Two words that strike fear in the hearts of city councillors: Projected deficit.
Hey look, here comes one now!
Yes, this year, the Director of Finance is warning council of a deficit of $3,200,000. Yes, it’s a lot of money, but it should not come as a surprise for anyone who paid attention to this year’s budget back in December, which was full of impending doom.
When the budget was voted on, Dennis O’Keefe himself predicted a deficit for the next two years, and said that we must look to make this money up through economic growth, as well as increased funding from the provincial and federal governments.
And to make it even worse, Gerry Colbert stated ominously, “if you think this years budget is tough, wait until next year.”
But should the city be so scared? I don’t think so. My deepest fear is that the city will allow this projected deficit to blind them from the long-term vision this city desperately needs.
The budget this year was a trying one for council and for the citizens of St. John’s, and I think council did a good job of maintaining levels of services on all fronts. While many wished to see more done, people couldn’t really complain that any vital services had been lost. In an assessment year which saw property values skyrocket in this oil-rich city of ours, council reduced the mil rate to offset what would have been a doubling of assessed value for some homes (which would have meant property tax doubling.)
The city of St. John’s budget is controlled by the province’s appropriately-named City of St. John’s Act. This act forbids the city from operating on a projected deficit. Due to this, the city uses what is called a zero-based budgeting process, which means every year, they wipe the slate clean, and work their way up, item by item, until they have accounted for all of the projected revenues for the coming year. Starting with fixed costs and financial obligations, such as debt payments, they move on up through the programs and expenditures of the city, starting with what they feel is most important, until they run out of money.
So… when projected deficits are talked about in St. John’s, they are predicting that costs will rise above present levels, and that to maintain the very same level of service will require more revenue than we actually have.
But this projected deficit is based on levels of revenue and assumes no growth. This year has looked good so far: There were increases in the number of development permits issued and growth for the current year, in taxes, is almost assured.
While $3.2 million seems like a lot of money now, new developments already in the works should make up at least some of this deficit by the end of the year.
Decisions that make us cut corners to deal with our short-term financial needs could just as easily leave us with bigger, and taller, problems.