Sarnia’s draft taxation hike for 2023 is now 6.3 per cent.
“We will have to be making some adjustments to our budget to handle that one way or the other,” Coun. Terry Burrell said Monday, as council heard the update.
Year earlier draft was 4.5 percent.
The new version factors in the recent 11.5 per cent police services budget increase approved by the police board.
Council still votes whether or not to accept that decision.
Last year’s approved tax hike in the city, after factoring in the transit tax that applies to the vast majority of residential properties, was 1.91 per cent.
A seven per cent increase in the consumer price index is having a major impact, city treasurer Jane Qi said.
“This increase, along with the pandemic and the current economic global climate are some of the challenges facing the current budget,” she told council.
And if it weren’t for recent surpluses letting the city borrow from its operating contingency reserve, the proposed increase would be even higher, she said.
Altogether $5.9 million in “mitigation measures” — from that reserve transfer, a one-time $1.45-million reduction in contributions to the Workplace Safety and Insurance Board reserve and deferring $1.5 million in contributions to the capital infrastructure reserve — mean the tax hike is about half what it could have been, slides for Monday’s update show.
Those moves aren’t sustainable, Qi said.
“So we have to manage the current capital spending and the operating expenditures,” she said.
Mayor Mike Bradley also expressed concern about what happens a year from now if costs stay high.
“We can save that discussion for another day, but it’s a real concern,” he said.
A public input session on the draft is Dec. 12 and council budget deliberations are set for Jan. 10.
Meanwhile $44.7 million in draft city capital spending is budgeted for 2023 on things like road and sewer upgrades, shoreline protection and other projects.
But there’s $186 million worth of unfunded capital projects over the next 10 years on the books, Qi said.
The city’s 10-year capital plan is not meant to be a wish list, she said.
“We are looking for direction from council on how to proceed,” she said; later adding financing “may need to be considered if council approves any unfunded projects.”
The current market rate for borrowing is about 5.5 per cent, she said.
Sarnia is on track to be debt free by 2026, she said, and has debt capacity for $236 million.
There’s also a 7.64 per cent increase to water and sewer rates, reflected in the proposed taxation increase, and fees for service are generally rising between two and four per cent in the draft to account for increases to the cost to provide them, she said.
A study in 2021 found the city’s water and sewer rates were 14 per cent lower than the provincial average, she said.
A sustainable capital budget for the city is about $40 million, she said.
“This allows for reserve growth to fund larger and long-term projects.”
Sarnia draft operating budget:
•General taxation increase before mitigation – $7.45M/9.39 per cent
•Mitigation measures – $5.9M decrease/-7.44 per cent
•General taxation increase after mitigation, excluding police budget – $1.55M/1.95 per cent
•Police services budget increase – $3.14M/11.53 per cent
•Draft general levy increase – $4.7M/5.91 per cent
•Transit tax increase – $602,000/13.48 per cent
•Total taxation increase – $5.3M/6.27 per cent
-source: City of Sarnia