INTRODUCTION:
Good day ladies and gentlemen. My name is John Hunter. I am a resident of Roche Point and a council watcher for about 8 or 9 years.
I
give this input not only as a concerned resident of DNV, but also as a fellow
who for the last 25 years was a senior executive of major Canadian utilities
and energy companies, and hence I am very familiar with budget practices, and
the analysis and interpretation of budgets.
I actually like this stuff!!!!!
My
analysis relies on the booklet “draft financial plan 2001-2005”. I have talked to two councilors who tell me
that, at budget time, “what I have is what they got”. I hope my assessment is wrong, but in any event please don’t
shoot me for telling it as I see it.
This
year, absent action, DNV was looking at a tax increase due to a number of
“surprises” in the order of 15-20%. So
two choices arise – make some tough decisions and cut programs and trim fat, or
play accounting games and take the route of the short-term fix. My analysis says this draft budget took the
latter course – “for heaven’s sake don’t take the risk and unpleasantness of
tough decisions and cuts, but rather take steps to push off the harsh reality
that we are outspending our means and hope things will improve before we get
hit again”. I hope Mayor Bell and
Council will show the wisdom and leadership to reject this proposal.
What is the budget strategy and objective? Oddly enough, you have to guess, because unlike any normal business plan, there is not much in this book to describe it. Here is my assessment.
Due to a number of factors, including RCMP costs, provincial downloading, wage settlements, etc., a huge tax increase was in the works. To make this problem disappear, the draft plan raids the Heritage Fund. For example, now we go beyond deferring any capital repayment from the golf course to the Heritage Fund – now we are canceling debt service repayment of about $600,000/year, in violation of the spirit if not the letter of the Heritage Fund Policy on page E18 of the draft plan.
But now we have another problem. People have bought into Ernie Crist’s point that selling land to pay operating costs is a bankrupt and dead end practice – financially, practically, and morally. So if we are going to raid the Heritage Fund, we better refill it so we can raid it again. Despite the fact that DNV staff’s own surveys show that the majority of residents want little or no residential development including the effect of band land developments, and despite the fact that there is very strong opposition to ANY development in Seymour before the east-west traffic issue is fixed, we go back to the old tactic of land sales – that is, more development - to refill the Heritage Fund – you can see that on page E19-20 of the book.
But this year’s budget problem needs more than just raiding the Heritage Fund. So now we raid the various reserve funds – the “rainy day” monies that we were previously told before were at prudent levels to cover unexpected emergencies. The plan raids the Riverside reserve, the equipment replacement reserve, the accumulated surplus, the water system reserve, and the sewer reserve. And we are not talking pennies her, but millions. You can see that in page B2 of the book.
It’s a beautiful plan - as long as you do not mind ignoring the expressed wishes of DNV residents and the promises of Council members and the Mayor at the last election. It is also the ONLY plan, if Council has neither the desire nor the resolve to make tough decisions, and cut programs, as opposed to the usual practice of nibbling at the edges of programs.
What is the plan if, as this year, we get more negative budget surprises next year or the year after? Well, that is in the book too, on page E2, an inventory of district land that could be sold. The hint is “don’t worry Council, be happy, we can always sell land so you do not have to stop spending – you can still make everybody happy!” This only leaves Council the minor problem of rationalizing that plan with the fact that this new Council was elected to do the opposite!
In summary, my analysis indicates this is a plan that can only be approved if Council is prepared to ignore the expressed wishes of residents of DNV and ignore the future. It should not be called a financial plan, but rather a “bread and circuses” plan. It is a plan that will result in continued raiding of the land bank for operating costs, plundering of Heritage Fund principal instead of interest, more traffic congestion, more forests cut, more heavy development – everything this Council was elected NOT to do.
Only a Council that has no stomach to make tough decisions will approve it. Mayor Bell, let’s see some leadership here. Prove the North Shore News was wrong when they said you had no stomach for controversy. We need controversy here.
Now Let’s Spend a Few Minutes on the Budget Process
and Package
I would add that I have done a comparison of the DNV draft financial plan package vs. a typical business budget submission and compared it to the equivalent City of North Vancouver package. Remember DNV is a corporation, with expenses just short of $100MM. A corporation of this size should have a professional, thorough business and financial plan to allow businesslike behavior and decisions.
In my view, we don’t. The DNV package is, in my opinion, a package that even a skilled budget reader can do little with. It has few meaningful breakdowns. It does not even show manpower changes - your biggest cost. Historical data is sadly lacking – the department that looks like a hero today with a very small increase may in fact be a bum due to a huge increase two years ago – but you can’t tell, because only 1999 historical information is there. Spending a lot higher on conventions and the like, or consultants??? I can tell you with the CNV package, but not DNV’s. It is impossible to apply the standard tests a business person (read Councilor) should apply with the DNV budget – the basic information is not there.
As an example, the DNV Parks and Recreation submission is seven pages and the equivalent package at the City of North Vancouver is about 60. I can tell you an awful lot about CNV spending down to convention expenses, manpower, spending history by year, but from the DNV package, I could tell you almost nothing. CNV’s process is not perfect, but it is light years ahead of DNV’s. The information is there if you care to review it.
It may well be that Staff have done a great job and there is not an ounce of fat in the DNV budget. But you as a Council need the information to spot test areas to develop that confidence. With this package, you cannot. In my view, you cannot accept such a package and claim to be running a businesslike operation.
The worst point of all is the lack of “zero base” budget – the ability to see what is in the budget from the bottom up, broken into standard cost categories, with a five-year history. The information exists – your Staff can’t produce this plan without it. You have allowed them or told them not to give it to you. So you are examining 3% of the budget that Staff suggests you examine on page B10-11, and fundamentally ignoring most of the $99MM on page B2.
Your budget process is fatally flawed, and if Council has trouble generating questions about the budget, I am not surprised. No wonder we see questions from Council on garbage can sizes and flower beds, as opposed to questions on staffing levels overall, and overtime levels, and programs, appropriate budget for information services, etc.
I am told your finance and budgets advisory committee have come to the same conclusion as I on this budget package.
Mayor Bell and Council, when are you going to require of Staff a budget package and process that puts the corporation on a businesslike basis? The corporate values and strategic plan, corporate policies, and the financial plan are not things you can delegate 97 plus percent to Staff, which in my view is what you have done in the case of the budget and financial plan to date. Sadly, with this package, I am not sure you can do otherwise – you gave up your management rights when, sometime last year, you apparently did not tell Staff what you wanted for a budget package.
JCH Feb. 24-01 finance and budgets