Like the large, immovable, hard rock behemoth standing on the Campbell River foreshore they’re named after, a series of financial Big Rocks loom over the city’s financial stability.
City councillors were warned that Campbell River faces increasing pressure to maintain current service levels and base operations, while striving to meet the community’s growing needs and keeping tax increases low. And councillors were advised to prepare for them in order to mitigate the potential risks associated while still being fiscally responsible.
“An integral part of long-term financial planning is being proactive and strategic in mitigating known ‘Big Rocks’ or financial impacts to the city’s budget,” a report to City Council’s June 14 committee of the whole says. “There are a number of upcoming Big Rocks that the city should be planning for and phasing into the budget to promote stability to city finances and operations.”
The city has a “Financial Stability and Resiliency” policy that outlines the pathway to achieving long-term financial planning goals. That policy dictates that tax increases should be phased in when changes influencing city finances are known to promote stability for taxpayers.
Besides increasing pressures on maintaining current service levels and base operations, while striving to keep tax increases low, the current economic climate further compounds these pressures and will impact financial planning for 2023 and beyond, the city report says.
For example, the cost of goods and services is rising “at a rapid level.” During the first quarter of 2022, annual inflation increased on average by 5.8 per cent. In April it continued to climb, reaching a 31-year high of 6.8 per cent. This is just one item that the city report says could have a significant impact on city finances and/or service levels.
There are two options for accommodating Big Rocks, change (or raise) taxes or cut services.
“So you either increase revenue, or you decrease expenses. It’s pretty basic and pretty simple,” Coun. Charlie Cornfield said during the committee of the whole meeting discussing financial Big Rocks.
The staff report identified known Big Rocks and their impacts on the 2023 financial plan (item/financial implication/impact to taxation):
- RCMP contract – $996,000 – 2.87 per cent
- Changes to Municipal Service Agreements/contracts – $910,000 – 2.60 per cent
- Wages/benefits variance – $738,500 – 2.11 per cent
- Transit contract – $72,000 – 0.211 per cent
There are also a number of potential future Big Rocks that should also be planned for:
- RCMP body worn cameras/NCO salary – $234,125 – 0.67 per cent
- Library lease – $145,000 – 0.41 per cent
- Additions to reserve – $157,500 – 0.45 per cent
- Capital Power closure – $1,000,000 – 2.86 per cent
- Debt servicing – $140,000 per $1 M borrowed – 0.40 per cent
- Future collective agreements for CUPE, IAFF, RCMP – “unknown”
- Inflation – “unknown”
The above Big Rocks are over and above the Financial Stability and Resiliency policy’s taxation parameters which allow for an overall taxation increase of 2-3.5 per cent. They also do not include unknown changes to the city’s base budget and inflationary impacts, “which are predicted to be substantial.”
“There’s very little room to manoeuvre on these big rocks, in terms of changing them,” Coun. Claire Moglove said.
The city’s financial officer, Alaina Maher, told council that this discussion is a warning for council to be prepared to deal with these Big Rocks.
“Right now we’re just signaling to council, like I said, the best that we know for inflation right now is 6.8 per cent, we can take a look at the macro economics and what people are projecting and where the environment is but it’s so unpredictable right now. And unprecedented. It is really just a best guess,” she said.
Coun. Colleen Evans said it’s important to have a process that prepares council for these Big Rocks ahead of time.
“The community does not want to see those big peaks and valleys that we have previously had. And so preparing the community for what I think is going to be a really challenging year, it’s important that we have a process to address that early on,” Coun. Evans said.
Coun. Kermit Dahl added that there’s a third way that the financial situation can be managed, besides either increasing taxes or cutting services.
“I’ve listened for probably an hour now to councillors talk about you can either raise taxes or decrease services but nobody’s talked about efficiencies,” he said. “I haven’t heard anyone talk about any efficiencies, or looking for inefficiencies or where we can start to try to save money without cutting services.”
Dahl said businesses and residents are at the breaking point with price increases so adding increased taxes to that can’t be done.
“All of this is costing the taxpayer more and more money. And we need to consider that they don’t have it,” Dahl said.
Mayor Andy Adams said that staff bring forward ideas that help with efficiencies.
“Wherever we can find ways to do things smarter, faster, more efficiently, it is in the best interest in the long run, but it’s gonna be a it’s gonna be a tough three to five years,” Mayor Adams said.