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'Paper' deficit of $1.7M at counties

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The United Counties of Leeds and Grenville ended 2012 with an operating deficit of $1.7 million – a shortfall officials say exists mainly on paper.

As he presented council's governance and finance committee with the upper-tier government's 2012 financial statements, auditor Howard Allan said the county is in a net asset position, unlike other county governments, and also enjoys plenty of room on debt repayment.

“I really think that this municipality enjoys strong financial management,” said the Perth-based chartered accountant.

The year-end deficit is the result of new standard accounting practices that require municipalities to include amortization of assets into their operating budget, said counties director of corporate services Nigel White. In essence, the deficit is due to the longer-term depreciation of the county's infrastructure: roads, buildings and other assets.

“It wasn't a cash deficit,” said White.

From a cash point of view, the upper-tier government broke even in 2012, he added.

The province has required municipalities to have asset management plans done by the end of 2013, which will set out how they plan to address the costs of aging infrastructure, noted White. The counties will also have to build in amortization in its annual budgets.

“There will be a deficit for years to come ... but not a cash deficit,” said White.

Allan told counties councillors they do need to look at their aging infrastructure and also sounded the alarm over another calculation in the latest financial statements: nearly 40 per cent of the county's revenue comes from the provincial government.

“If the province changes their policies, which they've been known to do, it could have a significant impact,” said Allan.

The counties’ strong financial position might actually put it at a disadvantage when dealing with the provincial government, Augusta Reeve Mel Campbell suggested.

He said the province “at least appears to be favouring” municipalities that don't balance their books.

While he did not cite specific examples, Campbell said municipalities in less favourable financial positions seem likelier to get grants from the province, which removes any incentive for good financial management.

“Right now, I would suggest that we have two sets of rules,” said Campbell.

Leeds and the Thousand Islands Mayor Frank Kinsella said he has had a similar experience in his township, saying municipalities that manage their books better don't get grants.

“If they look at our spreadsheet, they'll say: 'You can afford it,'” said Kinsella.

Allan said there has been a change in philosophy at the provincial level; the province now expects municipalities to be self-sufficient. He added the Eastern Ontario Wardens' Caucus remains an effective vehicle for conveying local concerns to the provincial government.

But this region still must face some stark political realities, said Allan.

“We just don't have a lot of political influence in Eastern Ontario. We don't have the seats. We don't have the votes,” he said.

Officials at the province's finance and infrastructure ministries had difficulty responding to questions about funding criteria without details of specific grant requests.

In an email to The Recorder and Times, infrastructure ministry spokeswoman Kirby Dier said the province's Municipal Infrastructure Investment Initiative (MIII) is providing up to $9 million to help municipalities prepare asset management plans, and nearly $90 million to address critical projects.

FACT BOX:

YEAR-END DEFICIT

The United Counties of Leeds and Grenville ended 2012 with a deficit of $1,714,124, from a 2012 budget of $88,857,625.

The deficit is up from a 2011 shortfall of $608,732.

The counties ended 2012 with financial assets of $27,189,394, compared to liabilities of $20,565,734. That leaves the upper-tier government in a net asset position of $6,623,660.

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