Is the Town heading to insolvency?

Qualicum Beach Town Council, at a Special Meeting scheduled for April 15, 2020, is expected to adopt a “Revenue Anticipation Borrowing Bylaw” enabling the Town to borrow up to an additional nine million dollars.

The first item of preamble in the bylaw is indeed sobering to us taxpayers: “Whereas the Town of Qualicum Beach does not have sufficient money on hand to meet the current lawful expenditures of the municipality ..”.

Here are some related facts and observations:

Fact – BC municipalities are prohibited from budgeting for a deficit. Every planned expenditure must be covered by planned revenues or transfers from existing reserves (aka our savings account).

Fact – The municipal budget year runs from January to December. The majority of the Town’s revenue comes from property taxes, most of which are not due until June 30. Hence the cash flow challenge of meeting payment obligations in the first six months of the year.

Fact – Provincial legislation (Local Government Act, Community Charter) does allow for short-term borrowing to bridge this timing gap in “anticipated revenues”. But the expectation is that any such loan will be repaid before the end of the fiscal year (December 31).

Qualicum Beach Town Hall

Fact – On March 11, 2020, Council adopted its updated Financial Plan for 2020 – 2024, in essence setting the budget for this current year. In doing so, Council approved planned expenditures for 2020 that exceed revenues by over $5,000,000. Their plan is to make up this huge shortfall by selling assets ($3,517,000), borrowing ($875,000), and raiding our savings account (transfer $922,000 from Reserves). 

Fact – The economic downturn effects of COVID-19 were already becoming quite obvious in early March. Stock markets were plummeting, vacation travel bookings were being cancelled, belts were being tightened across the globe. Also on March 11, 2020 – the very day that Qualicum Beach Town Council approved its expansive budget – the World Health Organization declared COVID-19 to be a global pandemic. 

Observation – In response to the financial gut punch from COVID-19, one could reasonably expect the Town to recognize its coming financial challenges, particularly in revenue expectations, and to do what every family, business and non-profit suffering a loss in income is doing – rethinking and paring back expenditures to the bare minimum, as well as deferring any and all discretionary purchases and non-essential projects. To date, we have seen no evidence to suggest that the Town has reduced any expenditures, or curtailed any service levels, or that it plans to do so. 

Fact – On March 13, 2020 – two days AFTER the declaration of the COVID-19 pandemic – the Town signalled its intent to plough ahead with a bevy of new projects including “the construction of childcare facilities, artificial turf field, affordable housing and/or other works.” See the Request for Expressions of Interest for Construction Project Management https://qualicumbeach.civicweb.net/filepro/documents/8008

Observation – Senior governments have reacted quickly with large sums of money to help Canadian citizens and businesses large and small to remain viable until the COVID-19 storm passes. It is reasonable to expect that financial assistance will also be forthcoming for municipal governments who find themselves temporarily cash-strapped. 

Taxpayers and citizens of Qualicum Beach may well wonder why Council is so eager to spend money on non-essential projects at this time. Why is our Council and Administration rushing out to borrow money  – loans that we taxpayers will have to pay back ?