After a first round of cuts, the City of Victoria still needs to find an extra $1.3 million in savings to keep tax increases at a reasonable level.
Last June, city council directed staff to restrict this year’s tax hike to 3.5 per cent, down from a 3.96 per cent increase last year.
Each department went to work, absorbing inflation and making cuts where possible, as they have done for several years in a row.
It wasn’t enough.
Several unanticipated costs and shortfalls leave the city in the same financial shape as it was before the cost-cutting exercise.
They include a shortfall of $494,155 in parking revenue, a $144,828 shortfall in conference centre revenue, and $190,000 in lost revenue from city-owned property leases.
Right now, the 2012 tax hike sits at 4.65 per cent. But that’s not the end of the story.
“We will do our utmost to present a budget to council in March that represents a 3.5 per cent tax increase,” said finance director Brenda Warner.
The challenges are many.
Salary increases added about $1 million to the budget. Meanwhile, the city has added many new assets to its inventory without increasing its operational budget for maintenance, such as Balfour Park, the Trent Street rain garden and 500 new public trees. The parks department, for example, has responded by reducing its budget for annual flower beds, weed control and graffiti clean up.
Another possibility up for discussion is to cut from the capital budget.
The city has a policy of transferring 1.5 per cent of its annual tax lift to the capital budget. Over the past few years, however, city council has chosen to reduce this increase to keep property taxes below four per cent. In 2011, it found $500,000 in savings by cutting planned capital expenditures, such as $100,000 earmarked for the urban forest initiative.
Council could choose to do the same this year.
Budget deliberations continue March 6.
Did you know?
New city revenue from new construction (called non-market property-assessment revenue) has fallen off dramatically.
“We’ll be lucky,” says finance director Brenda Warner, if this pot of new revenue equals $500,000. That’s down from $1.9 million and $1.6 million in 2010 and 2011, respectively.
The city has adopted a policy of transferring all non-market property-assessment revenue to its infrastructure reserves.