Do some NWT communities have a deficit problem?

After five NWT communities reported a budgetary deficit in the 2023-24 fiscal year, some leaders say they’re chronically underfunded from other levels of government.

If operating expenses exceed revenue generated over multiple years, a deficit can build up.

In Fort Simpson, the deficit accumulated over the past several years had reached $2.7 million as of December 2024, according to the Department of Municipal and Community Affairs or Maca.

The village’s mayor gave a different figure, $2.1 million, in a statement on the municipality’s website.

Mayor Les Wright said in his statement that to ensure the long-term financial stability of the village, council had approved a five-year deficit recovery plan that would have the municipality reduce its expenses by $389,000 annually.

“Regrettably, this has resulted in the implementation of broad cost-saving measures across municipal operations, including lay-offs,” the letter reads.

The village’s senior administrative officer referred Cabin Radio’s questions about the deficit recovery plan to the mayor. Wright did not make himself available.

Maca said the four other communities to have recently reported a deficit are Aklavik, Wrigley, Wekweètì and Fort Resolution.

Fort Resolution’s administrator, Tom Beaulieu, said the community will report a surplus in the 2024-25 fiscal year. Similarly, Wrigley’s Chief Jamie Moses said the community balanced its budget over the past fiscal year.

The NWT’s Cities, Towns and Village Act says communities that report a deficit at the end of one fiscal year must eliminate it by the end of the next. They cannot carry a deficit from year to year unless it is authorized by a debt management plan.

Maca, through a spokesperson, said the department regularly discusses the financial positions of all 32 communities in the NWT and offers assistance with budgeting, strategic planning and cost analysis to communities in a deficit position.

“Recent emergency events such as floods and wildfires and the associated recovery costs have affected many community governments, including Fort Simpson,” the spokesperson stated.

Giving Fort Simpson ‘basic amenities’

Sean Whelly was mayor of Fort Simpson for 12 years before he lost last fall’s election to former councillor Wright.

Whelly said the village is carrying a deficit because it has long been underfunded by the territory.

In 2014, Whelly said, Maca brought community leaders together to discuss possible changes to the way the department funded communities across the territory. After several rounds of discussions, the group found communities were underfunded to the tune of $40 million annually.

According to Whelly, Fort Simpson was found to be the community with the highest annual shortfall – some $3 million. (Maca did not directly address Cabin Radio’s questions about the 2014 study.)

Since then, he said, Maca found more cash that meant some communities received a small extra sum each year. “But it wasn’t a huge amount,” he said, “and it barely kept up with inflation.”

Whelly acknowledgd Fort Simpson has invested in infrastructure like roads, a splash pad, a swimming pool and fitness centre alongside its efforts to recover from a flood.

“You can say Fort Simpson overbuilt, perhaps, but that’s not true,” he said.

“What we were doing was trying to give the people of Fort Simpson the basic amenities, which I think every Canadian citizen would want to have.”

Creative solutions in Fort Resolution

The territorial government placed Fort Resolution into public administration in June 2023 over what the GNWT said were “financial and operational challenges.”

Maca told Cabin Radio through a spokesperson there is no deficit threshold beyond which communities are placed into administration. That decision is taken on a case-by-case basis.

Fort Resolution administrator Beaulieu, sent in to help fix the situation, said the community’s deficit was the result of the hamlet trying to do too many projects, too quickly.

“There was a lot of work performed that should have been maybe spread out a little bit more,” said Beaulieu.

To reduce the deficit, he said work has gone into finding efficiencies and creative solutions without reducing services.

An example he cited was crushing local materials to make gravel instead of paying to have it trucked in from elsewhere.

Short of funding in Wekweètì and Wrigley

In Wekweètì, senior administrator Fred Behrens said increasing costs contributed to the community’s deficit.

“Maca tries to give us some extra money but then, at the same time, the expenses keep increasing,” said Behrens.

In 2023, he said, the annual cost of utilities was around $270,000. That ballooned to $330,000 the following year.

“That was a shock,” said Behrens. “We have a lot of heavy equipment and vehicles that, of course, need fuel.”

He said the community is receiving support from Maca to improve its financial standing.

“We’re doing a council orientation, and that is the start of the whole thing,” said Behrens. “We’ll continue working with Maca to go over everything and build up our plan to recover, go forward.”

He said council will have to work to reduce expenses, which could involve things like no longer employing students over the summer and cutting recreation programs.

“Hopefully we can continue on without really too much of an impact, because we’ll still do water and sewer and garbage delivery and pickup and all of our normal operations,” said Behrens.

“It’ll be just the little extra benefits that maybe we won’t be able to provide as much of – maybe not spend so much on carnivals, or Christmas and stuff like that.”

In Wrigley, a community of just over 100 people, Chief Moses said a lot of hard work was involved in eliminating the community’s deficit, which he said went back to 2018.

He said no capital projects have taken place in the community since then.

“We’re short of funding right across the board,” said Moses.

“We have no services whatsoever. We don’t even have a nurse here, we don’t even have RCMP, basic services like that they can’t even provide us with.”

A new funding model

In April, Maca began implementing a new model for distributing cash to communities called the Community Allocation Model.

“This model calculates a standard cost for each community government to deliver core programs and services such as safe drinking water, local roads, recreation, and public safety,” a Maca spokesperson said by email.

“These updates do not introduce any new funding for community governments. Maca’s funding is intended to support community governments in the delivery of core programs and services, not to cover all of a community government’s costs.

“It is a shared responsibility between all levels of government to fund sustainable community government services.”