Nunavut capital’s finances improving but deficit risks remain, say top staff

Iqaluit’s chief financial officer, John Mabberi-Mudonyi, said Nov. 22 most of the city’s accounts are in better shape than last year, but are still running deficits. (FILE PHOTO)

The City of Iqaluit’s financial health appears to show further signs of recovery from the massive deficits reported in the city’s accounts last year, according to a release of third quarter statements to city council, Nov. 21.

But city administrators warned councillors that while the symptoms are being treated, the root cause of the city’s financial woes remains in a policy of allowing municipal services to continue operating at a loss every year.

One solution—increasing water rates—may be a tough pill for Iqalungmiut to swallow, Iqaluit’s chief administrative officer, Muhamud Hassan, told Iqaluit Mayor Madeleine Redfern and city councillors.

“We constantly are trying to come up with a solution on how can we account for the true cost of water. It’s something that you guys are going to have to discuss in time,” Hassan warned.

Currently, residential water rates remain low thanks to a subsidy from the Government of Nunavut, leaving commercial and industrial clients paying for the majority of the water service.

“The subsidy in a lot of ways actually hurts the city, because we have so many users on the subsidy we’re actually losing money,” Deputy Mayor Romeyn Stevenson added.

“It’s going to be a tough, tough sell. How do you sell that to the public?” Hassan asked, stressing that the city remains focused on cutting down its deficit.

After figuring that out, Hassan said, the city can have an “honest discussion” on its water rates.

Most city accounts continued to operate in a deficit as of Sept. 30, but remained above the end-of-year shortfalls tallied from 2015, Iqaluit’s chief financial officer, John Mabberi-Mudonyi, explained.

That includes both the city’s water and sewer funds and sanitation funds, which account for the bulk of the municipal financial drains in recent years—about $8.2 million in 2015.

“This fund is moving forward in the right direction, but its still in the negative,” Stevenson said about the city’s water and sewer fund, whose deficit has improved to $1.79 million over it’s 2015 closing deficit of $6.1 million.

“As everybody knows, this is the fund that we struggle with the most over the years.”

Mabberi-Mudonyi speculated that council’s decision to repeal the city’s controversial “Waterless Wednesdays” policy may have contributed in part to the city not reporting high savings in the fund.

“As you know, Waterless Wednesdays, it was actually bringing in some savings,” Mabberi-Mudonyi said, but added “at least we’re still going in the right direction.”

The city’s general operating fund reported a healthy surplus of $14.1 million in its third quarter, continuing the trend from second-quarter financial statements in June.

The availability of that money will allow the city to accommodate for the new expenses of operating it’s new aquatic facility, which is set to open sometime in January.

The funds will also give the city much needed room to budget for infrastructure and capital projects in the New Year, Hassan explained, and will create leverage for the city to pursue additional territorial and federal funding.

“The whole reason why we’re working so hard to have a surplus in that fund is that, come the budgeting process, we actually have funds to do things we want to do,” Stevenson said.

“Right now we are lobbying the federal government for funding and we need some money in the bank to produce our share,” Redfern added.

According to its third quarter consolidated financial statement, the city is currently sitting on about $17.1 million in government funding, earmarked for various projects, that has yet to be spent.

A series of budget amendments, presented to city council Nov. 8 and amounting to about $249,000 in additional expenses, was not included in the city’s third quarter statements.

Councillors voted not to pass those budget amendments at that time but are expected to approve them at council’s next meeting, Nov. 22.