Council presented first draft of 2022 operating and capital budgets

FORT ST. JOHN, B.C. – City of Fort St. John councillors were presented the first draft of the 2022 operating and capital budgets on Monday.

According to a report by chief financial officer David Joy, the administration faced several challenges with the 2022 operating budget.

These include pulling $586,000 from reserves to balance the 2021 budget, additional staffing coming in at $393,000, salary and wage grid increases totalling $444,000, lower return on investments, and “own source revenue” not fully recovering from the pandemic.

Joy told council on Monday that the city has used up the $3.77 million in federal restart grant funding in 2020 and 2021.

This year, the rise in property assessments means the city plans on collecting more tax revenue while keeping the tax rate “relatively flat.”

Based on an average residential property of $323,796, the additional tax revenue generated would be almost $103 per property, according to the January 24th report to council.

“It’s like a double whammy on property owners. We’ve actually slightly decreased our tax rate,” said Joy on Monday.

The proposed residential tax rate for 2022 is 5.1557 per cent, down from 5.1797 per cent last year.

“Even though most municipalities are experiencing significant increases in property assessment values, many of these local governments are increasing their tax rates,” Joy writes.

“Fort St. John Administration is actually proposing to keep our tax rate flat while assessment values have increased by 6.67 per cent.”

Joy notes that values may go down in April as property owners have a chance to challenge their assessments received in December. The city will get another report in the spring, and there is a chance that tax rates will increase slightly if assessments go down.

If assessments remain the same next year, the city could see as high as a 4 per cent increase in the proposed tax rate, said Joy.

Administration was also able to balance the operating budget by applying 5 per cent, or $1,295,034, from Peace River Agreement (PRA) revenue. The city will be unable to use more to reduce the tax rate, Joy notes.

Beyond 2022, “the City will have to continue to annually transfer 5 per cent of PRA money to substantially offset operating costs plus continue to discount staffing by 5 per cent for vacancies,” according to Joy’s report.

“Using PRA funds is justifiable due to the fact that we have had significant increases in capital infrastructure over the past 10 years, and this has created significant staffing and operating and maintenance pressures.”

If assessment values don’t increase council could motion for a 1 to 2.5 per cent increase in tax revenue for future years to match inflation or increase the current PRA contribution from 5 per cent to 10 per cent.

In 2019, the city experienced a deficit of $360,000, and a small surplus of $150,000 in 2020.

“This highlights the fact that there is really no fat in the City’s operating budget. The results for 2021 will not be known until April 2022 but may possibly show a modest operating surplus,” writes Joy.

The city budgeted $27.07 million for employee salaries, wages, and benefits in 2022, an increase of $1.4 million in 2021.

Additional costs in this year’s budget include RCMP costs at $1.7 million, transit costs at $393,000 and insurance costs at $140,000.

The report notes that the new RCMP detachment is expected to come with additional staffing and contracting service costs when it opens in 2023.

“Escalating RCMP costs will put further pressure on the operating budget,” Joy writes.

Joy told council on Monday that the city has spent around $20 million a year on the new detachment, which is drawing down total reserves, and affected the return on investments.

The majority of spending for the $72.9-million capital plan will go towards roads ($22.6 million) and facilities ($39.39 million). The plan is fully financed by the Peace River Agreement and other grant revenue, capital reserves, water and sewer reserves and borrowing.

Most of the capital projects are to “maintain or replace current assets,” but a few are considered as “community growth” projects such as the 100th Street Rebuild, the new RCMP detachment, the Trails Development for Toboggan Hill, and the Kin Park and Surerus Park upgrades.

Over the next five years, $175,402,895 is forecast to be spent on the Capital program.

The city has yet to recover from the pandemic reporting a $637,000 loss in “Own Source Revenue” from around $10 million pre-pandemic. Although, the city expects to see $9.28 million in own source revenues in 2021, up from the $8.5 million budgeted last year.

“Holding the line on the expenses the City can control will be required for a number of years, combined with anticipated increases in assessment values,”  said the report.