City reserves will help wipe out tax increase
City reserves will take a beating, but are healthy enough to wipe out a planned 2.9% tax increase and offer 10% discounts on utility bills for the remainder of the year, under the terms of a COVID-19 relief package approved Thursday by council.
“We have reserves and we put them in place for a rainy day, said Mayor John Vassilaki.
“We don’t just have a rainy day at the present time — we have a huge storm, and we somehow have to slow that storm down so people can catch up and survive.”
The 2.9% tax hike that was previously approved for 2020 will effectively be reduced to zero through a matching credit to property owners on their tax notices.
Doing so will cost an estimated $957,000, and leave just $148,000 in the city’s financial stabilization reserve. The move was supported unanimously by council during the nearly five-hour meeting, which was held by videoconference.
The relief package is worth a total of about $1.5 million, $960,000 of which will be funded from reserves, while the balance will come in the form of reduced revenues, mainly from city-owned utilities.
All told, it will save the average residential property owner $10 to $30 this year, and the average non-residential property owner $500 to $800, according to city finance manager Jim Bauer.
None of the changes will take effect until council votes on the enabling legislation at its next meeting, May 5
TAX DEFERRAL
While the July 31 deadline to pay property taxes won’t change, there will be no penalty for late payment through the end of September, then 10% after Oct. 1.
Council voted unanimously to support the measure.
Vassilaki suggested those two months’ grace will be imperative if businesses do reopen in some form by summer.
“Maybe end at the end of June, the commercial properties, especially in the downtown area and industrial area will (reopen and) have some time to bring in some revenue in to pay their taxes,” he said.
UTILITY DISCOUNT
All customers will enjoy a 10% discount on their utility bills — sewer, water and power — for the remainder of the year. It will essentially extend the 10% early payment discount to everyone, regardless of whether or not they pay on time, and cost the city an estimated $400,000.
Although council considered the option of simply letting customers defer their utility payments, Coun. Campbell Watt said that would only dig people holes.
“Nobody is going to jump back into making more money than they were (before the pandemic) to pay these” deferrals,” said Watt.
“We’re doing something without creating a bigger problem for us as the city and the people.”
Coun. Julius Bloomfield, the lone dissenter in the 6-1 vote, suggested deferrals would match up with senior government loan programs that are meant to ensure businesses can pay their bills.
The 10% discount will be cancelled if the province comes through with funding to offer three months’ free power for customers and their spouses who lost their jobs, plus owners of businesses that have closed. That program is already being offered by BC Hydro to the 95% of British Columbians it serves, and the city has asked the provincial government to extend it to the remaining 5%.
BUSINESS TAX MULTIPLIER
Council reversed its plans to steadily increase the business tax multiplier, and instead voted 6-1 to lower it to the benefit of businesses.
The multiplier is a complex formulation that determines how the tax burden is shared between residential and business properties. It’s based partly on the premise that business properties generate money, therefore owners should pay more taxes.
Council had been slowly raising it to gradually shift the burden from residential to business more in line with neighbouring cities, but decided instead to reverse course as another aid to businesses.
“Businesses coming back to life is going to bring this community back to life,” said Watt.
Coun. Frank Regehr, who registered the lone vote in opposition, urged colleagues to stay the course.
“COIVD shouldn’t lock in residential taxpayers with this continued unfairness,” said Regehr.
Combined with the property tax grant, the reduced multiplier will ensure a 0% tax increase across all property classes. OTHER MEASURES A slate of smaller measures were also approved unanimously. They include suspending a planned 40% increase to development cost charges this year and waiving fees for building permits for home renovations worth up to $100,000. BOTTOM LINE
Even while losing revenue at a pace of about $200,000 per week, the City of Penticton remains in a “fairly healthy” financial position, Bauer told council.
Having already limited spending to essential services and critical projects, and with $100 million in the bank, continued Bauer, “The city has sufficient cash flow for the next six months.”
Should conditions worsen, however, staff will seek council’s permission to take out a $35-million line of credit.
Bauer later took council through spending cuts staff has already made and intends to make.
Already, 57% of projects in the city’s 2020 business plan have been delayed, paused or cancelled outright, including design work for downtown revitalization, development of the lake-to-lake cycling route, and some community celebrations, such as Canada Day and B.C. Day.
Capital purchases worth $8.1 million have been deferred – representing 32% of the capital budget – the biggest of which is a fire truck for $991,000, followed by $836,000 for engineering design work for downtown revitalization. Smaller items, like pickleball courts at $150,000, and a lawn tractor at $3,500, weren’t spared either.
On the operating side, expect reduced maintenance in some lower-use parks, boulevards and gardens, plus less road, lane and sidewalk maintenance.
“We will be concentrating, for the most part, on the things people see,” said Mitch Moroziuk, the city’s general manager of infrastructure.
Transit service will be maintained as it is, despite a 55% total drop in ridership across the system.
Moroziuk said even relatively minor changes like dropping a route would require a redesign of the system and 60 days’ notice to the operating company, while also hurting riders’ ability to get to work.
Of particular concern to council is Route 70, which runs daily between Penticton and Kelowna and is seeing just 18 passengers a week.
However, the route is run by the Regional District of OkanaganSimilkameen, which will have to decide its future.