During the regular council meeting on April 24 questions about a recommendation from staff to have a five per cent taxation increase were posed by council.
At the meeting Chief Financial Officer, Lisa Vass, explained why staff had recommended the town go with a five per cent taxation increase.
Coun. John Jackson wondered what would have to be cut in order to tack the increase down to the second option of a four per cent increase.
“We recommend that we go to five per cent because as we have seen in the past if we lower the rate down the road then we are going to see issues with our capital funding,” Vass said.
Vass went on to explain that under the five per cent plan, the town would be able to get the snow removal reserve back to the level it should be at.
In an interview in the days after the council meeting, Chief Administrative Officer for the Town of Golden, David Allen, further explained the position.
“To put this into perspective a one per cent property tax increase only generates $43,000 in revenue for the Town of Golden, not a lot of money compared to larger municipalities. A five per cent tax increase is required if we are to maintain the current levels of service for the many services and programs that our municipality provides. For example, snow clearing budgets can be reduced as long as the public is willing to accept that roads and sidewalks will be plowed less frequently,” Allen said.
“However, some costs are far more difficult to control. The cost of energy has jumped significantly over the last few years, and in 2012 two per cent of the five per cent property tax increase is required to pay for the increased cost of electricity, propane, and fuel for municipal operations. Conservation is one way to minimize the impacts of these energy increases, and in 2011 the Town was able to reduce water consumption by 20 per cent, resulting in a savings of $21,000 in electrical charges for pumping water.”
Allen went on to explain why he felt this a better option for the town than the four per cent increase.
“A four per cent tax increase would reduce Town revenue by about $43,000, which would limit our ability to maintain adequate reserves, in this case the snow clearing and flood protection reserve. Managing risk as part of effective municipal management, and in 2010 we had a big snow year, which meant that we spent beyond our normal annual snow clearing budget,” he said.
In 2011 we had to draw down on our snow clearing reserve to purchase additional winter road maintenance materials, so the five per cent tax increase allows us to put money back into this reserve in the event of another big snow year.”
When asked if there was no increase in taxes what effect would this have on the town Allen said services would have to be cut and/or scaled back.
“ In fact, while eliminating public transit in Golden and the surrounding rural area was a difficult decision for Council, we would have been potentially looking at a larger tax increase if we hadn’t cut this service. Similar to the Consumer Price Index, which is adjusted every year based on annual cost increases in various goods and services, municipalities also have to keep up with annual increases in the inputs associated with the provision of municipal services and programs. The alternative is reducing the level of service (i.e. less frequent snow plowing, etc.),” he said.
“In addition to property taxes, like other municipalities the Town of Golden charges fees for certain utilities and services (i.e. water, sewer, municipal waste and recycling, and recreation, etc.). The public is generally more receptive to increases in user fees and charges, as they are more discretionary. In 2012 Council will be reviewing pricing and other financial policies to identify options for shifting revenues from property taxes to user fees.”
Allen also explained why these are very challenging times for many communities who are trying to keep their budgets under control.
“Unlike the provinces and the federal government, municipalities are not legally allowed to have budget deficits. Every year municipal budgets must balance. However, 92 cents out of every tax dollar go to federal and provincial governments, with only eight cents going to municipal government. Ironically, local government is the most accessible and transparent form of government, and provides the public with the most important services (i.e. water, sewer, roads, street lighting, recreation, arts and culture, etc.).
Allen went on to talk about this deficit.
“The looming infrastructure deficit ($123 billion in 2007 according to the FCM – http://dcnonl.com/article/id25221 ) is going to be an issue for all Canadian municipalities. Fortunately, Golden is making good progress on developing its own Asset Management Plan which will identify how to deal with the Town’s aging infrastructure over the next 10 – 20 years,” he said.
“It is time for municipalities to stop relying on property taxes as their main source of revenue (Golden will get about 43 per cent of total revenue from property taxes, and 24 per cent from fees and charges). We need new financial tools like consumptive taxes (i.e. a portion of the HST and/or GST, and the B.C. property transfer tax, etc.).”