Georgina facing $3.5M COVID-19 debt, town 'not in a horrible position': town treasurer

'Residents cannot handle a significant tax increase in 2021'

Yorkregion.com
August 25, 2020

As a result of the ongoing COVID-19 situation, Georgina could be slapped with a $3.5-million deficit by the end of 2020.

Based on the town’s existing "strong financial health," coupled with established long-term strategies, Georgina "is not in a horrible position," said Rob Wheater, the town’s treasurer and director of corporate services.

As of July 15, the financial impact of COVID-19 on the town was about $1.3 million, which is forecasted to balloon to about $2.4 million by the end of September and balloon again to $3.5 million by the end of the year.

"(That) is a lot for money for our size,” Wheater said. “But our financial health is good; it’s been built up over the years.”

According to the Municipal Act, municipalities cannot borrow funds to cover operating expenses, meaning the town would have to fund the deficit using reserves or increase taxes next year.

WHAT DOES THIS MEAN FOR RESIDENTS?

Residents can breathe a sigh of relief. The town plans to rely heavily on reserve funds to recoup costs, so residents won’t have to shoulder the town’s COVID-19 debt in 2021.

“We’re not the only ones going through a hard time,” Wheater said. “Residents are going through hard times, too.

“We can’t recover our expenditures through taxes. We know residents cannot handle a significant tax increase in 2021.”

Shouldering the impact of COVID-19 would involve long-term strategies, he added.

Putting that into perspective, a 1 per cent tax increase for residents amounts to about $450,000 in the town’s coffers, meaning an 8 per cent tax increase in 2021 would wipe out the town’s 2020 debt, Wheater added.

“We know residents will not be in a position to see a 5 to 10 per cent tax increase next year,” he said.

But Gerry Bones, a Sutton resident and member of the Georgina Fair Tax Association, sees tax increases as "inevitable".

"Beyond a doubt, the impending deficit will result in higher taxes," he said. "Given the uncertainty of (the coronavirus) duration, there's a strong possibility the economy will be stumbling into 2021."

Recently, council approved transferring the entire 2019 budget surplus -- $1.5 million -- to the tax stabilization reserve to help chip away at the looming debt.

Coupled with the province’s recent Safe Restart Agreement, which will see Georgina receive close to $1.2 million in Phase 1, the town is a “strong position to weather this storm,” Wheater said.

Town staff are also proposing to use 2021 as a catch-up year -- but don’t expect an increase in service levels next year, Wheater added.

HOW DID GEORGINA GET HERE?

Increased expenses, together with lost revenue, equals debt.

The three largest revenue losses for the town come from closed beaches, cancelled recreation programs and a hiatus on building permits from both large and small development projects.

In 2019, the town received close to $450,000 in revenue from pay-and-display parking at its beaches.

This year is a different story, as all waterfront parks remained closed except for De La Salle Park, which only recently opened at limited capacity.

The town is forecasting more than $430,000 in lost revenue by the end of September from pay-and-display parking as a result of beaches being closed -- that's more than 85 per cent of the revenue received in 2019.

The town is also bracing for a loss of about $1.2 million by the end of September as a result of cancelling recreation programs and summer camps. User fees for public swimming, skating and permit fees also dried up, as there’s no decision yet on when town facilities will reopen.

The Civic Centre remains closed to the public, meaning the town is issuing a limited number of building permits -- leaving an estimated hole of about $565,000 in development fees by the end of September.

Not only did the town lose money by cancelling programs and keeping the beaches closed, but it also spent more to help control the COVID-19 situation.

Increased expenses include staff overtime hours, providing PPE for employees, increased sanitization and cleaning and adding fencing and signage to closed parks.

Another expense includes the $250,000 emergency grant established to help local small businesses recover and reopen.

The town employed a number of mitigation measures to help curb the climbing costs of COVID-19, including laying off part-time town and library staff, not hiring seasonal staff and not filling vacant positions -- saving more than $1.2 million on the town’s bottom line.

Instead of hiring additional staff during the all-hands-on-deck situation, full-time staff were deployed to other departments and some became park ambassadors, monitoring closed parks and directing residents.

Without those mitigation measures, the town's debt would be sitting at an estimated $4 million by the end of September, Wheater added.