Faced with fish plant layoffs, closing businesses and a vocal opposition to any property tax increase, city council has decided to set this year’s tax increase on Prince Rupert home owners at 1.5 percent, which is an extra $13.50 for every $100,000 the property is estimated to be worth.
The motion to do so was not unanimous though, councillor Joy Thorkelson voted against and Mayor Jack Mussallem had his opposition put on the record as well.
This is a big drop from city staff’s original estimate of a 4.56 per cent increase, which would have added $41.00 for every $100,000 on to people’s tax bills. It’s even lower than Mayor Jack Mussallem’s goal of having a tax increase no higher than the rate of inflation, which is 2.2 percent.
“The community needs a break and I think next year things will turn around, so if we can just fasten our seat belts for the next six to eight months and hopefully things will turned around and people will be feeling better about things financially,” says Councillor Gina Garon.
Even with only a 1.5 percent increase, the total property tax levy on people’s homes in 2012 will be about $927.50 per $100.000.
The proposed 2012 tax increase has been falling every since city staff released the first draft of the budget a couple weeks ago. Despite tax revenue shortfalls, staff managed to find savings that reduced it down to 3.6 per cent and before Monday’s council meeting they managed to cut it down again to 2.75 percent.
The decision to reduce it further to 1.5 percent is not without its risks to the community though. In order to pay for the cut, the city will be taking over $200,000 out of its Accumulated Operating Fund surplus which is expected to be $1.4-million.
For some, taking money out of a surplus of over a million dollars in order to give residents a break on their taxes might seem like an obvious move. But whenever council broached the idea, city staff advised them against it.
The surplus is there to cover the city’s unforeseen operational costs; problems like broken water lines or extra snow plowing that the city will be responsible to pay for but can’t realistically set budgets for.
The City’s Public Works and Engineering manager, Bill Horne, has warned council that while $1.4-million may seem like a lot of money, it would only take a winter with uncommonly heavy snowfall to spend most of it just on plowing.
If the city doesn’t have enough money in the surplus to cover its unexpected costs then that deficit will be added on to next year’s budget, and tax payers will just end up making up for it in 2013. The majority of councillors said that this was a risk worth taking.
“Does this mean that it’s just a deferred tax increase if something goes wrong? Yes it does. But I’m hopeful that it won’t, and I don’t think that it’s such a big risk that its not worth it,” says councillor Anna Ashley.
Councillor Joy Thorkelson suggested that they could get around that risk by taking $100,000 Capital Purchases budget instead, and then setting the 2012 tax rate based on those savings. Her hope was that a large part of this budget reduction could be shouldered by cuts to the money going to the racquet ball centre, which is having success finding outside sources of funding for its improvements.
Councillor Anna Ashley – who originally moved to set the tax increase at 1.5 percent – argued that reducing the Capital Purchases fund at a time that the city is focussing on improving its infrastructure was not a great idea.
“I do not want to have as has happened before – because we are trying to keep the budget tight and trying to lower taxes – I don’t want to see roads hit, I don’t want to see parks hit, I don’t want to see our different departments hit, I want us to be able to do things in our city,” says councillor Ashley.
There was some talk during the meeting of not having a tax increase for 2012 at all, but the idea was quickly written off as being unrealistic, especially with the sale of Watson Island still not finalized.