Check against delivery.
Good evening Ladies and Gentlemen,
As required under the Act, I am taking a few minutes this evening to present the highlights of Gatineau's financial position for 2019, along with those of the Auditor General's report and the external auditor's report. The extraordinary situation we are currently facing raises a bit of a disconnect because, for 2019, despite the unexpected huge expenses occasioned by the major floods and the difficult winter, Gatineau's financial position remained very strong.
However, we already know that the pandemic is having a considerable impact on municipal finances, and that the picture for 2020 will be extremely different.
As mentioned, Gatineau's financial position for 2019 was very strong, as you can see from our financial results for the fiscal year ending on December 31, 2019.
Taking allocations and commitments into account, we achieved a net surplus of $6.5 million, which is relatively small when considered in the context of a total budget of more than $600 million and when compared to previous years. Given that by law we cannot adopt a deficit budget, it also attests to the tremendous discipline and prudence that guide our budgeting – and serves as a reminder of the need for strong government measures to support municipal finances in connection with this year's pandemic. I will get back to this point.
The net surplus for 2019 enabled us to allocate a further $1.275 million to cutting down ash trees, the same as in 2018.
In terms of additional expenses, the main highlight for 2019 is obviously the recurrence of the hundred-year flood, which generated expenses of more than $14 million, of which approximately $10 million are eligible for reimbursement by the Government of Quebec, leaving Gatineau to cover around $4 million. That expense comes on top of the $700,000 related to the September 2018 tornado, and of course the $2.7 million related to the 2017 floods. Even our winters are getting increasingly complicated and costly to manage given that, because of the tremendous climatic vagaries, it is much more difficult to project the necessary work and equipment. Extreme weather events caused by climate change are costing us more and more.
Yet, this situation also illustrates the need to take advantage of this crisis by reviewing municipal taxation. When it comes to covering additional unforeseen expenses, we have been highly dependent on the $8.5 million surplus from transfer fees, the $2.9 million surplus from building permits, and close to $1 million surplus from property taxes due to revised assessments.
In terms of debt management, most indicators remain at historically low levels, including debt servicing, which has fallen by 9.9%. It is important to point out that many of the projects funded by debt are relatively quickly repaid, such as the LED lighting transition plan, which will be fully covered by the associated electricity savings.
It should be noted that we only borrow when we have no choice but to incur the expense. Thus, the figure of $682.4 million represents the need for a term loan for projects, not the total debt to date.
In closing, the financial position for 2019, particularly in light of the current crisis, once again underscores the archaic and unsuitable practice of using property taxes to meet contemporary issues, and the urgency of reviewing municipal taxation. Whether trying to find ways to deal with the consequences of a health crisis or with environmental issues such as the emerald ash borer and the impact of climate change, we are confronted by a disturbing paradox. Development gives municipalities a source of short-term revenue, but that sometimes leads to urban sprawl or poor urban planning choices, and the revenues generated fall short over the long term, which only worsens the situation! The result is a rush to build cities that are poorly adapted to the 21st century, supported by continuously deteriorating infrastructures. This situation is untenable.
In 2019, municipalities and the Government of Quebec managed to take a step forward by signing a new fiscal pact allowing for the sharing of revenues related to the growth in the QST. For municipalities, this means unconditional new revenues that will keep growing every year, reaching a total of $25 million for Gatineau in 2024 at the end of the agreement. This was a historic achievement which, unfortunately, has been compromised by the imposition of a new financial charge on municipalities. Under Bill 40, municipalities are now required to subsidize Quebec's ministère de l'Éducation by having to pay for the purchase of land for new schools. We already manage 58% of public infrastructures with only 8% of public revenues, and this absurd decision only exacerbates the catch-up municipalities face in managing their infrastructures. Obviously, a great deal of work remains to be done before we can keep moving forward without taking a step backward on other fronts.
Unfortunately, the current crisis is but another example of this situation: even in response to a pandemic, a crisis that theoretically is not a municipal responsibility, Gatineau once again finds itself on the frontlines and taking on the leadership the community needs. But the financial consequences are out of proportion to anything ever seen before. Taking into account the STO's deficits, we are looking at a close to $35 million hit on municipal finances! Once the economic situation improves, the other government levels will see their revenues increase thanks to goods and services taxes, income taxes and business taxes. But we will still have nothing but property taxes with which to pay off our debts. Clearly, we will need financial assistance from Québec City and Ottawa if we want to maintain our services to the public. The talks in this regard have been encouraging, and we are hoping for some news within a few weeks.
Consolidating municipal finances amounts to consolidating the government that is closest to the front, the one that is in the best position to propose and implement solutions adapted to each community. After two floods, several hundred-year torrential rainfalls, a tornado, extreme winter conditions and now a pandemic…we know that the consequences of climate change will be felt for years to come. Municipalities are an essential tool in our collective response. They have to be strengthened. It's time for tax reforms.
Recognized for its quality of life, Gatineau is a city of 285,000 inhabitants. It is located on the north shore of the Ottawa River, and extends east and west of the Gatineau River.