Who remembers the movie Forrest Gump with actor Tom Hanks? There is a scene where he is at the Washington memorial in DC about to tell a huge protest crowd about the war in Vietnam, and then just as he starts to talk some military officer in the back pulls out all the microphone cables so that the crowd can't hear him.
Well, I made a presentation Tuesday night at North Bay city council on North Bay's Financials, Moody's credit report, and made some recommendations. One minute into my talk, the audio cut out. While I don't believe there was anyone in the back pulling out the cables, it did remind me of the movie and brought a smile to my face at the irony of the situation!
For the benefit of those not at council but are interested in reading my review and list of 8 recommendations, here is that presentation, below. It includes new and innovative ways to dramatically and practically increase city revenues, lower expenses, bring in jobs, make changes at Invest North Bay, eliminate North Bay's long-term debt while at the same time eliminating the need for any property tax (levy) increases, completely. There is a way to practically address the city's growth and infrastructure replacements, and not on the backs or wallets of city residents. Give it a read and tell me what you think!
Aug 17, 2018 Presentation:
Good evening Mr. Mayor, councillors, to the members of the public that are present tonight and those watching at home.
I’d like to begin by saying I appreciate the opportunity to present to you this evening and share some of my thoughts on the city’s financial position, after having conducted a review and analysis of the 2017 financial statements and, Moody's credit report.
Review of 2017 Moody’s report & financials
I’ve read and reviewed the financial statement on the city’s webpage and the last two years of moody credit reports for our city. A few months ago the city refused to release the Moody’s report publicly but instead offered for members of the public to come into City Hall and have a read of the document. Most people are not going to go out of their way on a weekday during business hours to City Hall to read a boring financial report.
However, I’m not most people, and I did go to City Hall and I gave it a read. So for the benefit of council and the public, these are some of the comments from that report:
- that our “smaller economy and constrained ability to increase own source revenue present a challenge for the city”.
- that “property taxes and user charges for services such as water and wastewater accrued for only ¾ of city spending”. That means that 25% of city spending is coming from debt sources, not revenues.
- two years in a row Moody’s says the cities “debt issuance was less than planned “
Hydro
I’ve spoken publicly and written about the city’s recalling of the Hydro loan’s. Echoing my comments on the matter the Moody’s report went on to state that “while the calling of the utility loans provided a short-term increase to cash and reduced reliance on debt, it does NOT provide for long-term solutions to all of the city’s funding needs”.
Now while the one hand is racking up the debt the other hand at the same time has been taking in surpluses from overcharging on property taxes and has used that money to build city reserve funds. In only a three year period From 2013 to 2016 when our city was losing jobs, house values decreased, and our population was shrinking, North Bay’s cash reserves increased by over 100%, going from $30 million-$64 million.
So what can we do? Here are 8 short term and long term Recommendations that can be implemented:
1. Lower spending. One of the ways our city is going to be able to change direction to a more fiscally prudent manner is to reduce spending on growth projects that do not directly generate revenue or bring in jobs. Another way to lower spending is by finding efficiencies.
2. JOBS – we need a dedicated effort to support our existing businesses and also in finding new employers to come to our city, big and small, from Microsoft to Bobs fishing supplies. When we get the jobs, we will get growth because people follow jobs, not the other way around.
3. Increase revenue. The other way our city can spend money on growth but not through tax increases, is by finding ways to increase own-source revenues. I think Invest North Bay as an economic development arm of the city could be a great tool if utilized properly, and if put to work efficiently. Also, The municipal act was changed this year which now allows municipalities to invest money that’s not being used. We don’t want tens of millions of dollars wasting away in the city’s reserve bank account’s that make little to no interest while losing value to inflation.
The City has the ability through Invest North Bay as well as directly to put the tens of millions of dollars we have in the reserve to work in the stock market, private-public partnerships that generate revenues, bonds, to partner with local businesses for an equity position, just like on Dragons Den. We now have an opportunity to Provide real outside the box thinking to generate revenues dramatically for the city and lessen the financial burden on its current residents.
4. Managing Debt. North Bay’s debt servicing costs are 7.7% of revenues. So for every one dollar of revenue that comes almost 8 cents is going towards paying debt. Paying off all or a portion of the city’s debt even on a phased-in approach could give north bay a real boost over the next few years. Last year the city spent a total of $11.5 million to service its long-term debt, with over $1.5 million going towards interest payments alone.
If the city were to pay off all or a significant portion of its debt they could keep that 7.7% and effectively earn an additional 11 ½ million dollars per year, instead of paying it to the banks. That would be more than enough money to cover all the new spending the city wants to do over the coming years for new police stations, arenas, libraries and downtown waterfront master plans while at the same time eliminating the need for annual tax levy increases completely.
5. Summer in the Park. There have been some changes this year which I’m very interested in to see how those changes pan out in the end, however, the biggest drawbacks to our festivals success is the consistent last-minute booking and announcements of the musical acts.
Last summer Mattawa Voyager days and Timmins Stars and Thunder festivals came out with their financial results within a month or two of their festivals ending, and they announced the next years line up close to 6 months before North Bay.
I for one look forward to this year’s festival and going to Saturday nights country show, but two months ago we didn’t even know if there would be a Saturday musical act at all and it wasn’t until last month that the musical act was even announced, again last minute. Establishing a timeline for results, ensuring the Festival committee and Council sticks to that timeline, and providing next year’s festival with funding it needs to book acts right now, or at least immediately after this year's festival ends is the only way to even give our future festivals any chance at booking a major musical act and succeeding financially.
6. Moratorium on cash advance/payday loan stores. These type of stores are modern day loan sharks that keep the poorest of our poor trapped in an endless debt cycle. Ontario laws were changed in the last year to give municipalities the authority to take action against these moneylending predators. Until this council or the next council comes up with a definitive plan to deal with or change how things are being run with these moneylending stores, let’s at least put into place a moratorium so that not a single new one can open. That is a motion I think this council can easily get behind and accomplish in a very short time.
7. Invest North Bay needs to start moving in a different direction and requires dedicated full-time input. This could fall under the leadership of the city’s CAO, or the city’s budget chief or lead to the creation of a Chief Investment Officer position that could work hand-in-hand with Council, Invest North Bay, with our city’s economic development department, Tourism Department, and the Chamber of Commerce, to maximize tax dollars being spent and to start bringing in revenues. We need someone to step up to the plate full time and take action and be accountable to the taxpayers for achieving results.
8. Handover. Being in the military you tend to move around a lot and take on new positions in new places with new rules and responsibilities. I can say from personal experience that a proper handover of duties and responsibilities can go a long way to ensuring a smooth transition. As we are entering the election period, some of you will be returning to Council and some of you won’t, which just goes to drive home the importance of having a proper and complete handover so that the next Councillor in charge of the Efficiencies Review Committee doesn’t have to start from scratch and begin the process all over again.
Finally, North Bay has a lot of potential and it also has a lot of challenges in its future. This council can take steps before your term ends to bring about positive and meaningful changes in some of the areas that I have discussed with you tonight.
I want to thank each of you for your service to the city these past years and for listening to me this evening.
Thank you very much.
Neal McNamara
