Yellowknife Mayor Gord Van Tighem had sobering news for business leaders on Friday.

That was the sobering bottom line in the mayor's annual 'State of the Union' address to business people, sponsored by the Yellowknife Chamber of Commerce.

Van Tighem pointed to an "acute" shortage of housing and skilled workers as the most pressing problems facing business and the city in the coming year.

"Without substantial investment in workforce housing, the growth we have recently enjoyed may not be sustainable," he said.

"The current situation in the workforce housing market -- low vacancies, low housing production levels and rapidly rising costs -- leave Yellowknife in a poor position to accommodate new economic growth.

"Without affordable housing we can't attract the required resident workforce."

Construction in the city during the past year was close to the projected 400 unit-starts, and 252 starts are "already predicted" for 2003, he noted.

The challenge for the city will be in providing the necessary infrastructure, including land and services. Finding the funding for those services has not been easy, said Van Tighem.

The "unprecedented demand" for services and infrastructure to support new construction is straining the city's capital and operating budgets.

Property taxes and user fees make up about 80 per cent of the city budget. New development costs are "swallowing" the new tax revenues accruing, which typically lag well behind.

"It is likely that the city treasury will be in a catch-up position throughout much of the diamond boom."

Finding additional land for development is yet another pressing problem, he said.

"Where do we go from here? We have reached a crossroads. Land available for residential and industrial development is becoming scarce.

"We have (building) lots for this year but what for the future? Where does Yellowknife go next? Along the lake, along the highway? What about Con and Giant leased land?"

Van Tighem challenged business people to rekindle a spirit of working together, including with government. Finding solutions to the problems the city faces will depend on business and community partnerships and innovative "out of the box" approaches, he said.

"To maximize exploitation of opportunity we need to be creative. Are we still working together or have we become complacent?"

He added: "Perhaps it is time for employers and developers to formalize arrangements which will reduce risk and guarantee occupancy rates."

Other pressing issues to be addressed in the near future include: airport expansion; a bridge across the Mackenzie River; downtown enhancement; and waterfront development, said the mayor.

The city also needs to move forward with plans for a new school site; solid waste treatment; redevelopment of the Gerry Murphy arena site; and a permanent site for Aurora College.