The District of Kitimat will be curbing capital expenditures after being rocked by the announcement of Eurocan’s pending closure late last month.

On Monday, November 2, Kitimat council gathered around the table for the first time since notice was given that the Kitimat pulp and paper mill will shut its doors effective January 31, 2010.

Councillors were briefed on the ins and outs of the pulp processing industry, before they crunched budget numbers.

“This is a huge blow to this town,” city manager Trafford Hall told councillors. “This is a very serious situation we’re facing. It will change everything, not just the municipal structure.”

He introduced a report to council on municipal response to the closure announcement.

“The entire processing industry in the northwest is gone. It’s probably going to take us three weeks to really understand what’s going on,” Hall said.

He urged council to impart “serious control” over capital spending by issuing both a hiring and expenditure freeze.

His report ordered all departments to exercise extreme prudence in municipal operations effective immediately.

Eurocan’s $4.724M contribution to the annual tax coffers will drop to an estimated $600,000 by 2011.

“We’ve maxed out our short-term debt with the interim financing of the pool,” Hall reminded council. “But we have a year. Then they’re will be a combination of tax increases on everybody and service reductions.”

Councillors around the table responded in a variety of ways.

Randy Halyk said council needed to make a decision immediately.

“We have to be careful that we don’t just draw back and stop everything,” he said. “I think the overall concept of this is that we need to be very, very cautious. And this is the way to do it.”

Mario Feldhoff requested that the recreation department remain unscathed by the cutbacks.

“I don’t want to be going crazy and cutting back recreation and quality of life quite yet,” he said. “I want the focus to be on departmental expenditures.”

“Our problem is not unspent capital monies, it’s the ongoing operating costs. I don’t want to give the impression I’m against cost-saving measures. We have to cut back on our spending. But I want to send a message that we’re committed.”

Said Feldhoff: “I guess we’re going to have to make changes, but we don’t have to make all the changes all at once. There’s lot of time to review the capital again for 2010 to adjust accordingly, but if people want to take individual capital items off the list, they can bloody well bring it back here and vote it off with the majority of the vote.”

He said a blanket policy could be dangerous. “We’re putting too much power into the hands of our administration according to their interpretation.”

Feldhoff told council that discussion is needed to decide what services the community values most. “We got elected to express the values of what we feel is most important,” he said, adding that if momentum continues on the LNG project, it might take some edge of the Eurocan blow.

Gerd Gottschling told Feldhoff that council should not be meddling into too many issues at this time.

“I find that we’re in a crisis right now,” he said. “We cannot micromanage but need to allow administration to do what they know best.”

After much discussion, Hall admitted being “somewhat discouraged” as his report represented a “standard response to major crisis.”

“On Wednesday, a major employer announced it was shutting its doors, and yet it remains business as normal,” he said in frustration. “Kitimat is facing a new reality.”

Hall told council that a serious expenditure change was off the essence. “We have to do it, and we have to do it now.”

“We’re not going to be spending unless council specifically says this money shall be spent, unless its necessary,” he said. “It’s not a carte blanche. The manager still must defer to council. But I’m telling everybody this is critical, it’s important, it’s large, stop right now.”

On top of crunching financial numbers, Hall said the municipal government will be looked upon to carefully explore all options to keep the Eurocan mill running.

The community will be counting on council “that we don’t allow this cornerstone industry to fail without giving it our best shot.”

He also noted that Kitimat will need to adjust to a plunging real estate market, a potential exodus of laid-off workers and the effects both will have on local education and health care. In light of this, he decided not to slash event grant funding in his closure response policy.

“Council may not want to send out a chill out to the community for things like the fair,” he explained. “We’re feeling pretty badly because we’ve got half the equity of our houses wiped out in a single announcement. Maybe we should have the odd party.”

Last time Kitimat lost 500 jobs, there was a 5-to-1 population direct job reduction, Hall added.

His report was accepted.