Penticton council plots budget with no tax increase

By Steve Kidd - Penticton Western News Published: November 29, 2012 2:00 PM

The City of Penticton is once again planning to hold tax increases at zero for 2013, as set out in the preliminary financial plan under debate in council chambers now. The 2013 budget includes no staffing increases or changes in service levels at the city, but it doesn’t come without a cost. According to chief financial officer Doug Leahy, the city is facing about a $1.16 million deficit, which will be made up by drawing on the city’s reserves. Without dipping into reserves, Leahy said the deficit would translate to a 4.6 per cent tax increase. “We are still in a deficit position and that goes out into the future.” When they started working with the budget figures, Leahy said, they started with about a $1.57 million deficit. Working with the city’s various departments and making adjustments, that was brought down to about $1.16 million. The city’s total budget is $54.5 million, though much of that is made up of fixed costs, like policing and labour. Only about $2.6 million, or just five per cent, is controllable by the city. Leahy’s five year forecasts show the deficit increasing, growing to just over $1.7 million in 2017. But if nothing changes, the city will be in trouble before then, Leahy said, as the reserves get depleted. His forecasts show the general surplus fund dropping to $262,000 in 2015 and entering negative territory in 2016. “We are going to have to, in 2014 budget year, take a look at our budget either on the expenditure side or the revenue side in more detail,” said Leahy. “We have to eventually deal with the deficit.” The prospect of declining reserve funds has caused some councillors, like John Vassilaki and Helen Konanz, to question the concept of keeping to zero tax increases. “We keep digging into our reserves and we can only last so long before something has to give and we can’t stretch it anymore,” said Vassilaki. “If we don’t increase taxation at the rate of our increases, we are going to be further back on every front.” Leahy, however, isn’t ready to recommend a tax increase yet. “I personally think the city is doing quite well, considering the financial times we have come through. In 2014, yes, we definitely have to start taking some action, looking at the deficit,” he said. “If the economy picks up maybe things will change on the development side, and things will be better, but taxing your way out of it, I don’t think any economy has shown that taxing your way out of it is a good solution.”