YK finances ‘solid’ as councillors evaluate Covid-19 options
The City of Yellowknife says a $6.7-million surplus will help the municipality respond to the Covid-19 crisis – whether that’s offsetting lost revenue or reducing taxes and fees.
The surplus exists because City Hall had some unexpected sources of income last year and didn’t spend as much as planned. In effect, the extra money is now a form of pandemic cushion to help soften the economic impact of severe restrictions on movement.
How exactly the surplus gets used will be determined by city councillors in the coming weeks.
“We are fortunate that we’re in a solid financial position,” said city administrator Sheila Bassi-Kellett. “Frankly there are a lot of municipalities around the country that are not.
“Some are looking at extending lines of credit and borrowing on the future backs of their residents, [or] analyzing how close they are to bankruptcy right now.”
Bassi-Kellett added: “We want to have a big-picture outlook that’s in the best interests of the City and the best interests of residents.”
Councillor Robin Williams called for at least some of last year’s surplus to be used in lowering property taxes or otherwise providing financial relief to residents and businesses.
The City is producing financial models of three scenarios – one where facilities reopen and operations resume on July 1, one where that happens on September 1, and one where nothing restarts until January next year – to help councillors decide how to use the surplus.
Mayor Rebecca Alty summed up the challenge for councillors: “Do we want to direct administration to reduce taxes? Do we want to direct administration to reduce fees and charges? If we decide to do both, what does that equal on our bottom line in scenario one, two, and three?
“We have a lot of decisions to make for 2020, plus there is the thinking for 2021.”
Council to assess ‘ideas and options’
On Monday, councillors were shown a presentation explaining some of the pandemic’s potential impacts on City finances.
Sharolynn Woodward, the City’s director of corporate services, said millions in revenue could potentially be lost without facility rentals, program registrations, parking charges, bingo licence fees, transit payments, and other sources of income.
While some expenditures will also drop – for example, the pool and ice rinks don’t cost as much to maintain right now, and casual staff aren’t being hired – there are also extra costs in the form of overtime to keep vital services running and payments for more protective gear and hand sanitizer.
“What we don’t know is the extent of any of these impacts,” said Woodward.
Meanwhile, City staff say they are keeping one eye on future big-ticket infrastructure projects. Replacement of the water supply pipe from the Yellowknife River is definitely going ahead, while there could also be a new swimming pool built in the next few years.
Normally, the $6.7 million left over from 2019-20 would go into a fund for those larger projects. “If we have more money banked for that, that’s ultimately going to be good for taxpayers in the long run,” said Bassi-Kellett.
But she said her staff recognized that the pandemic meant the $6.7 million now had many more potential uses, some of them urgent.
Bassi-Kellett said staff would be coming back to councillors with “ideas and options for council’s consideration,” expected to include some discussion of whether any taxes and fees can be frozen or reduced.
Councillor Williams, conducting some on-the-fly math, said he felt the City could accommodate its expected revenue losses with at least $2 million of the surplus left over.
“At this time,” he asked, “wouldn’t it be prudent to give some relief to the residents of Yellowknife as far as the tax burden goes?”
Bassi-Kellett said that kind of question was “exactly what administration has been contemplating right now” but decisions would ultimately fall to councillors.
Why does the City have a surplus?
The City has a $6.7-million surplus because of what Bassi-Kellett termed “a year of better-than-anticipated revenues” in 2019-20.
Among those revenues were higher land sales than expected, healthier investment income than the budget had forecast, and also some lower expenditures – mostly in the area of salaries and contracted costs.
In part, the reduced expenditures were because the City ran out of time to do everything it had planned in 2019-20.
The surplus “puts us in a fairly good position to manage the volatility of the year ahead,” said Bassi-Kellett, even if revenue from taxes, fees, and other sources were to drop significantly during the pandemic and its aftermath.
“Normally a surplus position does get transferred to capital,” said Woodward, explaining that the extra money is ordinarily used to help offset the cost of building things.
“That was at first our instinct for the 2019 surplus. However, we started to be aware of pretty significant impacts that Covid-19 was having on us and our community.
“Therefore, we recommend this remains in the general fund largely in case we need it to make ends meet this year.”
Councillors will next week examine – and most likely approve – a motion that allows City Hall to keep the surplus in its general fund for the rest of the year. Keeping the money in that fund leaves it more readily accessible once decisions about how to spend it are taken.
Separately, the City of Yellowknife has asked the federal government for an extension on the time by which it must spend funding received for the prospective aquatic centre.
The new pool could cost upward of $50 million. The City has access to $12.9 million in federal funding for the project, but Bassi-Kellett said community consultation about the pool would be delayed by Covid-19 so work has been paused.
There is no guarantee a new pool will ever be built. As it must borrow a large sum of money to complete the work, the City is obliged by law to put its plans to a plebiscite before taking out the required loan, letting residents decide.