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2009 Town of Banff Budget
November 18, 2008
Mr. John Stutz, Mayor
Town of Banff
110 Bear Street Box 1260
Banff, Alberta T1L 1A1
Subject: 2009 Town Budget
Dear Mayor Stutz:
The Banff Lake Louise Hotel Motel Association (BLLHMA) is pleased to
have this opportunity to provide input on the Town of Banff’s 2009
Budget.
Fundamentally, we have a number of concerns with the proposed 2009 budget,
beginning with an overall revenue and expenditure scenario that suggests there
is nominal growth occurring within the local economy.
Where the numbers for growth may have been better substantiated earlier
this fall, the global economic crisis that continues to unfold in front of us
has led to a major rethink in virtually every segment of the private sector;
we observe that this level of concern is not reflected in the Town’s proposed
budget.
Although the Town indicates that the 2009 budget was based on a 3.73%
increase as part of the 2008 budgetary process, the 2009 modified budget
actually represents an increase of 7.5% - double the increase that was
forecast one year ago. The proposed increase in 2009 municipal tax revenue
represents a 7% increase over the 2008 forecast; but more concerning is the
proposed 29% increase in consumption charges (34% increase in water, and 26%
increase in sewer).
Notwithstanding the fact the Town flows-through the majority of business
license revenue for tourism marketing purposes through Banff Lake Louise
Tourism, we believe the forecast increase in 2009 business license revenue is
highly optimistic given today’s economic scenario and should be forecast, for
Town of Banff purposes, using both recent year’s historical data and
conservative economic growth projections.
The Town of Banff references the use of CPI data in constructing budget
forecasts. The CPI is a widely used budgeting benchmark because it provides a
wide measure of the cost of living in Canada. Although Statistics Canada
reports that consumer prices rose 3.4% in the 12-months
leading up to September, 2008, it is important to note that the CPI,
excluding gasoline, increased 2.2% in the 12-months to September; removing all
energy components, CPI only advanced a total of 1.9%. The precipitous decline
in gasoline prices in recent months should be accounted
for, particularly given the current downturn in global business activity.
To not adjust expectations downward presumes the Town knows the present
economic situation is temporary and that it will be business as usual by 2010.
If this is a deep recession, as some predict it could be, and conservative
estimates of expected reductions in business activity are in the double
digits, then the Town’s failure to make significant adjustments could threaten
to destabilize the Town’s financial and administrative resources headed into
2010.
The objective must be to provide a stable and predictable administration
through periods of growth, but particularly, times of economic contraction.
Now is the time to be nimble and look internally at how to conserve resources
and prioritize those issues that are of highest importance to the public.
Canada while, perhaps, best positioned to weather a sustained economic
downturn, is no less immune to a failing economy due to low consumer
confidence. The financial and economic tsunami may have started elsewhere in
the world, but Alberta could be the place where it finally washes up on shore;
how hard it will hit still remains to be seen.
As we prepare these comments, a number of key projects are coming to a
halt in Alberta; credit markets are still largely frozen and the dual effects
of a slowing construction economy and nimble consumer spending patterns
threaten to unseat this destination’s recent years’ hope that the strength of
the regional market will see us through hard times. While the BLLHMA remains
optimistic that this financial and economic crisis will be short-lived, we are
realistic in our expectations that 2009 will be the toughest year this
destination has ever faced.
Here in Banff, feedback received from member hoteliers and other
commercial sector interests points to an anticipated downturn in business in
the order of -10% (optimistic) to -30% (worstcase). When business is
confronted with this type of unbudgeted, impossible to forecast
scenario, discretionary spending stops. Instead of capital spending to
meet growing consumerdemand, spending translates to “frugally maintaining that
which one already has in place.”Instead of hiring more workers to meet growing
visitation, we ask our employees to “bear with us and work harder to become
more efficient and effective in meeting our guests needs.” Instead of being
able to meet many of our employees deserved expectation to see their wages
rise with inflation, we say “not now, but rather when the economy improves and
we are certain that we can sustain that which we increase.”
This is not a time to be expanding the size of local government; the
cost is too great. It will serve the long-term interests of both the private
sector and the Town of Banff if it comes to terms with the need to reduce its
expectations for revenue and expenditure growth, while leaving enough agility
in the budget to act on important opportunities when the economy improves.
As one of many private sector interests with a desire to help the Town
of Banff construct a budget that will serve the interests of all, we would be
pleased to sit down with Council and Administration to share some of the
assumptions we are working with as we head into 2009.
If you should have any questions, please don’t hesitate to call me.
Sincerely,
Darren Reeder
Executive Director
Cc Town Councilors
Robert Earl, Town Manager
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