Whitehorse city council has passed its lowest tax increase in a decade.
The 2014 operations and maintenance budget passed third reading at city council on Monday night, cementing a 1.7 per cent property tax increase and a 4.7 per cent increase to water and sewer fees.
The budget, which clocks in at $68 million, is $3 million more than last year and includes a $13.4 million contribution to city reserves.
The city kept the tax increase low by cutting spending and deferring hiring new employees in a number of areas to find $1 million in savings.
Robert Fendrick, the city’s director of corporate services, explained the cuts to council on Monday.
The city saved a total of $557,000 by not hiring a building inspector, a lands co-ordinator, a financial systems analyst, a part-time customer service agent and two firefighters.
“We do have adequate staff to meet current demands. However, based on our hiring strategies it would be a little more ideal to have them a little sooner,” Fendrick said, assuring council that losing the two firefighters won’t have any impact on public safety or the department’s effectiveness.
When the city presented its provisional 2014 operating budget back in the fall, the tax increase was expected to be closer to 4.5 per cent.
Coun. Betty Irwin said she was pleased with the budget, and the work done to keep the tax increase so low. But she also raised a “hard reality” about how the city raises its money.
Cities across the country are “severely handicapped in that they have little or no ability to raise the revenue they need to function effectively,” she said.
The only way for cities to raise their own money is by increasing property taxes, but that system is “regressive and unfair,” she said.
“They are regressive in that federal, provincial and territorial governments have had tax powers that grow, and municipalities do not. They are unfair in that property taxes put a heavier burden on people with low incomes,” Irwin said.
Only eight per cent of taxes paid by Canadians goes back to municipalities, Irwin said, and that hasn’t increased in more than a decade. Meanwhile, inflation and rising housing costs means that any city tax increase will hit low-income families the hardest.
Cities and towns should be given the power to raise taxes that don’t put more of a burden on homeowners than on other citizens, which is the case right now, Irwin said.
Given how difficult it is for the city to raise money and the pressure to keep any tax increase low, some might wonder why nearly 20 per cent of the budget is going into city reserves.
Mayor Dan Curtis said that, while there is some flexibility for council to work with, most of the reserve contributions are decided by the city’s reserve fund bylaw.
“I think it’s all about balance. It’s more than just a rainy day fund. There are infrastructure reserves and equipment reserves and things that just happen that wear out. We don’t want to become another Detroit. It’s really good to show some fiscal restraint,” Curtis said.
This year’s contribution is slightly higher than the five-year average of $12.6 million, but Curtis said that is due mostly to the particulars of each of the city’s 17 different reserves.
“One, for instance, is the land bank reserve. If we sell some land, like the Skookum Asphalt site, that would go into the land reserves. In that case I believe it was $3.6 million in land sales this year that went into the land reserves. It was kind of a foregone conclusion that it would go there, because it was all land sales.
“For water and sewer, we transferred $4.2 million, which was 20 per cent of the total water sales plus any surplus from last year,” Curtis said.
In 2009 the city made its lowest contribution to the reserves at $8.6 million. The highest contribution came in 2011, at just under $17 million.
“The city transferred $63.1 million in those five years, but the 2014 budget projects that it’s going to have $25.4 million in city reserves by the end of the year. That money does get used up with large expenditures that come up. It’s not this ever-growing quantity of cash.
“For a city of our size, it’s really important to have a backstop for when something goes south.”
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