Chief Financial Officer Adam Langenmaier brought the preliminary 2020 – 2024 Financial Plan before the Finance Committee yesterday.
“The reality is that these increases are necessary for the City to continue to offer its current level of services. The alternatives are to either find additional sources of revenue or look at possibly reducing services. An increase in commercial revenue would be very helpful,” said Councillor George Doubt, Finance Committee chair.
“This is the cost of normal operating expenses for the services that make Powell River such a great place to live in. Things are costing more money and we have a $10 million debt for the new wastewater treatment plan (WWTP) that we have to start paying off. Council has some difficult decisions to make.”
The WWTP will have the biggest impact on the budget in 2020 and beyond. Langenmaier said a new property tax levy that is separate from the general property tax levy will be used specifically to fund municipal debt associated with the wastewater treatment plan. Council authorized $10,000,000 to be borrowed from the Municipal Finance Authority in the spring 2020 issue with the first bi-annual interest payment being due in the fall of 2020 and the first annual principal payment being due in the early spring of 2021.
The average residential property owner will pay $2,189 in property taxes plus $848 in utilities for a total of $3,037, an increase of $138 (4.8%) from 2019. The total variable property tax payable has increased by 11.6%, however, this has been offset by a decrease in flat tax (-$70, -28%).
Municipal debt accounts for 3% of the increase in total variable property tax with the average residential property paying $53.32 towards municipal debt associated with the WWTP.
Several known changes from the 2019 Financial Plan will have significant impacts on the 2020 financial planning process. Wages and benefits expense is estimated to increase 4.5%. In 2019 the City budgeted $16.9 million in wages and benefits. In 2020 the increase is $760,000 to $17.7 million. The increase is due to the CUPE collective agreement negotiations that concluded in 2019 with a 2% increase, increases to Canadian Pension Plan contribution rates, and the addition of staff members.
The 2020 – 2024 financial plan includes an investment in the Firehall Replacement Reserve Contribution, which is estimated to be $500,000 annually. The current balance in the Firehall reserve is $2,353.
“With the work that is being performed to find a suitable replacement for the current firehall, it is prudent to start taking steps to fund the replacement of the building,” said Langenmaier. “This will reduce the City’s reliance on debt when the project comes to fruition.”
Staff is recommending several changes to the property tax levy to adequately fund City operations. The total expected change in the property tax levy from 2019 is $1,540,000 which represents a change of 8.7% made up of a proposed general increase, new construction, and a proposed municipal debt levy.
A proposed general increase of 5%, or $816,000, to all property classes will bring additional revenue to the City. The Revitalization Tax Exemption Program Bylaw for certain industrial properties is set to expire at the end of the 2020 property tax year and most industrial lands will not see a change to their property tax levy due to the revitalization. The total revenue to be realized by the City from industrial land that is not subject to the revitalization is expected to be $88,927, an increase of $12,921 from the 2019 levy of $76,006.
Non-Market Change represents changes to the assessment roll that are the result of new construction or a change in inventory class and it is projected to increase 0.8%, or $145,000. For 2020 Powell River saw an increase in residential assessments of $23,246,400, the value of recent construction projects being 100% completed as of October 31, 2019.
“We’re recommending a new property tax levy that is separate from the general property tax levy. It will be used specifically to fund municipal debt associated with the wastewater treatment plant,” said Langenmaier.
Council authorized $10,000,000 to be borrowed from the Municipal Finance Authority in the spring 2020 issue with the first bi-annual interest payment being due in the fall of 2020 and the first annual principal payment being due in the early spring of 2021.
Langenmaier explained in his report the rationale to separate the municipal debt from the general levy. Adequate funding for the WWTP over the next 3 years would be assured. The structure would allow the City to use the property tax levy to fund debt payments for the WWTP in place of utility payments. If the debt were funded through utility charges, these charges would not be eligible to be deferred because only property taxes are eligible to be deferred under the property tax deferral program.
“Due to the size and impact of the WWTP and its associated debt, we’ve determined that using the property tax to fund annual debt payments is the best method to spread the debt burden,” said Langenmaier.
The WWTP is expected to consume staff time and resources over the next several years. Fewer significant operational changes are expected in the Sewer utility as a result. As work progresses on the WWTP staff will be faced with evolving challenges due to the magnitude of this project. In the 2020 budget, no significant changes to service levels were identified for Administration, Finance, Protective Services, Transportation Services, Environmental Development (planning), Fire Rescue, and Parks, Recreation and Culture.
Crime is on the rise in Powell River, particularly drug-related, and there is a request for Council’s authorization of $26,129 for the City portion of an additional RCMP member. If approved, the 2020 budget for the RCMP contract will be $2,644,379.
No significant changes to service levels for solid waste and garbage collection are expected. Changes to refuse bins that are compatible with automation of garbage collection is still being pursued but will not result in a significant change to operations in 2020.
With the implementation of new software and the increasing costs of existing software, information technology costs are expected to increase by $30,000, from $170,000 in 2019 to $200,000 in 2020.
Council received Langenmaier’s report as information to scrutinize before the next Finance Committee on Thursday, February 27 when the second draft of the 2020 – 2024 financial plan will be reviewed, including proposed tax implications, public input, and a report summarizing the Citizen budget. Directors are currently compiling capital project requests for 2020 through 2024, and Council will have the opportunity to learn more about individual departmental goals, challenges, and plans for 2020. The deadline for the budget to be adopted is May 14, 2020. All meetings are public.
Property owners can participate in the budget process through the Citizen Budget. The City uses the tool to consult with residents and obtain valuable feedback to improve the budget decision-making process. Follow this link to the Citizen Budget.