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How the City of Iqaluit balanced its budget

Councillors find way to deal with looming capital plan deficits

JIM BELL

Iqaluit city councillors did more than balance the city's books when they passed their 2005 budget at a special council meeting last week.

They also found a way to pay down looming deficits that they expect to start producing by the end of 2005 in their five-year capital plan.

The capital plan - a five-year deal with the GN to upgrade a long list of municipal infrastructure items - is to be partly financed out of the city's reserve funds.

Ian Fremantle, Iqaluit's CAO, told city councillors last week that a series of big, unexpected expenditures totaling at least $500,000, mostly in the first half of 2004, forced the city to dip into those reserve funds.

Some of the unwelcome surprises included hefty bills for fixing burst water lines and a shifting concrete slab under the floor of the AWG arena.

Others included:

• a loss of $115,000 in revenue, because of council's decision to lower the interest rate paid by deadbeat taxpayers;
• extra spending of $175,000 for power rate increases, depending on what the GN eventually decides.

So when city councillors began a special two-day budget session two weeks ago, they were staring at two potential deficits: a $485,000 deficit in the city's operating budget, and a series of deficits in their capital plan that could rise to $637,900 by 2007.

To eliminate those shortfalls, city councillors made two politically difficult decisions: they cut $437,000 out of their operating budget, and planned for $712,700 in new revenues by raising the tax rate by 2.5 mills.

Most of those cuts were achieved by asking department heads to hold spending at 2004 levels. More money will be saved by canceling the bus service, and by a decision to cut residential garbage pick-up to once a week.

The increase in property tax revenue is driven by new property assessments that came into effect in November, 2004, a scheduled mill rate increase of .75 mills, and new mill rate increase of 1.75 mills - for a total of 2.5 mills.

(This means ratepayers will pay an additional $2.50 for every $1,000 of assessed value in their property.)

But that tax increase of 2.5 mills is equal to the old education tax the GN imposed on Iqaluit property owners for years but cancelled as of last May - softening the financial blow that ratepayers will feel next year.

"One pretty much washes out the other," Fremantle said.

As for potential future deficits in the capital plan, Fremantle said the arrangement is reviewed once a year, and that cuts and other adjustments can be made, depending on changing circumstances.

Here are the main highlights of the city's 2005 budget:

How much will the city receive in 2005?

• Property taxes: $8.2 million
• Municipal service revenue: $6.4 million
• GN equalization payment: $0.61 million
• Total: $15.2 million

How much will the city spend in 2005?

• Total, all operations: $14.5 million

How much of a "surplus" will the city produce in 2005?

• Total projected surplus: $665,450

Why does the city need a surplus?

• The city must cover future deficits expected to occur in its five-year capital plan, put more money back into its depleted reserve funds, and prepare for possible power rate increases.

How big are the projected capital plan deficits?

• 2005: -$65,300
• 2006: -$451,439
• 2007: -$637,900

What is the capital plan budget for 2005?

• Revenues: $11,589,990
• Expenditures: $11,655,290
• Deficit: ($65,300)
  

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