CAPITAL CITY RESIDENTS COULD SEE TAX CUT
Charlottetown Mayor Clifford Lee says new funding formula with province could turn out to be good news for city taxpayers
Charlottetown Mayor Clifford Lee says residents could be paying less in municipal taxes in 2018.
The Guardian sat down with the mayor for a look at the year ahead and one of the items he discussed was the new municipal funding formula.
In November, the provincial government announced it is giving P.E.I. municipalities an additional $2 million in funding this year as part of the new formula, news that was greeted by widespread praise from mayors and chief administrative officers.
“Perhaps this is the year council should be looking at a possible reduction in the tax rate,’’ Lee said Wednesday. “I think the financial arrangement is a lot better than it has been for a lot of years. I’m very comfortable with the city’s finances at this stage.’’
The old grant-based system introduced in 2007 saw funding fluctuate up and down whereas the new formula will see a more predictable funding model.
Municipalities will also receive a 10 per cent grant on all of their eligible capital expenditures and, under a top-up provision, no municipality will receive less funding than it does now.
Under that 10 per cent grant, if the city spends, say, $3 million on its long-talked about new fire hall it would get $300,000 in additional revenue from the province.
Lee said it’s still too early to say how much Charlottetown will receive but he was clear that just because the city is receiving more money doesn’t mean it will automatically spend that money.
“You can’t just keep spending money because you found new sources of revenue,’’ he said. “At some point and time that benefit has to go back to the taxpayer and I think we’re at that point in 2018 where we should be looking at a lower tax rate.’’
Lee said budgets since 2007 have been tight thanks in part to the formula and other factors, such as the back-to-back bad winters a couple of years ago.
“There were years in there where revenue from the province to the city was reduced by five per cent. When you’re getting reductions in your operating revenue, obviously you can’t even entertain the idea of reducing the tax rate.’’
Lee also floated the idea of setting up reserve accounts for unexpected expenses such as bad winters.
In 2014-15, the City of Charlottetown spent about $3 million more on snow removal than it had budgeted.
“There is merit to that argument,’’ Lee said, referring to reserve accounts. “We need to have discussions on this over the next few months. Should we be looking at a reduced tax rate, should we be looking at setting up reserve accounts for specific purposes?’’
Lee stresses reserve accounts wouldn’t turn into slush funds.
“If it’s going in for reserve it needs to be going in for a very specific purpose so that you, I and the taxpayers know that $3 million is actually there for snow removal or other purposes.’’
The city brings down its annual budget in late March.