Economic pressure on the city budget raises challenges

Total municipal tax and user fees for an average Kelowna house in 2012 was 29 per cent below the average of the 17 largest cities in B.C.

Kelowna is well established as a fiscally conservative, pay-as-you-go kind of city.

Its financial strategy has positioned Kelowna for many years at the low end of tax jurisdictions in the province.

In 2012, Kelowna had the fourth-lowest property tax and user fee charges among B.C. cities with populations greater than 75,000.

The total municipal tax and user fees (before the Home Owner Grant) for an average Kelowna house was $3,653—29 per cent below the average of the 17 largest cities in B.C.

Taxes collected from property owners accounted for less than a quarter of the city’s $419 million in revenues for 2012.

User fees, charges, reserve accounts and grants brought in 76 per cent of revenues.

It’s a financial formula that has kept Kelowna competitive on the taxation front, while it continued to build facilities through its pay-as-you-go capital program and to enhance services residents want.

The new $4-million Parkinson Activity Centre, 45,000 hours of recreation programs and 1,500 citizen-requested road repairs are some examples of where the revenues went in 2012.

It’s a strategy that minimizes the tax impact when the economy is performing well. But four years after the onset of the global recession, municipalities are facing a situation where costs are increasing but revenues are not.

At the same time, being mindful of the economy’s impact on residents, municipal councils have strived for low-impact tax increases.

Last year’s rate increase was 1.1 per cent and the average tax increase in Kelowna over the last three years is 1.7 per cent.

These low rate increases, coupled with declines in revenues from sources such as grants, has required more funds to be drawn from reserve accounts to keep up with demands for service.

This imbalance challenges Kelowna’s discipline to control costs while also minimizing the requirement for a tax increase.

Because service demands have not dwindled—in fact, some are increasing.

The 12 RCMP staff members added to the payroll in 2012 are one example of an increasing service demand in Kelowna.

Citizens surveyed in 2012 put “low crime rate/safe” at the top of characteristics they want in their city.

Yet the same survey showed citizens’ satisfaction with police service levels was in the middle of the pack—just above satisfaction with bike lanes and public transit, and below satisfaction with cultural services, sports fields and fire services.

An independent consultant’s report on Kelowna RCMP staffing levels and city council’s subsequent approval of a financial strategy to ramp-up RCMP staff levels will account for a significant portion of the tax rate increase for 2013, as four more members of the RCMP will be added to get closer to the staffing levels appropriate for a city of this size.

The commitment to protective services has resulted in council approving a one per cent tax increase just to support police and fire services.

No one looks forward to paying their property tax bill every July, even though those funds pay for community safety improvements, road maintenance or more options for active living or cultural pursuits.

Seeing the tax rate go up can be alarming, particularly in a community accustomed to comparatively low taxes.

When city council meets to review provisional budget submissions on Dec. 13, it will be challenged to maintain the low rate increases of recent years.

At the end of the day on Dec. 13, council will strive to arrive at a tolerable balance between a rate increase and service levels most can live with.

Councils and city staff have prided themselves on building and enhancing a great city at a relatively low cost to taxpayers.

The instinct to keep a lid on taxes remains, but the financial realities indicate the rate increases of the past will be harder to maintain in this economic climate.

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