Property Owners To Be Hit With New Infrastructure Levy
Moose Jaw property owners will see what some might call one step forward and two steps back on their property tax bills in 2020 as the City will eliminate the Hospital Levy or flat tax of $15 and then initiate a new Infrastructure Levy or flat tax of $30 - double the flat tax or levy previously on property tax bills. The Hospital Levy is no longer required as the City’s required contribution for the new hospital has been honoured.
It is all part of the 2020 Budget which was adopted this past Wednesday evening (December 11th) at a special meeting of Council.
Initiating the debate Councillor Dawn Luhning asked about an internal report circulated to Council, but not the media, about the Infrastructure Levy and how it is to be implemented. It needs to be noted many of the revised and final 2020 - 2024 Capital Budget initiatives, including the final Infrastructure Levy report, were not freely distributed to the media prior to the meeting.
“I put a comment on the system because the recommendation in this report states to have a $30 Infrastructure Levy per year and then the background in discussion indicates a gradual increase and I am just wondering if that is the intention or is it $30 straight a year?” Councillor Luhning asked.
Finance director Brian Acker said the levy would start at the $30 level in 2020 and then ramp up to $100 over three years. In 2021 the levy would be $60 and $100 in 2022. A $30 Infrastructure Levy would generate approximately $502,000 annually, a $60 levy just over $1 million and a $100 levy would generate $1.687 million.
“Having said that depending on the financial situation we are in at the time or we are successful with grant funding there may be an opportunity to mitigate that. At this point in time we would see the $30 as an initial step towards that. There are certainly is a need for that money that is the local improvement portion of the cast iron project that has not been funded,” Acker said.
Councillor Heather Eby was told the $1.6 million annual funding shortfall - the amount a $100 levy would generate - had existed since the inception of the cast iron water main replacement program.
“Really what we have been doing has just been using our cash flows within the utility to fund that. We did borrow $30 million which came into the cash flow. We do have a number of projects with carried forward with large amounts we have not completed. So in effect we have used that cash flow to fund any shortfalls,” Acker said, adding the money had to made up somehow and as such he had made previous models showing higher utility rate increases.
“We are saying certainly some funding is required. At the end of the day whether it gets to $100 or not will be determined by our finances and how successful we are at generating revenues and receiving grant revenues going forward,” Acker said.
“I think it is important to realize when this funding has not been established and sustainable we are putting that project at risk and that was the big issue in 2016…we really need to figure that out and we cannot keep doing the shell game of we will take it from here and move it to there but the rooster is going to come home to roost pretty quick and then there is really going to be an issue,” Councillor Eby said.
Councillor Eby had previously floated an infrastructure levy years prior in the media but was soundly rejected. It is widely believed in the community she was defeated in the 2016 general civic election for supporting a Local Improvement Program for cast iron water main replacement approved by the previous Council. She returned to Council in a 2018 bi-election after Councillor Don Mitchell stepped down to care for his ailing wife Martha Tracey.
A Local Improvement Project (LIP) funding model, which would have seen the City pay 70 percent of cast iron water main replacement and property owners 30 percent, had previously been approved by former Mayor Deb Higgins’s administration but was defeated by referendum held in conjunction with the 2016 civic election.
Mayor Fraser Tolmie, who opposed the 2016 cast iron water main LIP due to the way it was instituted, said he liked the approach presented by Administraton because the City had two years of money coming from the Federal and Provincial governments which could be streamed into cast iron water main replacement.
“In two years time the question is going to be where are we going to get that funding so if we do it in this approach we are building up and we also have to recognize we have created another crew in the long term to attack this project we are dealing with,” Mayor Tolmie said adding the 2016 LIP Referendum had required to use already available revenues or reserves.
He would later read the text of the 2016 Cast Iron Water Main Referendum where it called for the project to be paid for by “general city-wide revenues and or reserve funds and not from Local Improvement Projects and special assessments.” It needs to be noted a referenedum is only valid for three years after it is passed.
“I think that is one of the things we are doing with our Investment Committee we are actually investing our finances to get a better rate of return. That is not always going to cover things because we don’t know what the predictability of the market is. So we have to back ourselves up with another plan to insure that,” he said.
Mayor Tolmie stated that with the replacement program on-going over time - seven years - the number of repairs will diminish and money used for repairs can be transfered to cast iron water main replacement.
It needs to be noted in 2017, 2018 and 2019 the number of years until the rate of repairs drop so funds can be transferred from water main repairs to water main replacement has always been publicly stated as five years.
“If we start this levy at $30 and in two years time our water main breaks are down we have got that funding and that is a good time to evaluate the project and insure we have not gone to crazy but to go to $100 that could create rate shock for a lot of the local community and I think that is one of the things we want to do is to have a balanced and steady approach.”
Councillor Crystal Froese said she could not support the levy as it is not what the community wants not voted for in the 2016 Referendum.
“I am just not 100 percent convinced yet on the levy and I am not 100 percent convinced the referendum actually expressed the community agreed to paying a levy. The word levy is not in the Referendum Question,” Councillor Froese said, adding “I would like us to go one more year and see how much work is completed it is a pretty ambitious $9.1 million we have received funding for other areas in that…I just think the community is ready for a levy yet,” Councillor Froese said.
“Even in the fact we were able to drop it down from $100 to $30 is a flag for me in saying ‘How much do you really need the money’...I just don’t believe that this is a year for a levy. If we were to do a levy I would like to go back to the community and have a much broader discussion about this...”
Councillor Eby said that she was the only person on Council who supported the LIP funding soluton which was defeated in the 2016 Referendum and was frustrated no funding solution had been found.
“Here we are four years later and we can’t support a levy but what is the the soluton? Oh we will just wait another year and then we will get farther in the hole than the $6.5 million hole that we are in...so we can wait and let the next Council figure it out”
“It was a refendum brought forward that 80 perent of the community was wiling to pay as opposed to an LIP project. This is a community answer so I am in favour of it,” Mayor Tolmie said re-entering the debate.
“I just wanted to point out I have presented options for paying fo the LIP shortfall over the course of this Council. It is just that they weren’t grabbing more money from the taxayers and they didn’t get the support.”
Councillor Swanson spoke out against the ‘franchise fees’ the City charges to the utilities - water, sewer and solid waste - and then transfers the funds to help subsidize the Operating Budget. He said the $1.3 million taken out annually over the past five years would equal $6.5 million and as such if not used to subsidize elsewhere in a different budget the funds were available,
It shoud also be noted prior to the levy model Council approved there were two other main proposals put forward by Administration on how to model a levy or a flat tax - by water meter size or frontage - both were rejected by Council.
A 2018 levy proposal brought forward by Administration would have seen a levy assessed based upon water meter size. The underlying reasoning in that proposal was based upon those with larger meters use more water and therefore should pay more based upon its use. That levy proposal was dumped following a pushback from the business community.
The 2018 levy proposal stated the Waterworks Utility finncial model presented was stable for five years but required additional funds through a levy as the financial requirements of the system made there financial model untenable. Read the report by clicking here.
“The financial model presented will meet the needs of the utility over the next five years, but does not provide long term financial stability for the utility.
Going forward into the future, there will be a need for utility rate increases greater than 6% annually and/or significant amounts of Federal and Provincial grant funding
”
Another levy proposal, based upon a property’s frontage and touted by city manager Jim Puffalt as more more fair, was likewise rejected and the present straight flat tax or levy applying to all properties and dwellings was adopted.
“Sure I think at this point sure $30 is reasonable for the infrastructure work that has to be completed in this City and sets in place a plan that….after five years we can review it and see how we are doing…I am OK with this, this is not going to make me think ooo this is going to ruin the City. We have to put a plan in place a serious plan for the infrastructure work we have to do and for the deficit we have in cast iron of $1.6 million…I am fully in support of the motion,” Councillor Luhning said.
Councillor Chris Warren said although he could not support a general $100 Infrastructure Levy he could support a $30 levy assigned to cast iron water main replacement.
“We are going to share this as a community and when I looked at the original $100 I would much rather be in favour of maybe a tax increase so that it compunds over time but this approach by bringing it over a three year period it does a similar thing. What it is doing id capitalzing on the Federal and Provincial grants we have reeived,” Councillor Warren said, adding progress had been made but two out of the four budgets Council had to pass were hampered by the Province’s austerity program.
“It wasn’t that we did not fund cast iron in those years we used other funding sources…there were other funding sources we identified to backfill that $6.4 million.”
In a 5 - 2 vote wth Councillors Swanson and Froese opposed Council approved the $30 Infrastructure Levy.
It is unknown at the present time if the City can impose a levy on individual mobile homes on trailer courts and agreements would be needed to have them pay the levy.
The Infrastructure Levy will be reviewed in five years or 2024 to see if it is still required.