Twenty Pounds (First in a Series on our Municipal Budgets)
Ron Bolin: September 10, 2012
“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”
Mr. Micawber speaks of his family fortunes in terms of its cash flow and whether that flow is positive with income exceeding expenditures, or negative. It is possible to look at the cash flow of the City of Nanaimo in the same way. On its website, under financial reports from the Finance Department, one can find the: “City of Nanaimo Consolidated Statement of Financial activities for the year ended December 31, (year)” dealing with City finances all the way back to 1999 which provides a 13 year record up to 2011. Another document, the City of Nanaimo Financial Plan for 2012-2016 adopted by Council this year adds estimates for the years between 2012 and 2016. An examination of these two documents allows us to look at the City’s record from Mr. Micawber’s point of view, one with which, I would suggest, many of us, particularly those on fixed or falling incomes, are very familiar.
The net difference in income over expenditures was or is projected to be positive in eight (8) of these eighteen (18) years and misery making for ten (10) of them, with a net cost of expenditures over revenues of some $60,724,448 dollars. Poor Nanaimo. With such a record it could be anticipated to join Mr. Micawber in the work house, if it were one of us rather than a government corporation with the power to tax.
So how do our public servants, both elected and appointed, manage to defeat Macawber’s dilemma from year to year? Why by the magic of compound interest, of course! The City has the ability to “overtax” its subjects (or underspend its budget) and thus put money aside when it is in a surplus as was demonstrated in the eight “fat” years. On the other hand it had the ability to borrow money from the moneylenders in those ten “lean” years because it is known that credit risks are slim to none as a government can always increase taxes on its subjects to raise more money. Borrowing either from previous savings or from lenders funded the nearly $61 million dollar shortfall during the period 1999-2016. This matter deserves further discussion as money borrowed from lenders tends to cost about twice as much as is made on money conservatively invested which raises questions about the value to taxpayers of municipal borrowing.
As Nanaimo taxpayers are aware, the City has consistently raised taxes at rates significantly higher than the consumer price index for BC which leads one to wonder why this should be so if the growth that we have had since 1999 has led us to such a deficit –and further to question why, given these factors, that our political masters continue to harp on growth to entice newcomers rather than concentrating on financial stability for those who have already chosen to make Nanaimo their home.
More on some of these topics will follow. It would be most advantageous if we could form a working group to undertake more facets of a Nanaimo Budget Project. If you are interested in discussing such matters further, please contact me at email@example.com. There is lots of readily available material and there are many angles to be covered.