Experts warn Sherbrooke needs to stabilize budget

On Monday night Sherbrooke’s city council heard from Université de Sherbrooke professor Mario Lavallée, hired by the city in a consultative capacity based on his expertise in financial management, and Nathalie Lapierre, Director of the city’s finance division, that its budget needs to be better managed in the face of growing debts and deficits.

“The goal of the presentation was to present a concept we call a structurally balanced and sustainable budget,” Lapierre told The Record, explaining that such a budget takes into account costs past, present, and future. “It is a budget with a more long-term vision.”

The finance division director noted that a partial analysis of the city’s current material assets (not including roads) indicates that there is more than $97 million in general maintenance work that should have been done already to keep buildings, vehicles, and other city properties in good shape. That figure, combined with the fact that analysis shows the city’s surpluses to be consistently too small to address major issues, indicates a need for action given the fact that it does not take into account present or future costs.

“Having the information means that it needs to be addressed,” Lapierre said, putting an emphasis on the building of a financial cushion or rainy-day fund. She explained the urgency with regard to the city’s debt load by comparing it to an example of two people who each buy a $200,000 house. In her example, the first person has a $50,000 downpayment and the other doesn’t. Since the first person’s initial debt load is smaller, the amount they eventually pay for the house ends up being smaller because they pay less interest; by applying the same principle of debt reduction to city projects, she said, a great deal of money could be saved in the long term.

The finance division director acknowledged that this issue is not unique to Sherbrooke, but pointed out that the municipalities of Montreal, Quebec City, and Gatineau have been more proactive in addressing the matter. She offered the example of the dedicated infrastructure tax implemented by Montreal as a measure put in place to help decrease the amount of borrowing needed for large projects. By having more money set aside in advance for infrastructure projects, the city gets to reap the same benefit but with less debt burden, bringing it out ahead overall.

On the subject of what Sherbrooke needs to do however, Lapierre said that decision rests with the City Council.

“The presentation was really to inform the council,” she said. “The goal was not to identify the steps that need to be taken to address the issue.”

Lennoxville Borough President Claude Charron echoed Lapierre’s position that this situation is not unique to Sherbrooke and although he agreed that it is serious and needs to be addressed, he did not have an easy answer to how.

“Every budget, with no exceptions, we are trying to keep the taxes down,” the council member said, blaming the fragile finances in part on the “vicious cycle” of trying to keep taxes low while also providing services to the population. “There’s no miracles and there’s no easy fix, but if we carry on like this, we’re going to get stuck one way or the other.”

Charron pointed out that the city has been working on ways to cut costs for several years now, citing examples of reduced garbage pickups and partial snow clearing, but he said that there is a balance to be struck between cutting costs and reducing quality of life for the residents.

“An outdoor skating rink is very expensive because it melts and then you have to rebuild it, so it takes a lot of work, but I still have a hard time with the idea of cutting skating rinks because when they’re open they’re used,” he said.

Charron also noted that a large percentage of the city’s budget is committed to expenses that cannot be changed, like union-mandated salaries. Those set costs, plus requirements from the provincial government and rising costs for necessities like asphalt put the city in a challenging position when it comes to making decisions about how to get the budget on track.

“We’re always looking for places to save money,” he said, “but it’s all a drop in the bucket.”

Reiterating that her job is to advise rather than to tell the council what to do, Lapierre councilled that when it comes to long-term planning, even the smallest amount of saving can make a difference.

“What happens next depends on the council’s priorities,” she said.