Executive Discusses A Levy, Cuts Or Five Percent Plus Tax Increase

How does the City find money to rehabilitate its infrastructure was a hot topic at Monday night's Executive Committee meeting as some Council members called it fair, another saw it as unnecessary as budget changes could find the funds while another saw it as a disproportionate tax grab against lower value properties.

The topic for discussion was the potential implementation of a $100 infrastructure levy or a flat tax on every property and dwelling in the city.

The discussion was based upon an August 7th, 2019 decision by Council for Administration to provide a report on the options for the introduction of an Infrastructure levy.

Addressing Council city manager Jim Puffalt provided his recommendations for a levy which did not always match Administrations recommendations.

Puffalt recommended any infrastructure levy be directed at a specific purpose whereas Administration wanted a general infrastructure levy.

“In my mind it’s important to insure if the infrastructure levy is established it is for a specific purpose. I would suggest it (Administration’s recommendation) is too wide open right now,” Puffalt said, adding “for the foreseeable future I think the infrastructure levy should be put towards the cast iron program and the road rehabilitation that comes along with that.”

Puffalt also wanted any potential levy collected head in a specific reserve fund to demonstrate to the community what the funds were spent on and accomplish. Administration want the funds deposited in the general roadways account.

Thirdly Puffalt spoke about the potential of not making the levy on a per property basis but possibly on a front footage model whereas Administration was seeking a flat $100 for every commercial and residential dwelling.

“I think of a hotel compared to a small property in the center of the community. It isn’t particularly right that each of those pay $100.”
— City Manger Jim Puffalt

In his report finance director Brian Acker said introducing an Infrastructure levy had been discussed for a number of years. In 2017 a policy was established to convert the hospital levy into an Infrastructure levy based upon water meter size in 2019.

“We have had discussions over a number of years in terms of an infrastructure levy and really the requirement or need for that is inadequate funds for our infrastructure rehabilitation. We just don't have enough funding to be able to do all the work we need to,” Acker stated.

Although federal and provincial funding helped Acker termed it “unreliable funding it tends to come at election time and not again.”

The gas tax, a percentage of gas excise taxes, was reliable but inadequate, he said.

“We do need some additional funding to do some of the infrastructure work we have to do.”

There was an Infrastructure deficit of $17.6 million over the five year period which needed to addressed. Most of the deficit relates to the transportation area.

Acker said from six years ago there was rapidly expanding expenditures in the transportation infrastructure budget from $14 million over five years to today when $40 million is spent over a five year period.

The infrastructure needs of the waterworks utility was $94 million whereas the utility only brought in $11 million annually.

The proposed annual levy of $100 would bring in $1.6 million annually.

Acker said Administration preferred a base tax over utility based levy as it allowed flexibility in where the money was spent as the areas requiring funding were flexible and changing.

The proposed $100 levy would additionally help reduce the property tax gap between commercial and residential properties a policy adopted by Council.

Under the mantra of tax fairness Council in previous budget discussions had moved to a tax sharing approach slowly reducing the tax gap between commercial commercial and residential properties which has commercial properties paying 2.36 times more property tax on residential property with the sane assessment.

The levy structure proposed would see the gap on an assessed property value of $200,000 from 2.36 times to 2.25 times.

Raising taxes to collect the $1.6 million instead of a levy would equal a 5.5 percent property tax increase.

If the $1.6 million was raised by increasing water rates the increase would be 16.6 percent he said.

Councillor Heather Eby said she supported a levy or base tax as the most fair as the referendum defeat of a Local Improvement Program funding model for cast iron water main replacement in a 2015 removed that option.

I think the levy is fair and I do think it should be to each property. I don’t agree commercial properties should pay more
— Councillor Heather Eby

“I think the levy is fair and I do think it should be to each property. I don't agree commercial properties should pay more,” Councillor Eby stated, adding the massive support for the 2015 referendum meant the community “wanted it shared equally and they said they wanted to pay for it. They didn't want the burden on certain people or certain properties.”

Mayor Fraser Tolmie showed support for a levy but wanted it to be a dedicated levy for cast iron water main replacement so it had an end date.

“If not it is just a tax,” the Mayor said.

A general infrastructure levy just meant money would move around when Council should be making tough decisions, he said.

Councillor Dawn Luhning said she could not support a levy when the money could be found through savings within existing budgets.

“I think we need to look at these budgets a little bit closer and not always adding on more and and more in every single department, every single situation that the City believes that they want
— Councillor Dawn Luhning

“We should be able to find this kind of money in our budgets,” she said, going on to predict “thus is going to be an issue.”

Councillor Scott McMann said there was plenty of support from people expecting a levy given the infrastructure needs the City has but many would also oppose it.

We need the money…the levy is a better course than a five and a half percent municipal tax increase
— Councillor Scott McMann

Councillor McMann also sought an end date for any possible levy.

Councillor Crystal Froese said she did not want to see a 30 year levy as in her opinion it was not a levy butva tax.

Councillor Froese acknowledged economically times were tough and a levy could hit some people very hard.

One hundred dollars for somebody might not mean anything but for somebody struggling it might mean to keep their lights on for that month,
— Councillor Crystal Froese

Councillor Brian Swanson acknowledged times were tough but he would support a levy only if there was no tax increase and a similar $1.6 million was found by cuts in the City budget and the money used to match the levy.

Given that the finance director had earlier stated to fund the $1.6 million the levy would bring in was equivalent to a 5.5 percent tax increase Councillor Swanson said when added to the proposed three percent tax increase the actual tax increase was 8.5 percent.

“Since the beginning of this term I have stated my concerns about the local economy and the ability to pay taxes. I am not going to vote to force the taxpayers of Moose Jaw to pony up 8.5 percent in more taxation revenue to City Hall.

Councillor Swanson also spoke about how the impact of the levy plus the proposed three percent property tax would disproportionately hit lower assessed properties versus properties with higher assessments.

What this does is tries to reduce the impact on the higher (taxed) properties by increasing dramatically the impact on the lower (taxed) properties,
— Councillor Brian Swanson

He gave the example of how a combined levy and three percent property tax increase would mean $130 more paid to the City on a home paying $1000 in property taxes whereas a home paying $5000 on taxes would pay only $200 more.

Hiding the tax increase within a levy helped prevent residents fighting the tax increase, he said.

“If we went to the taxpayers of Moose Jaw with an 8.5 percent tax increase there would be a widespread revolt.”.

At the end Executive Committee voted to table further discussion and a decision until Budget Committee meets.

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