While City of Powell River Council has tried to hold city tax increases to cost of living increases in recent years, it appears economic reality will force council to exceed the consumer price index increase this year.
At the finance committee meeting on Thursday, April 25, chief financial officer Adam Langenmaier explained the factors faced in this year’s budgeting process, which could result in increases over past years’ property taxation rates if council adopts the five-year financial plan as written.
Langenmaier said in preparing the latest draft of the five-year financial plan, there were no changes to the assumption of doing a five per cent or less increase to the residential tax rate, along with a decrease to the flat tax amount, from $335 per home to $250.
In terms of change from 2018 to 2019 in the draft, an increase in city taxation levy of $724,446 is forecast, according to Langenmaier. He said $170,000 of that figure was the result of new construction between 2018 and 2019.
In terms of a budgetary snapshot, the average single-family dwelling in Powell River was valued at $305,300 in 2018 and increased to $345,163 for 2019. In a report to council, Langenmaier said with the combination of a five per cent tax increase and $85 reduction in flat tax, the average single-family dwelling in the city will see a property tax increase of $94.40, which equates to an effective increase of 4.9 per cent. When factoring in charges for water, sewer and garbage, the increase is $121.60 for the average single-family dwelling, which equates to a 4.4 per cent increase in taxation.
“Although council is authorizing a five per cent change to residential rates, the average home isn’t going to see a five per cent change,” said Langenmaier. “Some houses will change more as a result of the change to the flat tax and some are going to see a lower increase than the 4.4 per cent.”
Looking at city expenses, Langenmaier outlined a reduction of about $200,000 from the first draft of the five-year financial plan. According to his report, reductions were achieved by more accurate wage expenses related to partial year filling of positions and removal of duplicate special projects.
“We were able to reduce expenses and move into a balanced budget, into a surplus position where we are able to put some funds back into reserves,” said Langenmaier.
In terms of the city’s reserve funds, transfers to reserves are lower than withdrawals from reserves.
“We are in a situation where the city is relying on savings to maintain current service levels and we’ve come to a point where, without a significant change, we’ll be facing hardship in the future,” said Langenmaier. “In 2019 we are able to pull it together, and work will have to be done over the next several years to get us to a place where we can maintain our reserve balances and contribute appropriately.”
In the summary of his report, Langenmaier stated the city is not in a strong financial position to continue providing services at the level historically expected. The city has been able to continue providing services at the expense of the capital program, reserve contributions and some staffing positions. Continuing this trend will result in severe infrastructure shortfalls in the future, along with a city that is not financially resilient to sudden changes in revenue, according to Langenmaier.
“Over the next number of years, the city must take steps to significantly decrease expenditures or significantly increase revenue to ensure long-term financial sustainability,” stated Langenmaier.
Mayor Dave Formosa said he was looking at a table Langenmaier had drawn up, and estimated the value of his house, which means he could see a 7.4 to 7.6 per cent increase in his city taxes in 2019, which Langenmaier confirmed.
Councillor George Doubt said he would like to see a lower tax increase but does not think there is a quick way to come up with a two per cent reduction to get it down to where everyone would like it to be. He said council and people in the city are going to have to start thinking about whether they want to see continuing tax increases or cuts in services.
“It’s not rocket science here,” said Doubt. “It’s finances and you either get more revenue or spend less money.”
He said he did not want to see a five per cent tax increase but does not see other choices at this time.
“Ad hoc reductions in services right now without careful consideration of what we are doing would be a bad idea,” said Doubt.
Formosa said council really has to roll up its sleeves and see what the future brings. He said the cost of living increase is about three per cent and council has always tried to hold tax increases at that level. He said the city has been working hard at finding new revenue sources but it is not enough.
“It’s not pretty going down the road,” said Formosa. “We could use 10 or 15 per cent and still not be there.”
Councillor CaroleAnn Leishman said it is way too late to start adjusting service levels.
“What we should be doing is sticking with this plan for this year,” said Leishman. She added that council needs help from the public regarding what residents are willing to accept for service reductions going forward.
Councillor Jim Palm said he was worried about the numbers after the last finance committee meeting. He said council has to start telling the public that the city is not in great financial condition. The city has to look at generating more revenue and decreasing expenses in every category in order to make things palatable in the future, he added.
“I don’t want to say the sky is falling but we have a heck of a lot of heavy lifting to do,” said Palm.
Councillor Maggie Hathaway said a lot of increases are out of the city’s control.
“I agree we are at the point where we are going to have to look at cutting services,” said Hathaway. “It’s something we’ve fought against doing for the 10 years I’ve been here.”
Council will give first three readings to the five-year financial plan on May 2 and will adopt it at a special council meeting on May 13.
Deadline for budget submission to the provincial government is May 14.
