A good balance sheet

An exchange between Mr. Fox, leader of the opposition, and Prime Minister Pitt from The Madness of King George: Fox: Do you enjoy all this flummery, Mr. Pitt? Pitt: No, Mr.

An exchange between Mr. Fox, leader of the opposition, and Prime Minister Pitt from The Madness of King George:

Fox: Do you enjoy all this flummery, Mr. Pitt?

Pitt: No, Mr. Fox.

Fox: Do you enjoy anything, Mr. Pitt?

Pitt: A balance sheet, Mr. Fox. I enjoy a good balance sheet.

The sober burghers of Whitehorse will be pleased to learn that our city appears to be run by stolid Pitt-ites.

With the city budget debate coming up next month, and having a certain affection of my own for balance sheets, I decided to read the City of Whitehorse’s 2012 financial statements. These are the most recent audited statements available.

I have to admit that, going in, I suspected our city council of having certain pro-flummery tendencies. So I was surprised, as so many are, when I got to Note 2 of the document.

I had already learned that tax revenues went up $2.1 million, or eight per cent, in 2012. This was not a surprise, since more than a few property owners complained to me at the time about their tax bills going up.

The surprise in Note 2, for readers still with me, is that the city contributed $1.7 million to its reserves in 2012. This means that city council had a choice to be popular and hold the line on taxes, but instead chose to strengthen our municipal balance sheet.

Over $435,000 was added to the Building Replacement Reserve, which is where the city stores money to rebuild non-recreational, non-sewer buildings that need rebuilding. Over $350,000 of revenue was shunted into the Parking Development Reserve, which is for “parking related capital projects,” while $457,113 went into our general contingency reserve. Various other Pitt-friendly reserves were also topped up.

The citizens of bankrupt Detroit probably wish their city council was more like Whitehorse’s, and hadn’t been run by flummery extremists for the last 50 years.

The city’s reserves were $24 million at the end of 2012, up 63 per cent from just two years previously. Meanwhile the debt (Note 4, if you’re reading along) was around $11 million, up 10 per cent over the same period.

Mr. Pitt would probably approve of all this. I don’t know if city council takes advice via Ouija board like Prime Minister Mackenzie King used to do in Ottawa, but Mr. Pitt would probably recommend more of the same in the coming budget. He would not be swayed by business owners and residents complaining about tax hikes as the Yukon economy slows down.

Nor would he be swayed by those (including yours truly) who argued last year against the city’s proposal to cut the property tax exemptions given to non-profits like the Guild, Biathlon Yukon or the MacBride Museum.

The balance sheet’s needs are paramount, he would say.

If Mr. Pitt were to criticize our civic leaders, he would probably say that they have not been loud enough about their pro-balance sheet policies. I don’t recall them saying that subsidies for Mount Sima couldn’t be afforded because that would require the reserves to be augmented more slowly.

Others have criticized the city for not being transparent about how the money moves back and forth between the operating budget, capital budget and the reserves. Some have gone so far as to claim that the reserves are being built up so the city government can afford to build itself a new headquarters building.

I hope this is not true. The current building on Fourth Avenue is perfect on the primary criterion for being a good administrative centre: it is already paid for. Mr. Pitt would be very wary of schemes for new headquarters buildings, especially if they involve elaborate financial partnerships with third parties.

On the transparency point, I did a word-search in the “Complete Budget Package” for the current spending year. There is no mention of the Building Replacement Reserve. And the chart “Where Does Your Tax Dollar Go?” does not have a slice showing reserve accumulation despite the fact that – clearly – lots of our tax dollars have ended up in reserves.

I hope that the city improves the information in the budget package it debates in January. We should see operations, capital and reserves all in one easy-to-understand package. If there is a tax increase coming, citizens deserve to know in advance how much will be used for flummery and how much for the balance sheet.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Twitter @hallidaykeith