2010 Cultus Lake Budget commentary
Cultus Lake has been encountering some serious financial difficulties over the past few years, and this is the first chance that the new park board has to correct the situation. Before I go on about the 2010 budget, some background information is required to explain how we got into a situation that required so much drastic action.
Financial Summary of Cultus Lake Park, 2003 to 2009
In the three years from 2003 to 2005 the park has managed to live within its own means and managed to run a total of $400,263 in surpluses. The surplus is defined as revenues minus expenses and capital expenditures. At the end of 2005, they had approximately $1.33 million in cash, cash equivalents and investments, which was a healthy buffer.
In 2006, the park board spent $124,526 more than they received, which was the first deficit incurred in quite some time.
In 2007, the park board spent $36,274 more than they received. The deficit would have been larger if it wasn’t for the fact that the park board received a substantial one-time sum of money relating to the expansion of the Cultus Lake Waterpark (waterslides) – if not for this, the deficit would have been much, much larger, approximately $400,000 to my calculations.
In 2008, the park board spent $766,368 more than they received. This massive deficit went through approximately half of the remaining cash balances of the park.
2009′s park board budget was passed by the previous board on November 26, 2008. It was a very poor budget that did not account for capital expenditures, and expenses continued to balloon at a ridiculously high rate.
As a result of the past four budgets, the park board is in a situation where they are out of cash and where our revenues were clearly over our spending amount – essential capital projects (e.g. replacing the roof in the plaza) needed to be performed, but they weren’t because of the budgetary situation.
Working with the 2010 Budget
The 2010 budget, as originally presented, would have resulted in a $790,000 deficit. As we no longer have money in the bank account to bridge this deficit, there are only three ways to deal with deficits, in no particular order:
1. Raise revenues
2. Cut expenditures
3. Sell assets
I made several motions to bridge the deficit, all of which the board carried. They were as follows:
1. Increasing the Sunnyside campground seasonal rates.
Sunnyside’s actual result for 2009 will be approximately $1.77 million; the budgeted amount for 2010 is now $1.88 million, which is an approximate 5.9% increase. Sunnyside campground contributes approximately half of Cultus Lake’s revenues and there can be no significant revenue increase without involving Sunnyside. Our seasonal camping rates are significantly lower than competing campgrounds (even those with lesser amenities) and judging by the waitlists we have seen, there is lots of demand for seasonal camping spots.
2. A reduction in expenditures and wages by 5% from the original 2010 budget.
Cultus Lake’s expenditure increase has been growing at an unsustainable rate (7.8% in 2007; 13.2% in 2008; 9.5% in 2009) and this must stop. This reduction in expenses, assuming the budgeted values turn out as expected in 2010, will result in a 1.7% total decrease in expenditures from 2009 to 2010.
This is the first planned decrease in expenditures in at least the last 7 years.
3. Reduce the capital projects planned for the year.
We will only be spending what is absolutely required (replacing the plaza roof) and maintaining an amount for the paving replacement program. Until we get our financial sense of direction back, we cannot spend money on discretionary capital expenditures. The capital expenditure budget is $184,000.
We are putting away $122,000 in reserves, but this money will only be spent once it is earned. The previous board spent reserves before they were even earned.
4. Increasing the parking fee from $3 to $5.
This measure will raise about $40,000. The park spends significant amounts of money on its public places (such as garbage cleanup, security, etc.). While we are very happy to share the beauty of Cultus Lake with the public, the only way we can recover part of these costs is through parking fees. During the summer, the parking lots we have are filled to capacity and it is only during the summer period that we expect to have people manning the parking lots.
Even after this change, we will be spending far more money on public services than we will be taking in through parking fees.
5. Increasing residential and commercial leaseholder rates.
Residential leaseholders will be facing an average of 17% on their residential leases, and commercial leaseholders will be facing an average of 7% on their commercial leases. While 17% may sound like a huge increase, it is based on a fraction of their total property tax expense.
Residential leaseholders pay two sets of taxes – one to Cultus Lake in the form of lease payments, and one to the Fraser Valley Regional District (FVRD) in the form of property taxes. On a typical Mountainview Road home worth $425,000, the CLPB lease payment in 2009 would be $1,056 and to the FVRD would be $1,845. A 17% increase in the lease rate means an overall increase of 6.2% on a typical leaseholder.
6. A reduction in pay for Park Commissioners
At the end of each year, commissioners receive a $1,200 cheque for communication expenses, whether they actually have incurred any expenses or not. This typically would go towards items such as a cell phone, or a printer, but it is completely up to the discretion of the commissioner. I made a motion, that subsequently carried, to reduce this to $800. In addition, our stipends will be dropped by 5%, which is approximately a $2,500/year cost savings.
As a result of these two changes, the total drop in a commissioner’s take-home pay will be about 10%.
The cost savings to the park will be $5,300, which is a drop in the fiscal bucket, but it is part of my personal belief that the pain in this budget should be felt by everybody, including us.
Net result after the 2010 Budgetary process
With all of these changes, the projected budget will show a surplus of $165,423, which will be the first surplus produced by Cultus Lake Park in 5 years. This budget also provides for a 4.6% cushion in case if there are operational hiccups during the year.
These decisions I have not made easily; everybody who is a stakeholder in the park, whether residential, commercial or visitor will be feeling the adverse impact of these decisions. However, if we did not make these decisions, we would be plunged into insolvency.
Fiscal discipline is absolutely required for a sustainable Cultus Lake Park, and 2010 will be the year that we make sure our fiscal ship is in order. If we execute this correctly, this will hopefully be the only year where we have to take such harsh decisions.