FILE PHOTO

(STEVE ARSTAD / iNFOnews.ca)

Past tax cuts are likely to cost Penticton homeowners as city hall looks to replenish its dwindling savings.

Tax funds needed to replace ageing equipment and build new facilities aren't keeping up, especially after COVID-era tax cuts, and recent inflation means the costs are getting out of reach.

The city is going to need to start stashing away millions more dollars every year to be prepared, according to a city hall report.

“This strategy is about building a resilient future for Penticton,” Penticton CFO Angela Campbell said in a news release. “By tying the levy to property taxes and phasing in increases gradually, we can ensure our infrastructure investments keep pace with inflation and community growth – without placing a sudden burden on taxpayers.”

Inflation has meant big increases in costs for City purchases. A staff report cites a fire truck purchased in 2010 might have cost $600,000, but the current replacement "can be well over $2 million."

But, the need to catch up didn't come by accident.

City hall put $300,000 into reserves in 2018 and planned for annual increases of the same amount. At that time it equated to one per cent of property taxes.

Faced with the uncertainties of the COVID-19 pandemic, it was cut by half in 2020. Another two years later, council decided to replenish that amount through gaming funds provided by BCLC, but the incremental increases didn't pan out because of "other financial pressures," according to the report.

Last year, the contribution was increased to $2.1 million per year, but nearly half was still coming from gaming funds instead of taxes, while around $200,000 went toward City debt.

Staff are now suggesting the entire $2.1 million come from taxes, equating to about 4.5% of annual taxation. If approved, it should be annually increased by one per cent until at least 2030.

“We’re focused on ensuring that Penticton’s infrastructure can meet the needs of our growing community – not just today, but for decades to come,” Penticton infrastructure manager Kristen Dixon said in a news release.

Combined reserve funds meant for equipment and facilities, both new and those to be replaced, should be sitting at $67 million. Instead they're at a combined $20 million and would drop another $6 million by 2029 if the City stays the course, according to the report.

“This funding strategy gives us the ability to plan and invest more sustainably in critical assets like roads, parks, and public facilities. By aligning contributions with property taxes, we can better keep pace with inflation and the increasing demands on our infrastructure network," Dixon said.

Penticton is not the first South Okanagan community to have catching up to do.

Last year, Osoyoos had a staggering 24% property tax increase after years of low taxes, which was cut from an initially projected 40% hike. It meant the average homeowner had to pay $913 more to city hall.

City staff didn't say what the Penticton tax increase would mean for the average homeowner's pocketbook when reached by iNFOnews.ca.

And, when asked about how previous policy decisions affected city savings, Campbell said city city infrastructure reaching end-of-life and recent cost escalations are "driving the need" for longer term planning, while council has "continued to support" financial planning goals.

The staff report said Penticton accounted for its "infrastructure deficit" in 2021 and it expects to pump millions into ageing facilities like city hall, fire halls, new rinks and an arts centre.

Next week, city councillor will debate how to increase savings quickly enough to keep up with costs and staff are suggesting not to hit property owners with the burden all at once, according to a staff report.

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