Infrastructure tax could be first of many increases to deal with Kelowna's $477 million deficit

Image Credit: ADOBE STOCK

KELOWNA - A proposed 1.95 per cent infrastructure tax in 2019 is just one relatively small part of the hit Kelowna residents and businesses are likely to take in the next few years to ease a projected $477 million shortfall.

A second tax hike is proposed for 2020 but that will still leave the city far short of the money it needs to pay for $1.05 billion worth of roads, parks and other infrastructure projects through 2027. It has funding sources for only $573 million, leaving a so-called infrastructure deficit of $477 million.

City of Kelowna finance director Genelle Davidson will explain the proposed tax to city council on Monday, Dec. 3.

“It’s one of the tools in our tool belt that we could start to chip away at that infrastructure deficit,” Davidson told iNFOnews.ca. “It’s what we think is reasonable and affordable.”

It’s also complicated.

The proposed tax increase for 2019 is expected to bring in $2.6 million.

For 2020, the proposal is to add another $2.6 million to that fund for a total of $5.2 million and keep it at $5.2 million each year until 2027.

Since the tax base will likely increase by 2020, that year’s actual infrastructure tax is likely to be slightly less that 1.95 per cent.

That’s where the increases are supposed to end, with a flat $5.2 million collected each year going forward.

Davidson’s report cites Vernon as one example of another city that has an infrastructure tax. It was set at 1.9 per cent every year for 10 years and Vernon is in its seventh year with the ongoing tax increases.

If future Kelowna councils decide to follow Vernon’s example, they could just keep adding another two per cent or so every year.

The tax, if approved for Kelowna and not changed in future years, will bring in $44 million through to 2027, still leaving a $433 million shortfall that will have to be made up from other sources or work won’t get done.

Those other sources include a likely increase to Development Cost Charges paid by developers for new projects. It could also mean increased fees and charges for existing services and a fee of storm drainage similar in concept to what is charged for water and sanitary sewer.

Roads make up almost half of the expected infrastructure costs through to 2027, at $456 million. Buildings are expected to cost $248 million and parks $220 million.


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