Speak to three Lunenburg County mayors and you’ll get three different opinions on the accuracy and fairness of financial scorecards issued by the province.
Financial condition indicators for fiscal year 2016/17 were published earlier this month by the municipal affairs department. Every municipality in Nova Scotia received an individualized report examining revenue sources, expenditures and financial management.
Bridgewater was found to be at risk in five of 13 categories. The towns of Lunenburg and Mahone Bay were at risk in four categories. The municipal districts of Chester and Lunenburg were flagged in three and one, respectively.
“I take these with a grain of salt,” said Bridgewater Mayor David Mitchell. “We know we’re in good shape. We’re growing and doing all the right things.”
Bridgewater was given a “high risk” warning for inaccurate budget predictions in two of the last five years. In the 2016/17 fiscal year, the town had a surplus of nearly $1-million. Before that, it recorded a deficit of more than $69,000. This type of volatility fares poorly under the provincial assessment formula.
“The only red mark we got is for budget accuracy, which to me is ridiculous,” said Mitchell. “We had a big deficit in our snowplowing budget one year because that was the winter from hell.”
The large surplus was due to higher-than-expected deed transfer revenue, staffing vacancies, unanticipated project roll-overs and lower costs for snow-clearing due to a mild winter, he said.
Bridgewater’s other four warnings were deemed “moderate risk.” The town was cited for having one deficit in the past five years and maintaining lower-than-average combined reserves and operating reserves. It was also flagged for its “residential tax effort,” which measures a municipality’s ability to raise taxes if necessary.
“I don’t think it’s fair to be scored that way on tax rates,” said Mitchell. “I think it’s been seven years that we’ve held the line on residential taxes. We’re pretty much in the middle. And we brought down the commercial rate last year to be more competitive.”
Mitchell believes the provincial reporting system favours rural municipalities over towns and cities. “It’s not an ‘apples to apples’ comparison,” he said. “When I look at these financial indicators, it’s sometimes frustrating for me because it’s not a clear indication of the pressures we face.”
He pointed to the Municipality of the District of Lunenburg (MODL) as an example of a rural municipal unit that benefits from the assessment criteria. “They’ve built up more reserves, they’re going to be debt-free by 2021, they’re not raising their tax rates,” he said. “But they also don’t have to pay for most of their roads and they only pay 80 per cent of their policing costs.”
The provincial funding formula for municipalities is “not balanced” and puts too much of a burden on towns and cities, Mitchell said. “We’re almost using our tax rate to subsidize other municipalities that don’t pay the full cost for their services.”
While Mitchell dismissed his municipality’s financial condition indicators, MODL Mayor Carolyn Bolivar-Getson embraced hers. “It’s further evidence of our strong financial position and our commitment to reduce debt and reduce deficit,” she said. “We try to live within our means and council is very adamant about sound financial planning.”
MODL had only one warning on its scorecard: a moderate risk flag for budget inaccuracy in one of the past five years.
While she agreed it’s difficult to compare rural districts to towns, Bolivar-Getson refuted some of Mitchell’s claims. “We still pay a big chunk for roads, including municipal roads,” she said. “We also spend a lot on recreation and have to deal with a very large geographical area.”
MODL may have less infrastructure to build and maintain, but it also has fewer revenue streams than a town like Bridgewater, Bolivar-Getson said. “We do not have the commercial base they have to support us here.”
While Mitchell sees little value in the financial indicators issued by the province, his MODL counterpart finds them to be quite useful. “I often refer to them to see where we are, compared to other municipalities,” she said. “I want to know how we compare and council wants to know.”
Town of Lunenburg Mayor Rachel Bailey falls somewhere in the middle when it comes to the relevance of the financial indicators.
The town received one high risk warning for maintaining low operating reserves and three moderate risk warnings for liquidity, combined reserve levels and residential tax flexibility.
“It’s always helpful to get different perspectives on how to manage the finances and the budgeting process,” Bailey said. “It gives us some useful information … but it also presents us with some challenges, too.”
Those challenges include “problematic” comparisons to other municipalities that could cause undue alarm among Lunenburg residents, she said. She suggested financial indicators might be better utilized as “internal” instruments to inform and guide elected officials.
Lunenburg is in good financial shape, boasts its own water and electric utilities and is confident about the future, Bailey said. A small residential tax increase, probably in the neighbourhood of one per cent, is anticipated this year. As for rural districts being favoured by the province’s assessment formula and funding model, she was largely in agreement with her Bridgewater counterpart.
“We’re very different animals. (Rural districts) tend to be more revenue rich because they have fewer responsibilities,” Bailey said. “We have an arena, a community centre, a collection of sports fields, a significant sewage treatment facility, all of our roads, sidewalks and all of the big infrastructure investments that are proportionally heavier in towns. We have those responsibilities to bear and typically with a much smaller tax base. It presents challenges that don’t exist in most rural municipalities.”
LighthouseNow Progress Bulletin
May 23, 2018
Scott Costen 