City of Nelson develops strategy to avoid $1.6 million shortfall

The City of Nelson is looking to curb revenue loss due to the COVID-19 pandemic.

Chief Financial Officer (CFO), Colin McClure, alerted Council of a potential shortfall between $830,000 and $1,200,000 depending on, “the length of time and the nature of the restrictions remaining in place.”

Council had already nixed a proposed 2% tax increase earlier this year. This increased the City’s deficit to $400,000 in the preliminary 2020 budget.  Add on the above shortfall and the deficit could reach up to $1,600,000.

Mayor John Dooley and Council held a special Council meeting on April 23, 2020 to enact  cost-saving measures which will have a direct impact on Nelson residents and the City’s coffers.

They include:

• Zero percent property tax increase for 2020.
• Zero percent fee increase for Nelson Hydro for 2020.
• Zero percent increase in Nelson Hydro dividend to the City.
• Zero percent wage increase for 2020.
• General hiring freeze.
• The flexibility for the replacement of critical positions and hiring if there are grant-funded positions.
• Minimizing travel, training, legal fees and other discretionary costs.
• The City has negotiated with its benefits carrier to reduce dental and extended health premiums by $40,000 per month.
• An allowance of $100,000 for recovery and/or wildfire response activities.
• A request to the Provincial Government to fund the operating shortfall for transit.

Council said they estimate savings between $700,000 to $830,000 with policies above. Also, the City said they may draw down reserves by as much as $800,000 to balance the 2020 budget.

“The City is facing a significant financial challenge, and our first priority is to ensure we manage our financial sustainability going forward,” said Mayor Dooley. “We are fortunate that we were in a relatively strong financial position prior to the pandemic; many other local governments will really struggle.”

An economic stimulus program is also in the works with partnerships between the City, the regional District of Central Kootenay and the Columbia Basin Trust. The plan will focus on local businesses, non-profits and the broader community. The details and strategies of this plan will be revealed in the next few days, according to City staff.

“Initial feedback from our Business Outreach Project has been well received and has identified where our community needs additional support,” stated Mayor Dooley “while we have limited financial capacity to directly support our community, we believe we have found some creative ways to help out and stimulate the economy going forward.”

 

Addendum – Financial Plan and Taxation Points *provided by the City of Nelson*

 

1. The 2020-2024 Financial Plan will be amended to reduce revenues by $830,000, operating expenditures by $800,000 and utilizes $530,000 in reserve funding. A 0% property tax increase for 2020 will be incorporated into the financial plan.
2. The financial plan will be increased to add an allowance of $100,000 for recovery and/or wildfire response and recovery.
3. A hiring freeze for 2020 will be implemented, except for replacement for critical positions and grant-funded positions.
4. Salaries will be frozen for 2020, including the current Council CPI increase will be rolled back to 2019 amount effective May 1, 2020; the freeze for union employees will be contingent on negotiations with the appropriate Union; existing union contractual increases will be honoured.
5. The dividend to the City from Nelson Hydro for 2020 will be frozen at the 2019 amount.
6. The Nelson Hydro rate increase for 2020 will remain frozen at the 2019 amount.
7. Funding to reserves from taxation will be deferred where possible for 2020 unless this would have a significant negative impact on the City’s sustainability and resiliency in the future.
8. Council will request that the Provincial or Federal Governments provide funding to cover the shortfall in fare revenue and operations for transit services provided through BC Transit.
9. Expenditures, where the majority of the economic benefit is external to the Greater Nelson area will be deferred for 2020 (e.g. equipment replacement), unless critical to the operations of the City.
10. All organizations that receive grants from the City and/or lease city facilities will be asked to first access other funding support (grants) prior to requesting support from the City of Nelson.