By Chris Marchand
“When you’re in a hole like this, the first thing you have to stop doing is digging,” says Dryden City Manager Joe van Koeverden.
A disturbing report from senior management staff to city council warned that council must take action to reduce service levels in the 2013 budget to get cash outflows under strict control, Sept 17.
The report from the city’s Acting Treasurer Adrienne Bodnarchuk says the city is essentially running on credit, servicing a $27 million debt-load with annual interest payments of over $1 million. To make matters all the more urgent, an internal review of the city’s cash reserves has found that reported reserves of $3.35 million amount to more like $163,000 of accessible cash — the remainder ‘absorbed into the general operating account to help with cash flow ($2.25 million)’. Another $1 million is tied up between loans to the Dryden Regional Health Centre and the Kenora District Services Board (for Kenora’s Parkview Seniors’ Apartments)
Council responded to the grim news with the obvious question of ‘how does a city, that was mostly debt-free a few years ago, find itself in such a precarious position?’.
While he says city departments on the whole have operated well within spending parameters, Van Koeverden attributes the massive accumulation of debt to the 2007 decision to move forward with a Retain and Grow Strategy for Dryden Municipal Telephone System when council examined their options at the time.
“The fatal decision was not to sell,” said van Koeverden. “It was a perfect storm. We invested in the wrong technology that didn’t work well for carrier-grade service, we struggled to compete with Mobility because of the need for infrastructure (more towers). We spent in the range of $15 million in capital spending and another $7 million in operating deficits.”
With multi-million dollar deficits mounting year after year, van Koeverden says he doesn’t think council was made fully aware of the extent of the problem.
“I don’t believe council was fully or properly briefed, or warned about where this was going financially,” he said. “Because telephone (DMTS) was reported separately and not part of the overall budget, the $4 million operating deficit per year was sort of hidden on a different line item. Plus the financial statements weren’t produced for all those years. When I came on board in July of 2011, we didn’t have financial statements for 2009, or 2010 — so it wasn’t easy to see in black and white that this was a problem going back to that period of time.”
News regarding the city’s plan for DMTS is expected mid-week.
The report clearly disturbed council members like Sid Wintle who remarked that tough decision will have to be made.
“If this doesn’t concern anybody in this town, there’s something wrong,” said Wintle. We’re at five to seven years before our interest gets down below $600,000 per year.”
The city’s current debt repayment program extends to 2030.
Mayor Craig Nuttall says the community should expect to see some reduction in service levels.
“We can not continue on this route,” said Nuttall. “If this were a business we would be bankrupt. We have nothing in the reserves. The public has to realize just where we are. I think we have to rely on our staff to really understand that we’re under the gun.”