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Prince Rupert city staff recommending 10.2 per cent tax increase as budget shortfall looms

The City of Prince Rupert's finance department is recommending council approve a 10.2 per cent tax increase for the coming year as it struggles to cover a $1.55 million shortfall.

In a report to council, to be discussed at the March 24 meeting, chief financial officer Corinne Bomben outlines four options to cover the surplus in light of potential issues arising from the payment-in-lieu of taxes (PILT) coming from the Prince Rupert Port Authority.

The first option does not recognize the full PILT from the port, only $1 million over next five years, and no reduction in services. In this case, taxes would need to rise 10.2 per cent this year, 6.54 per cent next year and 8.16 per cent the following year.

The second option recognizes $1.675 million in PILT payment in 2014 and $1.7 million in PILT payments in 2015 through to 2018, the reduction of two full-time equivalent RCMP officers and the use of the accumulated surplus to offset any tax increase. The result would be a zero per cent increase in taxes this year, but a project tax increase of 9.175 per cent in 2015 and 8.695 per cent the following year.

The third and fourth option are similar in that they consider a full PILT payment from the port authority and the reduction of two full-time equivalent RCMP officers, but the third option envisions a 3.28 per cent tax increase this year and three per cent increases in each of the next four years while the fourth option proposes a five per cent tax increase in each of the next five years to begin building a surplus.

While the second and third option provide certainty for tax payers, Bomben said they are not the preferred option.

"Options two, three and four recognize the port authority paying 100 per cent of the projected PILT. This has not been the reality and therefore could be overly optimistic ... historically, the port has paid approximately 35 per cent of that value ... needless to say the port and the city do not agree on the value of the assessment and as such the city does not receive the amount it bills. The city has not budgeted the full amount from the port over the last recent years to prevent an even larger shortfall," wrote Bomben.

"For this reason, and to be financially responsible, finance still recommends option one."

The Prince Rupert Port Authority, which has paid more than $2.5 million in PILT payments in the past five years in addition to a $2 million "good faith" payment, said the question surrounding the PILT payment has been an ongoing conversation since the city disputed the assessed value of vacant port land leading into 2012.

"As peR the PILT Act, the port authority used a third-party assessor and that has a dispute resolution process included. The city said the Prince Rupert Port Authority assessments were lower than they should be. The panel agreed and, subsequently, the port authority agreed. What that dispute resolution panel said is the method used by the assessor was incorrect," explained Prince Rupert Port Authority director of public affairs Ken Veldman, noting the two sides are in discussions to reassess the property.

"The third party assessment takes into account the restrictions on the land, that they can't be used for non-port related activities ... the 100 per cent number the city refers to is BC Assessment values. Whether the revised assessment comes out to BC Assessment value remains to be seen."

Once the reassessment is done, the industrial mill rate would be applied to the vacant property. Existing terminals have a mill rate capped at either 27.50 per $1,000 of assessed value or $22.50 per $1,000 of assessed value depending on when the terminal came online before or after 2012.

Along with concerns around the PILT payment, Bomben noted the Community Enhancement Grants cost the city $873,000 this year and the Digby Island Ferry is expected to be subsidized by approximately $900,000 of taxpayer money.

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