In our previous issue of Second Opinion QB, we reported that, in the wake of the coronavirus pandemic and state of emergency declared by the province, two things stand out regarding the efforts of Qualicum Beach Council compared to other municipal governments on Vancouver Island:
- No changes have been made to our (pre-pandemic) 2020 budget; and
- Council has not undertaken any meaningful, in-depth review of its extensive, and growing, list of capital projects.
The 2020 budget, produced in the fall of 2019 and approved by Council in February 2020, forecasted the Town’s expenditures would exceed its revenues by about $5 million.
By mid-year, the Town’s 2020 budget shortfall has now ballooned to over $7 million – which can only be covered by either draining reserves, or borrowing money, or selling assets (or all three, which is the Town’s current plan).
In that previous article, we also discussed the efforts made, and dismissed, within Council to conduct a thorough assessment of the Town’s capital projects in light of COVID-19. We also raised questions about major capital projects, and identified some of the Town’s inadequate financial reporting practices.
In this issue, we examine the rationale used by some members of Council to quell concerns raised by QB’s citizens about our Town’s ballooning 2020 deficit.
The three-part, oft-repeated narrative of Wiese, Westbroek, and Harrison
For several months, Mayor Wiese and Councillors Westbroek and Harrison, who are, to say the least, bullish on capital projects, have repeated the following narrative in various forms:
- We need to prop up the local engineering and construction sector in the wake of the COVID-19 pandemic;
- We can get some real bargains if we act fast; and
- We have plenty of money to do whatever projects we want to do.
We need to prop up the local engineering and construction sector in the wake of the COVID-19 pandemic
Firstly, our Mayor and Town Councillors should not need to be reminded that municipal governments in this country have neither the taxation capacity nor the mandate to provide support or subsidies to industrial sectors. That prerogative rightfully lies with the provincial and federal governments. To mitigate the adverse effects of COVID-19, wage replacement and other financial relief for businesses totaling a half-trillion dollars, borrowed largely from bondholders, has already been injected into the Canadian economy. QB taxpayers are already on the hook for our share of the ballooning provincial and federal debt.
Secondly, few, if any, of the engineering and construction companies that compete for Town infrastructure projects (think SNC-Lavalin, Knappett, ..) are domiciled in QB or pay taxes here. If QB Council feels compelled to provide its largesse to local businesses hammered by the pandemic, they could start with our local tourism/hospitality sector as well as our independently owned, local retailers who are hanging on by a thread.
We can get some real bargain bids if we act fast
The argument of Wiese, Westbroek and Harrison is that, right now, supply exceeds demand and contractors are eager to cut rates just to gain some cashflow. But is that realistic, or just more wishful thinking like the mythical grants built into the 2020 budget?
These firms have recently enjoyed several years of plentiful work, high prices and solid margins. The well-managed companies will have retained an earnings cushion to mitigate leaner times like an occasional disruption to a project start. During COVID-19, construction efforts have continued, albeit with added costs to protect workers from virus exposure.
There appears to be plenty of construction work on Vancouver Island these days. In a recent interview with the Times-Colonist, Casey Edge, executive director of the Victoria Residential Builders Association, said contractors have been reasonably busy, thanks to the BC government’s decision to allow construction to continue as an essential service during the pandemic. On the south end of Vancouver Island, the value of building permits issued in June 2020 was 30 percent higher than in the same month in 2019. The increase came even as builders face higher costs due to the virus, a labour shortage and rising material prices such as lumber.
As a reality check to the wishful thinking of some members of Council about cheap bids, consider the shock recently experienced by the Town of Tofino. A year ago, Tofino had established a project budget of $53 million for a new waste water treatment facility. When tenders were issued this year, in the midst of the COVID-19 pandemic, the average of the bids was $29 million (over 50%) higher than expected. The Town of Tofino’s July 17, 2020 media release states “It is not clear entirely at this time what factors contributed to the jump in price as compared to the estimates from just last year. However, given the current uncertainty due to the COVID-19 pandemic, tenders may include a certain amount of risk built into the bids.” So much for “bargain bids.”
We have plenty of money to do whatever projects we want to do
To a QB taxpayer, this is the most chilling part of the Council trio’s narrative. Lest the reader consider this to be an exaggeration, here are comments made by Councillor Westbroek at the June 24, 2020 Council meeting discussion of capital projects: “We weren’t sure how people were going to respond to their tax notice. Then when we got the backup plan for $9 million if we did run short, in my opinion the projects that we identified [in the 2020 capital budget], several of them were funded by grants and I personally didn’t think we needed to make any changes. That’s why I didn’t agree with Councillor Filmer that we had to discuss it. We have a plan, we’re halfway through the year already. The funding seems to be going along nicely, the people are responding to their tax notices. I don’t see a need to adjust our capital list.”
The $9 million line of credit that Council gave itself is NOT newfound money. Just because the credit card company raises my credit limit doesn’t mean I should go on a spending spree. From a demographic perspective, given the relative wealth of many homeowners, Qualicum Beach is probably the most pandemic-proof and recession-proof town in the country, i.e. most homeowners are quite able to pay their property taxes. Yet Council and staff were worried about a major default on property tax bills?
Perhaps Council ought to be a tad more worried that their grant revenues are going to be at least a million dollars short of their budgeted $2,688,000. So, given what we’ve gleaned from the last few Council meetings, QB taxpayers are probably looking at about a $7 million dollar shortfall this year, instead of the $5,314,000 deficit that persists on the Town’s monthly Financial Plan Report.