The city is forecasting a $3.6 million budget shortfall for 2012, according to preliminary figures.
That’s up substantially from the last estimated budget deficit of $550,000 back in December.
The picture looks bleaker now because of a change in the property assessment value of the defunct Catalyst mill site. The BC Assessment Authority announced early last month that Catalyst no longer meets the requirements of a major industrial property, and has been reclassified as business/other, which means a significant reduction in Catalyst’s property taxes.
That decision results in a loss of $1.8 million in tax revenue for 2012. Included in the deficit is a $1.1 million tax shortfall carried over from 2011, plus a $1.3 million increase in costs related to contract commitments and inflationary increases, said Laura Ciarniello, the city’s general manager of corporate services.
If the city were to maintain the current level of services it provides to citizens, the tax rate would have to increase by 24 per cent in order to make up the $3.6 million.
The loss of $1.8 million from Catalyst alone, equates to a 12 per cent residential tax increase.
To put that into perspective, Ciarniello said a one per cent residential tax increase would bring in $150,000 in revenue for the city. That one per cent increase would mean roughly $12 more per year in property taxes for the average homeowner.
The city’s operating budget is approximately $37 million which includes general operating, water, sewer and airport funds.
“Council is being asked to provide guidance and direction with regards to the assessment of current service levels provided to the community,” Ciarniello said in a report to council. “Council must determine if these services can continue to be funded given the current financial challenges the city is facing.”
Ciarniello said council must also discuss potential tax increases, possible borrowing options to fund capital projects, and using limited financial reserves to bridge city services until 2013.
However, Mayor Walter Jakeway said he is not interested in increasing homeowners’ taxes.
“My personal intention is to have a zero per cent tax increase in 2012,” Jakeway told the Mirror in January. “That’s my personal goal.”
If that’s the case, council will likely have to look at service cuts.
“If council’s priority is to reduce future tax increases, then significant changes to the status quo will be required,” Andy Laidlaw, city manager, said in his financial report to council in December.
Council is scheduled to meet Feb. 14, Feb. 28, March 13 and March 28 to discuss the budget.
It’s expected council will adopt its five-year financial plan, which includes this year’s budget, at the May 1 council meeting.