Digging holes

Costs rise, debt grows as financial stress mounts

The County’s financial picture deteriorated badly in 2024. According to newly released audit statements, municipal costs soared last year—far exceeding 2023 and much higher than budgeted. Salaries and wage expenses spiked up 13.5 per cent. Interest payments jumped 33 per cent, while materials and supplies—the things needed to provide municipal services—spiralled upward by 40 per cent over the year before.

Taken together, Shire Hall’s operating expenses rose nearly 15 per cent in 2024 — $8 million more than budgeted. Inflation, meanwhile, clocked in last year at 2.4 per cent. It isn’t the cost of living driving the rising costs in this municipality.

But the County didn’t start the year in a strong position. Twenty twenty-four began with a net debt (financial liabilities greater than its financial assets) of $38 million— meaning Shire Hall owed more than it could pay back. It got worse during the year.

By the end of 2024, if lenders had called in their temporary loans and creditors had demanded payment for their bills payable by the municipality, Shire Hall would not have had enough cash to pay them.

In this awkward position, the County must either sell assets or raise property taxes to restore the municipality to a positive net worth. Unable or unwilling to sell its things, it will be residents who bail out the municipality’s dismal financial performance.

But that job became much harder, as the County’s net debt grew to $55 million last year. Rather than work its way out of its hole, Shire Hall dug it deeper by $18 million last year.

Runaway costs are a problem. Net debt is another problem. Together, they spell extraordinary stress on municipal finances. It may mean higher borrowing costs and additional strain on service delivery. It most certainly portends higher property taxes. The County’s audit committee will receive and review the auditor’s report today (Wednesday).

THERE’S MORE
The situation is worrying enough. Yet Shire Hall still has big spending dreams. At least some on County council remain stuck on spending hundreds of millions of dollars to build a pipeline to run water from Wellington to Picton and to rebuild County Road 49.

One piece of the waterworks plan—trunklines in Wellington—is already a year late and likely similarly over budget.

At the end of 2024, the County already had about $200 million of capital projects on its books. But that’s just the tip of the iceberg on the horizon. Council is looking at adding $300 million in waterworks spending, and perhaps $25 million or so to rebuild CR49.

Rather than working out of its financial predicament, Council seems intent on digging its hole deeper.