To the editor:
Why are Thunder Bay councillors patting themselves on the back for passing yet another budget with spending above the rate of inflation while drawing down on dangerously low reserve funds?
Councillor Frank Pullia twists himself into knots trying to justify council’s decision to divert money intended for a reserve fund. (In response to “Levy hike rings false”.)
Council ignored the advice of city hall managers who’ve describe the state of reserve funds as “risky”. Our debt to reserve fund ratio is completely out of whack. We’ve got two dollars of debt for every dollar in reserves. That’s twice as much debt as is norm.
The fact is that in an election year, council saw the political danger in a tax levy increase well above three per cent.
So they dipped into reserve funds to the tune of $4.4 million to make the tax levy more politically palatable to a fed up electorate.
Councillors don’t mention that a good chunk of the spending in the budget is underwritten by a $17 million donation squeezed from TBaytel which is now forced to borrow money for its own budget.
Instead, councillors tout what great shape the city is in financially because the credit rating has gone up. They don’t mention that’s largely because of TBaytel and all the cash it generates.
If we don’t eventually want to be forced to sell TBaytel we have to do a far better job of bringing city costs under control.
Councillor Pullia boasts of the surpluses in recent budgets, the result of “on-going operational reviews and efficiencies”. Mostly that’s code for putting off construction projects to the next decade, such as finishing Balmoral Street.
Finally, there’s one bit of “context” I’d like to add to the debate over whether it was prudent to not build up our reserves as much as possible.
In the latest audited financial statement of the city, the municipality had to “de-recognize” $24 million. That’s how much money the city will be out if it loses a lawsuit against its insurance company over the catastrophic damage to the sewage treatment plant in 2012.
The city is suing its insurer after the company refused to pay the full costs of refurbishing the treatment plant.
If we lose in court, how are we to come up with $24 million? A huge tax increase? Or would it have been more prudent to start putting away money now?