The city’s corporate services director believes the municipality is in a good financial position — enough so that Kamloops is not yet relying on $12 million in reserve funds to help it weather the economic storm brought on by the COVID-19 pandemic.
“We were in a pretty good position to start with,” corporate services director Kathy Humphrey told KTW after cost-cutting measures and project deferrals were approved by Kamloops council this week. “I think the fact that we have just been able to defer projects and reduce our operating costs to offset revenues and bring our budget in balance, without using reserves, is really great.
“I think that’s a really good move from council and the staff that looked at all their projects, to be realistic about what they can and can’t do is operationally appropriate to defer and what isn’t.”
According to the latest figures, presented this week to city council, the city anticipates $12 million worth of budget shortfalls through September as a result of the novel coronavirus outbreak, including $7.8 million in lost revenue and $4.2 million in lost grant funding.
Council heard that if the city is to maintain closures and its reduced services until the end of September, it anticipates $7.86 million worth of lost revenue in areas of recreation ($3.96 million), bylaws ($1.78 million), transit ($1.43 million), building ($403,000) , including smaller amounts in the form of donations, sponsorship funding, interest and penalties ($290,000).
As a result, council has approved $7 million worth of operational reductions that will largely cover revenue losses through September, including savings in wages ($2.67 million), utilities, ($1.8 million); wages for vacant positions that will not be filled ($750,000), cancellation of Music in the Park, the Uji visit, the Kamloops Centre for the Arts referendum and reduced food and drinks ($600,000), personnel costs for travel, training, conferences, meetings and supplies ($500,000), parks maintenance ($420,000) and recreational programming ($265,000).
In an April 7 report, the city had anticipated reduced expenses to be $5.5 million through September. That figure, along with the lost revenue amount, is now higher.
Humphrey told KTW the previous report contained estimates, while numbers in this week’s report were confirmed by city departments for the most accurate figures in the most recent update.
Humphrey said the layoff and wage line item reflect primarily layoffs that have already happened. In addition, the city is seeking savings in not filling vacant positions. For example, a vacant legislative services supervisor position left open by Deanna Campbell, who recently took a position with the Thompson-Nicola Regional District, will remain vacant until the new year, Humphrey said. Future layoffs have not been ruled out.
“As this goes out longer and longer, there may be specific roles that don’t have work,” Humphrey said. “So administration will consider laying off individual positions as those positions run out of work. But that, basically, is the layoffs that have already happened for the facilities we know aren’t open.”
The gap in the additional $850,000 needed to offset lost revenue was covered after council deferred a series of tax-funded projects in order to make up the amount, including salt storage ($300,000); ICBC road safety improvement projects ($246,000), park/trail connections ($110,500), infrastructure improvements ($100,000), bus stop enhancements ($85,000) and small equipment and furniture ($14,000).
In addition to lost revenue, the city still faces $4.2 million anticipated in lost grant funding through September, including community works and gambling funds. Community works funds are federal dollars administered through the Union of BC Municipalities, while gambling funds are a portion of revenue collected by the province for casinos, shared with communities that have facilities within their jurisdictions.
There are two casinos in Kamloops — Cascades and Chances — and both remain closed due to the pandemic.
Humphrey told council that although it is not certain those funds will dry up entirely, the city is preparing for the worst-case scenario, with a looming deadline to complete its budget by May 15. Many unknowns remain, she said, noting it would be easier to add money back into the budget at a later time, should the city receive good news from upper levels of government.
To that point, Arjun Singh — a Kamloops councillor and and UBCM past-president — expressed optimism communities will likely see similar past funding or, perhaps, even more, when it comes to community works funds.
Pandemic leads to deferrals
In the meantime, many projects have been deferred until next year or beyond.
Two-million dollars’ worth of gambling fund projects through September have been deferred, including downtown streetscape improvements to Victoria Street between Fifth and Sixth avenues ($750,500), museum facility and storage improvements ($368,000), the second phase of McArthur Island community park ($210,000), Old Courthouse renovations ($141,000) and the purchasing of accessibility mats for events like Canada Day, previously approved during supplemental budget talks this year ($40,000).
Meanwhile, $2.3 million worth of community works-funded projects have also been deferred, including active transportation projects ($1.6 million), pedestrian crossing upgrades and special crosswalk and road build outs ($300,000), pickleball expansion ($63,000) and other projects ($300,000).
Asked about the fate of the Summit Drive multi-use pathway project, Humphrey told KTW: “That one, we’re waiting for a grant, anyway. We haven’t heard back either way on that Summit pathway. I think whether or not we get the grant for that project, it will determine the timing of when it goes ahead. I think, at this point, we’re not going to move ahead until we hear back from the grant.”
Also deferred is a $750,000 draw on the city’s general surplus reserve, which would have funded a study to upgrade the Battle Street RCMP detachment. It had been approved during supplemental budget items, but council has reversed course.
So far, the city has not had to dip into $12.4 million worth of reserves in response to the pandemic.
Humphrey explained the purpose of reserves is typically to cover services that weren’t planned for in the budget, including changes to or new projects, project cost overruns, changes in scope or unexpected situations, saving money for larger projects down the road or to offset one-off budget shortfalls.
“We’ll use the reserves if some of our assumptions are wrong or if this goes longer than we thought or, you know, all of sudden we have to shut down some things that we shouldn't have had operating. Then we can use the reserves to top off the shortfall,” Humphrey said. “But, it’s kind of like your last resort. It’s kind of like cashing in your RRSPs when you’ve already drained your savings account and done this and done that, right? You want to sort of have that there for an emergency when you need it.”
As previously reported, council approved reducing the planned three per cent tax increase to 2.3 per cent by delaying supplemental budget items funded from taxation and holding off on sending a half-million dollars to the asset management reserve fund.
Asked why the tax rate could not be reduced further, Humphrey said the remaining tax rate increase is a result of the increase in cost of services in 2020, independent the pandemic. She said most services continue to be provided by the city, including fire, police, bylaws, water, sewer and building permits.
“Lots of what the city does is what people need to keep happening,” Humphrey said.
Budget needs to be adopted by May 15
Council will finalize mill rates next week before the budget bylaw goes to council on May 5. It needs to be adopted by a May 15 deadline.
Projects that will go ahead include the Canada Games pool project, roads and drainage projects, the Westsyde Pool HVAC project, IT digital strategy, fleet replacement, planning and engineering design projects and the Hillside Stadium turf replacement.
An additional project that council deferred is the track replacement at Hillside Stadium, amounting to an additional $600,000 in savings, which was to be funded by a combination of gambling and community works funds. Humphrey said money from that project will go back into those funds until next year. The turf replacement portion of that project will continue as planned because the materials have already been ordered.
Deferred projects are expected to bump schedules down the road, with 2020 projects pushed to 2021 and 2021 projects in 2022, etc. Humphrey said there may be the ability to do some previously scheduled 2021 projects in that year alongside this year’s projects, but noted that will be determined at a later date.
Council this week also approved a bylaw authorizing borrowing up to $15 million from the Municipal Finance Authority, should the need arise.
Humphrey said the biggest challenge going forward will be in collecting property taxes and utility revenue. The city is anticipating some $114 million to come into the city by way of property taxes, which are due on July 2, and residents are grappling with an economic crisis piled on top of a health crisis.
Add to Kamloops Centre for the Arts, additional city projects swept up by the pandemic: McArthur Island, Victoria Street and active transportation projects. Kamloops Mayor Ken Christian said on Tuesday: “There’s pain all over that list.”