Budget 2017: Revelstoke council moves money out of tax reserve

Revelstoke council found $300,000 in savings in the city budget, without cutting a single service or project.

Council continues to deliberate the 2017-21 Financial Plan.

City council found $300,000 in savings in the city budget, without cutting a single service or project.

How did they do it? They voted to reduce the amount put into a tax equalization reserve to $200,000 from $500,000, freeing up that money for either a smaller tax hike or, more likely, more spending.

The 2017 draft budget includes a five per cent tax increase, $19.6 million in operating spending and $3.7 million in capital spending.

Council met for the second time to discuss the budget on Thursday, Feb. 23. The main topic of discussion was a list of capital spending items that staff put forward for consideration, but did not include in the draft budget.

The big one is $900,000 to spend on road repairs, but others include $20,000 for a generator for the community centre, $150,000 to move the sani dump to Powerhouse Road, and $70,000 for a review of the development cost charges bylaw. The full list can be found in Appendix E of the City of Revelstoke’s draft budget.

Council didn’t vote to include any items in the budget, saving those decisions for a future meeting. Doing so would either require finding cost savings in other areas or dipping into past years surpluses, something Allan Chabot, the city’s Chief Administrative Officer, warned against.

“It’s not sustainable over the long term,” he said. “You’re living beyond your means.”

The major decision council made was to reduce the amount of money put into the tax equalization reserve.

The reserve was put in place after Revelstoke Mountain Resort and a few other property owners successfully appealed their assessments, costing the city about $250,000 in tax revenue in 2013.

At the time, finance director Graham Inglis told council the city would likely have to live with the ambiguity in perpetuity. The following year, council established the tax equalization reserve to hedge against future successful appeals.

RMR has regularly appealed to have the Sutton Place Hotel classified as residential instead of business to avoid paying higher taxes. Last year, the hotel was classified as a business, boosting the city’s potential tax revenue by $1.2 million. The city hedged against a successful appeal by putting $750,000 of that into a reserve.

The appeals can take years to decide, creating uncertainty for the city.

Councillor Linda Nixon led the push to reduce the amount of money being put into the reserve. She said instead of putting money into a reserve, the city could dip into its accumulated surplus if the appeals are successful.

“Taxpayers paid that, and I don’t think tax payers should be paying out for one particular taxpayer when we can find that money if we have to pay it back,” she said.

She proposed eliminating the 2017 transfer to the reserve entirely, but Mayor Mark McKee instead suggested cutting the amount put into it in half.

“It makes me nervous,” he said.

Tania McCabe, the acting director of finance, concurred with the mayor. She said the city faces $1.5 million in risks to its tax revenue if RMR was successful in getting all the units it owns at the Sutton Place hotel switched to residential class from business class.

“I think BC Assessment has it right, but there was another time they said they had it right and it didn’t go the way they said it would,” she said.

The city had $1.3 in accumulated surpluses as of the end of 2015, McCabe said.

In the end, council opted to put $200,000 into the reserve.

Council also freed up $500,000 from the water budget by putting off a proposed $500,000 upgrade of the Farrell Road water line. Funding for the project was set to come from the water reserve fund, so the move won’t save tax payers any money this year. What it will do is free up the money for costly water infrastructure projects in the future.

The next budget meeting is Thursday, March 9. Council has until May 15 to pass the new financial plan.

Correction: An earlier version of this article said councillor Linda Nixon proposed eliminating the tax equalization reserve entirely. In fact, she only proposed eliminating the contribution to the reserve in 2017. The reserve has about $600,000 in it from past transfers.

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