How Dawson City’s sewage plant keeps the Yukon budget in surplus

The Yukon government achieved a small, $13.7-million surplus in the last fiscal year, according to public accounts released this week.

The Yukon government achieved a small, $13.7-million surplus in the last fiscal year, according to public accounts released this week.

But the numbers had a bit of help from a problematic wastewater treatment plant in Dawson City.

The public accounts were hailed this week by the Yukon Party, which has campaigned on its fiscal track record and commitments to no tax increases and no net debt.

“Again this year, you’ve seen through tougher economic times that the Yukon government has again a modest surplus and that we continue to have net financial resources,” Yukon Party Leader Darrell Pasloski said on Thursday.

The Yukon Party government originally predicted a $23-million surplus for the 2015-16 fiscal year. That estimate was revised downward to just over $1 million this spring. The actual surplus now sits at $13.7 million.

But it turns out the government’s decision to own and operate Dawson City’s oft-malfunctioning wastewater treatment plant in February made a surplus out of what would have been a deficit.

The plant was supposed to be run by the City of Dawson, but the facility never worked as it was supposed to, and the city expressed concerns about taking it on.

Corix, the contractor, will run the plant until 2017. After that, the Yukon government may start paying for the operations.

But for now, the plant shows up as a $25-million asset in the public accounts and transforms what would have been a $12-million deficit into a $13-million surplus.

Pasloski had little to say about the matter when asked about it, and focused instead on how the Yukon is the only jurisdiction in Canada with no net debt.

Liberal Leader Sandy Silver, on the other hand, didn’t hold back.

“If this is the way that they balance the books, then that’s not good financial accounting,” he said. “It’s creative, I’ll give them that.”

Part of the reason the government wouldn’t have posted a surplus without the treatment plant is that its income tax revenue was more than $30 million less than expected. It totalled $65 million, down from an expected $96 million. In the spring, finance officials said the shortfall was due to adjustments from prior years and an economy that was weaker than expected.

Still, the Yukon Party government has now posted five consecutive surpluses, which have been central to its claims of a strong financial record.

It’s also true, though, that the government has spent more than it’s made for the last couple of years.

How is that possible?

The answer relates to recent capital projects, like the new Sarah Steele drug and alcohol services building and the F.H. Collins school. Instead of the cost of those projects showing up as an expense when they’re built, they actually count as assets, because they’re owned by the government. Their cost is spread out over time, as they depreciate. So even though the government’s cash reserves are declining, partly to pay for those projects, it can still record an overall surplus — for now.

The Yukon government’s cash in the bank totalled $223 million in the spring of 2015. A year later, it was down to $153 million. It’s expected to drop to $57 million by the end of this fiscal year.

Pasloski has also made much of the fact that the Yukon has no net debt, comparing the territory favourably to other jurisdictions.

“For this current fiscal year… Ontario has budgeted $11.4 billion to service their debt,” he said. “Servicing their debt is the number three expense item on their budget.”

But that’s not to say the Yukon doesn’t have debt at all. Currently, the Yukon development, housing and hospital corporations hold $202 million in debt, up from $189 million last year.

The biggest chunk comes from $100 million in bonds the Yukon Development Corporation borrowed in 2010 to finance the Mayo B hydro project and the Carmacks-Stewart transmission line.

That debt has revenue coming in to pay it off, in the form of ratepayers’ electricity bills. But that’s not the case for the remaining $43 million of debt from bank loans taken out by the Yukon Hospital Corporation to finance the construction of new hospitals in Dawson City and Watson Lake in 2013. That debt will be paid off by taxpayers.

Still, Pasloski says the Yukon government is in a strong financial position.

He pointed out that the territory’s population has grown, even as the economy has slowed.

“Every other downturn in the commodities cycle historically in this territory has seen an exodus of thousands of people, and that, for the first time, did not happen,” he said.

He also mentioned that Yukon has had the lowest unemployment rate in the country at various times over the last few years.

“We’ve seen the creation of hundreds of more new businesses since five years ago and the largest labour force in Yukon’s history.”

And in September, global credit rating agency Standard and Poor’s reaffirmed Yukon’s AA credit rating for the seventh year in a row.

The report lauded the government’s “long track record of strong management that produces solid financial results.”

Contact Maura Forrest at maura.forrest@yukon-news.com

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