In 1999, the City received an A+ rating (AAA being the highest, with only 6 municipalities in Canada having received it) from the Canadian Bond Rating Agency (the full report can be viewed at Development Thunder Bay web site at http://devtbay.city.thunder-bay.on.ca). This rating was based on a number of financial factors such as a history of fiscal prudence (pay as you go) stable economy and assessment base, plus a strong reserve fund position.

The same agency also identified a number of financial issues and challenges that the public should be aware of. These are provincial downloading of services; the elimination of temporary funding; and infrastructure (roads, sewer, etc.).

The downloading of services by the Province (social housing, social assistance, public health, land ambulance and transit) was supposed to be revenue neutral (i.e. no extra costs to the City). However, included in the provincial calculations was a $7.1 million savings requirements which the City was able to meet in 1998 with $3 million in special circumstance funding (one time only), cost savings, and a $1.5 million allocation from sewer rate charges. The shortfall was carried over. to 1999 and it was funded by the year-end 1998 surplus of $3.6 million (produced in part by net savings from the thirteen-week 1998 CUPE strike), $1.3 million from the sewer charge revenue and the application of a 2% tax increase.

The elimination of temporary funding by the Province will create further financial pressures on the City’s operating budget in 2000. In fact this is already evident by the mid-year operating deficit of $420,000. The shortfall position that was deferred from 1998-99 is $7.6 million. The Core Services Review of last year was undertaken to address this problem.

The City’s strong reserve account position also needs to be evaluated in light of the requirements to maintain our infrastructure. Most of the reserve funds are set aside for specific purposes, with $75 million (out of the total $92 million) to be used for the acquisition or construction of fixed assets such as the secondary treatment plant and the expansion of the water supply at Bare Point.

Once these plants are built and the money is spent, the City will continue to face ongoing requirements to maintain the roads, sewer and bridge infrastructure. In fact, just to bring our roads to provincial standards it will cost up to $7 million per year for 10 years (total cost of $70 million). Other capital financial requirements are the $25 million for the new hospital, $11 million for the Causeway to the Mckellar and Mission Islands, and $14.2 million for major renovations to both the Grandview Lodge and Dawson Court nursing home.

In conclusion, the City has been able to defer its financial deficit since 1998 through temporary funding and by transferring dollars from the reserve account. While it is in its power to do so, this is not a long-term solution and permanent financing must be eventually built into the City’s fiscal plan. This, and the need to maintain our infrastructure while keeping taxes low, is a challenge that will demand a higher standard of fiscal performance in the future.

Note of clarification: the cost of the "City’s Report to the Community"(previous articles) is reported by the City to be $44,160. The number previously reported by me ($100,000) was an estimate and included the cost of a second report due to come out at a later date (fall?). Frank Pullia is Principal of Pullia Accounting & Consulting. He can be reached at 767-6579 or via e-mail at frank@frankpullia.com

Return to List of Articles