Penticton singled out for municipal spending

For spending in 2009 alone, Penticton was ranked 22nd worst, and the highest among municipalities in its population bracket

  • Nov. 15, 2011 8:00 a.m.

Penticton may have been pegged as a spendthrift municipality, but the mayor is defending the city as being punished for sins of the past.

The Canadian Federation of Independent Business issued a report Monday called B.C. Municipal Spending Watch, which singles out the Peach City for its 2009 operating expenditures being the highest per-capita spending among municipalities of a similar size.

The fourth-annual report casts a critical eye on municipal spending throughout the province, positing that operating spending increases of 46 per cent should match the population growth, posted at 12 per cent.

“Business owners and residents have reasons to be concerned, because most municipal government revenue originates from taxes,” the report states.

According to the document, Penticton ranked 32nd worst among B.C.’s 153 municipalities for spending between 2000 and 2009. This was factored on a five per cent population increase, compared to a 66 per cent jump in real operating spending. Per capita, that works out to be 59 per cent — behind only Langford and Langley Township for municipalities with populations of 25,000 or more.

For spending in 2009 alone, Penticton was ranked 22nd worst, and the highest among municipalities in its population bracket. That year, operating spending per capita was listed as $2,326.

Although it was listed 22nd worst, the city was singled out as a result of “equal weighting” of the nine years of spending and how much was spent in 2009. “This is different from previous reports that mainly considered operating spending growth,” the report noted. The methodology behind the weighting is not explained.

Had Penticton maintained operating spending to inflationary levels and population growth since 2009, the report suggests, a family of four could have saved a cumulative $11,339.

The report offers two recommendations: that cities limit spending increases to the rate of population and inflation growth by undertaking a core services review, and support the creation of an independent municipal auditor general.

Mayor Dan Ashton said the city has already done both.

“What we did was dive into the operational and make sure the changes were taking place,” he said.  “We had to right size the city and no one knew that more than we did.”

Ashton said the report doesn’t factor in neither the gaming revenue the city receives to pay for the South Okanagan Events Centre costs, nor how municipalities are facing a deadline to upgrade aging infrastructure about to reach the end of its lifespan. Water and sewer treatment upgrades were big expenses, but necessary, he said.

“This is stuff that keeps us ahead of the curve. You keep hearing that infrastructure is falling down in a lot of communities. In my opinion, Penticton has been proactive in trying to take the step ahead,” he said.

Julius Bloomfield, a mayoral candidate challenging Ashton, suggested municipalities should be steering clear of property values as the baseline upon which taxes are set, choosing instead the Consumer Price Index.

In a booming real estate market, he explained, a city can easily generate more revenue and residents and businesses are less likely to be concerned about a slight rise in taxes — compared with the point at which real estate values decline.

“In the last decade, taxes have gone up with real estate values, because assessments are based on real estate values,” he said, noting it should be tied to inflation, not market fluctuations. “When the tide turns, and it always does, and real estate values go down, then it becomes extremely difficult for a municipality to reduce the taxes by the same amount the market comes down. In fact, it’s impossible, because they’ve committed to spending all their income.

“It would be prudent for municipalities to cap their tax increases to the CPI rather than real estate values.”

He said councils couldn’t foresee the dynamics of the market because “people feel good” when their real-estate investments go up — but that one area of investment may not be indicative of the sustainability of the market.

“If we all spend in relation to our house values, we end up in the same mess as the United States has been,” Bloomfield said. “Our spending has to be in the economic realities of the market we live in, rather than in the real estate values, which may not follow the economic realities of the jobs, economy, spending and Consumer Price Index.”

In comparison, Osoyoos was ranked 28th worst in the province, posting $1,442 spent per resident in 2009. Summerland was ranked 33rd worst with $1,786 per capita spent. Oliver placed 107th in the province with $1,065 per capita expenditures, while Princeton earned 113th place with $1,127 per capita. Kelowna landed 54th place, with per-capita spending of $1,552.

Penticton didn’t rank high among the CFIB’s list of “free spenders,” however. That dubious distinction went to Lytton with a $4,826 per-capita expenditure level.

Ashton said the city has also already written Premier Christy Clark to invite the incoming municipal auditor general to review Penticton’s books.

Already a step ahead of the report’s recommendations, Ashton said the timing of the report is questionable the week of an election.

“I can’t help wonder why this report is coming out now,” he said, adding meting out political punishment to Penticton is uncalled for at this point. “Spank people who deserve it, not those who are trying to make it better.”