PENTICTON - Minimal tax increases over the past few years have caught up with the City of Penticton as staff and council met yesterday to begin scrutinizing the 2016 budget.
This was council’s first major budget session this year and they didn't get a lot off good news from staff.
Chief administrative officer Eric Sorenson told the councillors the low level of taxation and slow growth in the city over the past five years has put the city in a position where — without a property tax increase — there will be no choice but to make service postponements or "outright cuts." Sorenson also noted since the city’s service review, Penticton had achieved levels of efficiency “unprecedented in the history of the City of Penticton."
Sorenson said other municipalities have nominally increased their taxes over the last five years, adding research showed sustaining levels of taxation currently to be in the order of increases between two and two and a half per cent.
“If the city would have raised taxes by two and a half per cent per year, that cumulative increase would have been compounded at 13.14 per cent. That’s 10.33 per cent more than the city’s actual rate of tax increase. That difference is approximately the same as the existing structural deficit of $2.7 million dollars, that the city currently faces,” Sorenson explained.
Over the past five years the city has only seen a 0.56 per cent increase overall.
Sorenson said in order to continue delivering services taxpayers expect, the city would need to recover its current structural deficit, suggesting “prudent" tax increases over the next two years of 4 to 4.25 per cent, followed by annual increases of two per cent annually, in order to be sustainable.
“If we didn’t lift a finger, the budget as it presently stands would involve a 7.3 per cent increase. There’s going to be some sort of increase, but I don’t think council has an appetite for that,” Mayor Andrew Jakubeit said.
Jakubeit said past logic involved avoiding tax increases at the expense of the city’s reserves, in hopes there would be more growth, but that’s something he believes has only been happening recently.
“This year we’re wrestling with what number we’re going to the community with. We’ve just started the process of going through each department and seeing where we can find efficiencies, because it’s just not sustainable to keep dipping into our reserves,” he said.
The city needs to build its reserves as it faces increasing costs associated with aging infrastructure, Jakubeit said, pointing out last February’s rupture of a downtown water main as an example.
“These things happen at random, you can’t predict them, and we have aging infrastructure throughout the whole community. We need to start accounting for that and dealing with it,” he said.
Jakubeit said council will have to find a balance between an acceptable tax increase and the need to rebuild reserves, adding the public doesn’t want to see a lessening of services.
Halfway through deliberations Wednesday, council hadn’t been able to find many ways out of their dilemma, shaving $25,000 from budget by cutting a $50,000 public art grant in half in a 4-3 vote.
Council's next budget meeting is on Monday, Dec. 21 in city hall council chambers from 10 a.m, until 4:30 p.m. Community grant funding is expected to be the topic.
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