City of Powell River councillors were told that to maintain current services in 2022, taxpayers would be facing a 7.07 per cent increase from the 2021 city taxation.
At the November 25 finance committee meeting, chief financial officer Adam Langenmaier presented the preliminary 2022 to 2026 financial plan, outlining in detail the city’s financial position and obligations. After considerable discussion, councillors instructed staff to see if a lesser increase of 4.1 per cent can be implemented.
Langenmaier said he was before the committee seeking guidance.
“This is really the opportunity for the committee to dig in, have those questions and mould what you want city services and the city budget for next year to look like,” said Langenmaier.
He said that at the August finance committee meeting, councillors gave direction that they would like to see the status quo continue.
“Services provided in 2021 will become the basis of the services for 2022,” said Langenmaier.
He said he has moved away from what the average household change will be because it confuses people, so he’s not going to reference that anymore.
According to Langenmaier, currently, the financial plan as presented is out of balance. He said it is short $152,000.
“If we want to keep everything the same, for the required increase to maintain current services, we’d need $827,000, so it would be a 5.47 per cent increase over last year’s overall taxation,” said Langenmaier. “We bring in some of the change requests and capital projects, which brings us to an additional $241,000 in revenue we’re looking for, so this is an additional 1.6 per cent tax increase.
“This brings the overall 2022 preliminary additional taxation needed to balance the budget at $1,069,100, or a 7.07 per cent increase. That’s a pretty big number and that’s why I’m bringing it to committee early to discuss. What do we want to do about this?”
Langenmaier said that in the preliminary housing assessments, the city is seeing a significant increase in 2022 over 2021. He said in 2017, there were changes of about 19 per cent, but there is potential for a 30 to 40 per cent increase in assessed value of homes in 2022.
“That will impact the historical tax ratios used to drive what our commercial rates are, our recreation, farm and industrial rates,” said Langenmaier. “They are all based on what the residential rate is. When residential assessment rises, what you do to maintain a smooth tax levy is you reduce your tax rate. We don’t simply have a rise in assessment and keep the rate the same because taxes would increase significantly and that’s not what we’d like to do.
“However, if your commercial assessment is not changing at the same rate as your residential, but you are trying to keep to the same tax ratio targets, you can have reductions in your commercial taxation, inadvertently caused by the increase in your residential assessment. When we have more concrete information on what the change in assessment does, we will likely see a change in the recommended tax ratios.”
Wastewater plant impact
Langenmaier brought up the consolidated wastewater treatment plant. The question he is hearing from the public is: how much is this going to impact my taxation? So far, interest rates have been stable, said Langenmaier.
According to his report to the finance committee, by 2023, it is expected that the project will be completed and by 2025, all debt will be transferred from temporary to long-term borrowing. Debt servicing costs will remain at an estimated $1.3 million per year.
In terms of expenses, the city is expecting a 7.5 per cent increase in wages, which accounts for more than 50 per cent of the city’s spending, according to Langenmaier. The RCMP cost will also be increasing, with recent unionization and ratification of the first collective agreement.
Langenmaier said for Powell River, the estimated retroactive payment is expected to be $850,000. The city has been accruing a liability for this, so cash has been put away since 2017 to assist with the payment.
Langenmaier said balancing the financial plan would either require an increase in taxation, decreased expenses, increased transfers from surplus or other reserves or a combination of all three to achieve a balance.
Finance committee chair George Doubt said the recommendation is that the committee receive the report, and that Langenmaier would like direction regarding change requests, the tax levy and services council wishes to provide.
Councillor CaroleAnn Leishman said once again the city finds itself in the conundrum of raising taxes or cutting services.
“I’m not surprised we are looking at potentially a seven per cent tax increase if we want to balance the budget and hold the line on services,” said Leishman.
Mayor prefers service cuts
Mayor Dave Formosa said it all comes down to what council’s appetite is to increase taxes.
“I’m going to say no more than three or three and a half per cent [increase],” said Formosa. “The rest has to come from cuts. Nobody wants to see services cut but we can’t keep going five, five, five, and then seven per cent.
“It’s terrible. Nobody wants to see services cut, but we’re going to need staff to come back and tell us where they can create some savings because we don’t have $1 million extra. We’ve got a big challenge in front of us.”
Councillor Maggie Hathaway said it’s time for council to do some heavy lifting and perhaps look at cutting services or finding innovative solutions. She said cutting services is not something she wants to do but maybe it’s time.
Doubt said he hears from people who are upset about taxes and how high they are now, and the fear of how high they might get.
“We’re going to have to do some hard work and look at the reality,” said Doubt. “You can’t keep spending more money and have lower taxes.”
The committee bandied about what to look at in terms of a potential increase in taxes. Chief administrative officer Russell Brewer reminded the committee that last year’s increase was 4.8 per cent.
After extensive discussion, the committee directed Langenmaier and senior staff to look at a financial plan representing a 4.1 per cent tax increase.