CBRM, province disagree over funding issues as budget talks drag on

Cape Breton Regional Municipality's draft operating budget is still in limbo this week amid a dispute with Nova Scotia's Municipal Affairs Department over how to spend $3 million in bonus money.

The department also has a list of beefs with the municipality, but both sides say that is not a sign of a broken relationship.

The province gave CBRM the extra $3 million on the last day of the previous fiscal year, March 31, under a new capital grant program called the Sustainable Services Growth Fund.

It is targeted at capital projects such as accessibility, active transportation and housing, but CBRM councillors say that won't help with a draft operating budget deficit.

Municipal Affairs Minister John Lohr said the municipality appears to be ungrateful, especially since the province is spending $1.5 billion on other capital projects in CBRM, such as hospital redevelopment, the Tartan Downs housing project and a proposed medical school at Cape Breton University.

"It's a little bit frustrating for us as a government," he said. "We're doing so many things in CBRM and for CBRM.

"We've done more than any government in the last eight years ... probably ever, actually, and we continue to do more. So I want the citizens of CBRM to know that we are doing our very best for them and we want to work with the municipality, not against them."

CBRM looking for more operational funds

While CBRM has thanked the province for the extra funding, Mayor Amanda McDougall and several councillors said last week they would like the municipal capacity grant — which has been frozen for years — raised to help the municipality deal with increasing operating costs.

The minister and his deputy, Paul LaFleche, reached out to CBC News following coverage of the dispute last week. At the same time, the minister wrote an op-ed piece in the Cape Breton Post saying if CBRM needs more money, council should not have cut its tax rate last year.

LaFleche said he spoke with CBRM's chief administrative officer last week and made it clear that the $3-million capital grant could be used for operating expenses.

He said the province also offered to help find ways for CBRM to use the money in its operating budget.

"We have not heard from the staff since we offered last Thursday," he said. "We've made a few phone calls and we have people on standby waiting to speak to CBRM's financial staff."

On Tuesday, the mayor said staff had sent the budget to the province and the municipality has formally asked for help.

"To date, we haven't received a response back, and just awaiting those conversations to happen," McDougall said.

She added that it was still not clear whether the new capital money could be used in the operating budget.

"The terms associated with that $3 million were quite rigid. They're very strict and they do not say in any part that you can use that for operational. It is strictly for capital projects."

Council suspended its budget talks last week, hoping to get more information from the province on ways to avoid a deficit with the draft operating budget.

It had been short $4.2 million before council voted on cuts to some services, and increased user fees for transit and the municipal landfill site.

With the changes, the budget was still short $2.4 million.

The provincial PC government doubled the municipal capacity grant last year, giving CBRM an extra $15 million.

It was fulfilling an election promise to do that one time only, along with negotiating a new operating agreement with municipalities.

New deal still in the works

McDougall said she wrote to the province last week asking for any information about the new deal to see if it could help CBRM balance its budget.

"We know negotiations have not concluded yet, but if there's any possible way we could have a conversation about what to anticipate, that would really inform what we could do," she said.

Lohr said that deal is still in the works, but said CBRM should have used last year's extra funding for the long-term benefit of the municipality.

"We were a little bit surprised it was used for a tax cut and we were disappointed, because we know that the finances of the CBRM are a challenge for them."

LaFleche agreed.

"I think the disappointment there was using a one-time fund to institute a permanent cut," he said. "It's like getting an inheritance from your grandmother. It's a one-time thing. You don't use it to do permanent tax cuts."

Tax cut 'maybe' wasn't reasonable: minister

Council used about $4 million of the extra $15 million to cut taxes across the board by five per cent and it set aside the rest for debt reduction and future spending on Centre 200 arena and a new library.

The municipal capacity grant used to be called equalization funding that municipalities could use to offer reasonably comparable services at reasonably comparable tax rates.

Last week, McDougall also said that freezing the capacity grant was unfair because municipalities have to tax local properties for provincial services such as education, housing and corrections, and those costs climb every year.

LaFleche said the province was actually doing CBRM a favour by capping the grant at $15 million.

"The reason it was frozen back in 2015 was because CBRM was declining as a percentage of population in the formula and they would have continued to receive less and less money, " he said. "So the freezing of the equalization in 2015 was a great benefit to CBRM and allowed them to stabilize the money and it didn't go down."

Latest spat joins long list of irritants

The latest spat between CBRM and the province joins a list of other recent irritants.

In February, the minister expressed alarm over CBRM's financial indicators for things like tax collections, debt and the amount of money in reserve accounts. But CBRM staff said those were longstanding issues that are being managed.

The following month, CBRM staff and the minister disagreed over the reason for delays in financial aid stemming from the 2016 Thanksgiving Day flood.

Later in March, acting Municipal Affairs Minister Colton LeBlanc expressed disappointment with CBRM council's complaints over a lack of provincial support on rapid housing funding.

Getting it in writing

However, McDougall said she is not concerned about the relationship between CBRM and the province.

"I will continue to operate in a professional manner and making sure that anything goes on the record through my office ... and await response from the province in the same manner," she said.

Lohr said the differences may mean the two sides need to communicate more, and with the recent issue over how to spend the $3-million capital grant, communication may need to be more formal.

"Maybe everything has to be in writing, because from my point of view, a verbal conversation with my deputy minister with senior staff there results in a very different message being put out," he said.

"That's what I see happening and I'm not happy with that."

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