Budget time can be confusing and controversial, when muncipalities struggle to calculate the rate at which the public will be taxed.
The budget construction process is underway now, with public meetings of elected officials and civil staff going on through January and February. This is true of the Village of Burns Lake, the Regional District of Bulkley Nechako, School District 91 and on through to the provincial government.
In a year where inflation has caused financially troubling flux across society, the impacts and echoes will reverberate into the local municipality’s budget. Property values have jumped, but incomes have not jumped with them, and property value is in a way tied to tax rates.
However, as Village of Burns Lake chief administrative officer Sheryl Worthing explains, there isn’t a direct link that forces high assessments to mean high taxes. Municipalities have their own assessments of the assessments, and that is called the “mill rate” used for setting the actual tax rate.
“A common misconception regarding tax increases and BC Assessment increases is that if your assessment goes up by 20 per cent, your taxes will go up by that amount,” Worthing explained. “In reality, this is different from how municipal tax calculation works. When we receive BC Assessment figures that are higher than the prior year, we adjust the mill rates down to offset the increase in assessments. The mill rates are decreased as the assessments increase, so we calculate what new mill rates will get us to the same property tax revenue as the prior year. From here, the tax rate approved by council is applied, if any. If your BC Assessment property value increase by the average for your area, which this year for residential is about 14 per cent, your tax increase will only go up by the tax increase council approves. If your assessment is a bit higher than the average, your tax increase will be higher than council’s approved rate and vice-versa.”
Worthing said that the vast majority of property taxes collected are used for annual operations. Capital projects - the new structures a municipality builds, a machine a muncipality buys, any one-time big-ticket items - are funded by a combination of grants from various levels of governments or organizations, plus any money left over in a reserve account if previous years’ expenses were less than expected, or if the municipality got more money than they anticipated.
In Burns Lake, The highest value reserves held are from government grants to support local governments for different initiatives and from Burns Lake Community Forest distributions.
There will be some higher bills to pay, this year. Council is still hashing out the details, but when there is a regular and constant expense it is most efficient and transparent to make that an annual line-item everyone can see. Water is one such line item. Water in this town will cost more, going forward.
“At the Jan. 25 budget meeting, Council faced a difficult decision regarding current water rates,” Worthing said. “The water operating budget presented to council, for the years 2023-2027 showed a projected deficit of $525,000 over the next five years. The three main reasons for this shortfall include improvements to our accounting system that provide us with a more accurate picture of how much it costs to operate the water system, having not applied an increase in fees to keep up with inflation over the last four years, and receiving additional water filling station revenue since 2020 from the LNG pipeline, which was used to help offset expenses. The additional water filling station revenue stream is anticipated to end in 2023. Council made the hard decision to increase water rates by 20 per cent for 2023 and by 4 per cent in each of the following four years from 2024 to 2027. This will resolve the deficit problem by 2026.”
A municipality has two ways to balance a budget in a year when societal costs are unavoidably higher than last year: increase revenue somehow or cut expenses somehow. The most dependable and even-handed way to increase reveue is to increase taxes; there aren’t many other ways a town can make money, and there are laws in place that map out those limits.
In a small town, cutting expenses can be a wreched idea, because the only programs and services are important and in place usually through much public demand: plowing the streets after a snowfall, a functional library, timely repairs for potholes, police and firefighters at the ready.
“We know Burns Lake citizens are feeling pressure from high inflation,” said Worthing. “Unfortunately, the municipality has the same cost increase challenges. Based on predictions from economists, we anticipate a 4 per cent average inflation rate for 2023. Therefore, this has been applied to the majority of our budgeted expenses for 2023. The 2023 tax rate will be decided by village council at the Feb. 21 budget meeting.”