|
|
|
Former mayor weighs in |
|
|
|
Written by Gerald Gauthier
|
|
Friday, November 14 2008, 11:02 PM |
Former Lethbridge mayor David Carpenter admits he doesn’t follow city hall affairs as closely as he did during his 24 years on city council, but growing criticism of the handling of the city’s finances has certainly grabbed his attention.
Much of the flak has been aimed at programs and policies Carpenter helped introduce during his 15-year tenure as mayor, which ended in 2001 when he opted not to seek re-election. Critics have questioned the city’s ballooning investment portfolio, the need for additional fees on utility bills and the justification for charging interest on internal loans. In addition, city hall has been accused of turning its sizeable Municipal Revenue Stabilization Reserve into a slush fund.
When The Herald approached Carpenter for his perspective on the controversy, he willingly obliged.
His comments clearly indicate he believes the city’s finances are being managed soundly, but he says the current council has largely failed to provide adequate public responses to the most vocal critics.
“I think that city council could have done a much better job at trying to explain these issues at the time they arose publicly. Now the issue is huge, and it didn’t need to become that way,” says Carpenter, a chartered accountant who serves as chairman of the Workers’ Compensation Board of Alberta.
Although he endorses the city’s three-year budgeting process, Carpenter says the only real flaw with the city’s financial plan may be that not enough attention is paid anymore to reviewing and evaluating existing programs and expenditures.
“It’s fine to look forward at the beginning of the term and plan for your three years, but somebody has to look back and say ‘How are we doing?’,” he says. “You spent some money. Did it achieve what you wanted it to do and what changes should you make? Those are reasonable questions.”
Carpenter attended a recent public session where retired Lethbridge lawyer Robert Babki accused city hall of gouging taxpayers through what he considers excessive taxation, needless interest charges on money the city borrows from its own reserves, and the use of electrical utility fees to generate profits from the pockets of citizens.
Like most municipalities, Lethbridge maintains several financial reserves, mainly to fund future replacement of equipment. The most contentious reserve is the MRSR, Carpenter says, which was established in 1980 with a $20-million infusion of cash when the provincial government paid out per-capita grants to help cities pay off all tax-supported debt.
“The MRSR operates more as a flow-through account for the benefit of taxpayers than a slush fund to pay for gratuitous political whimsy. Whether you think the reserve provides proper value is subjective depending on whether or not you agree with the expenditures. One thing is clear, though, and that is if you reduce money coming into the reserve, you must also reduce money going out of the reserve or you will run out of money,” he says.
He notes in 2007, the MRSR balance started at $7.8 million and ended the year at $7.3 million. “Some $32 million was deposited to the fund during the year, and roughly the same amount was withdrawn and used either to reduce taxes or to pay for items which, ultimately, the taxpayer would have to pay for,” he says.
The original purpose of the MRSR was to smooth out property tax increases and cushion the city from fluctuating interest rates on its investments. Over time, its purpose has been expanded to include evening out other fluctuating sources of revenue.
Interest on internal loans and utility access fees are necessary, Carpenter says, to ensure costs of city services are shared fairly between local taxpayers and external users.
“The users of city utilities are not always the same people as the taxpayers who own them,” he says, adding in the case of the city’s water treatment plant, customers include city residents, industrial users and external clients such as Coaldale and McCain Foods west of Taber.
“When interest is charged on the loans for the water treatment plant, water is priced properly and the interest received is credited to the MRSR. Those funds are taken from the MRSR and either used directly to reduce taxes or are used for approved civic projects,” he says. “If the interest wasn’t charged, the taxpayers of the city would be subsidizing the residents of Coaldale as well as McCain Foods.
“The next question arises, however, is ‘Can we eliminate internal interest charges on tax-supported projects . . . and reduce taxes by the same amount?’ Well, the interest on these internal borrowings goes directly into the MRSR, and the biggest use of the funds in the MRSR is to reduce taxes. So, you could eliminate the interest paid into the MRSR, but only if you reduced the amount transferred out of the MRSR to reduce taxes — which would be a zero-sum game. But it might have a political purpose.”
This year, the city expects to transfer $18.8 million from the MRSR into general operations. Under the proposed budget for 2009-11, the annual transfer would increase to $21.9 million by the third year of the budget.
“I sat through 24 budgets. The only thing that really ever seemed to make a difference was when we actually took the time (to review existing programs and expenses) — and it was gruelling, those sessions went on forever,” he says. “There isn’t a silver bullet. It really just takes hard work, and that’s one thing we can expect from our council.”
|
|
Last Updated ( Monday, August 10 2009, 2:27 PM )
|
|
|
|
