equipment replacement reserve, reduced by $300,000.
According to Leahy, the reduction of the transfer to the ERR will result in the deferring of the purchase of equipment and vehicles for a longer period time, in particular the replacement of a 20-year-old fire truck which will require recertification.
That decision might prove to be of the pound-foolish variety, as according to Fire Chief Wayne Williams, the truck is becoming difficult to service due to parts not being readily available.
The issue is one Leahy suspects the city will continue to face with every old vehicle or piece of equipment it defers replacing.
“It is a calculated strategy,” he said. “But at some point the cost of maintenance to keep the vehicle will be more than actually replacing it.”
Leahy said by not contributing adequately to the ERR now, the city risks depleting the reserve to potentially insufficient levels down the line.
“Currently, the value of our fleet and our equipment is about just under $12 million,” he said. So, for example, if each item is depreciated on an overall average of 10 years, Leahy reasoned, then the city should be making an annual $1.2 million contribution to the equipment replacement reserve. With the $300,000 reduction, the 2011 contribution will be $550,000.
“I’m still projecting that in five years we are going basically from a $2.9 million reserve now, down to about $1.2 million,” Leahy said.
Moving forward, council still has to deal with the matter of negotiating a new contract with the city’s CUPE workers.
As the budget currently includes no increases for labour costs, the city says it wants zero wage increases across the board, plus wage decreases for new employees at certain positions. The union worries that some old employees might end up becoming new ones, thus losing their seniority and wages.
As an “alternative option” for labour at the Penticton Community Centre, council has taken steps to potentially privatize operations at the facility, estimating the city could save $400,000 a year by do so. That move prompted a strike vote by CUPE members.