Town adjusts budget to reflect $800K revenue reduction due to COVID-19

Town adjusts budget to reflect $800K revenue reduction due to COVID-19

Staff deals with shortfall with transfers from reserves and project deferrals

The coronavirus pandemic has necessitated changes to the Town’s 2020 budget and pushed back its adoption by a week.

The original budget was developed over three open meetings in February. It must be adopted by May 15 under provincial law.

At a special meeting of the Finance Committee March 30, Chief Administrative Officer Alan Harris presented the adjusted numbers.

Overall, Harris reported a net revenue reduction of $817,000 based on a $1.3 million shortfall partially offset by related reductions in expenses. Staff dealt with the shortfall by recommending a combination of transfers from reserve and surplus funds and project deferrals.

The CAO’s report identified several major impacts of COVID-19 on municipal revenues, the largest being a 54.4 per cent decrease ($989,000) in airport operating revenues. This reduction was slightly offset by a resulting reduction in expenditures of 11.4 per cent ($331,000).

To make up the difference staff recommended transferring an additional $417,420 from the airport surplus fund, leaving just $22,000 in surplus barring any 2019 year-end adjustments. Short-term debt expenses of $53,000 will be paid out of the airport’s infrastructure reserve.

READ MORE: COVID-19: B.C. business, local governments get further tax relief

The second greatest impact, the report stated, is an anticipated $95,000 loss to Tourism Smithers in lost hotel tax revenue. This directly affects Tourism’s budget.

Finally, staff anticipated a 50 per cent reduction of campground user fees ($58,500); 100 per cent of field user fees ($18,300); and 98 per cent of recreation program fees. These are mostly offset by a 100 per cent decrease in direct program costs ($58,200) and a decrease in the Town’s cost share to the regional district ($9,250).

To offset the impact to revenue several adjustments were made:

Expenses of $26,000 added for safety supplies, such as refitting the Town office (this was borrowed from the Emergency Services Reserve, but staff expects it will be reimbursed by the province);

Council remuneration and expenses were adjusted to reflect six rather than seven council members, a savings of $23,200;

Deferral of purchasing new firefighting gear ($14,400)until 2021; and

Deferral of the building condition assessment special project ($95,000) until next year.

Harris’s report also identified the potential for further COVID-related impacts. For example, the report states if council were to defer penalties and interest on tax arrears, it could cost tens of thousands of dollars (last year, the Town collected $76,000).

Harris told The Interior News council cannot unilaterally defer tax due or penalty dates because they are regulated by the Province.

READ MORE: B.C. could see some COVID-19 restrictions eased by mid-May

On April 16, the Province announced relief measures for municipal taxpayers and municipalities grappling with the potential for tax defaulting.

These include an extension of the penalty date from June 30 until the end of October for utility, business, industrial and recreation/not for profit tax classes.

To help municipalities deal with the budget implications, they will allowed to borrow against capital reserves interest-free for five years.

“It buys us some time,” said Deputy Mayor Gladys Atrill. “It’s not a great solution because it doesn’t actually replace the missing money. I guess the expectation is eventually people are going to pay their taxes, so this will tide us over until [they do].”

Commerical tax classes will also see a 50 per cent reduction in school taxes, although this does not affect Smithers’ bottom line as the local government merely passes along that revenue to the school district.

There was no relief announced for residential taxpayers, but with all the pandemic-related job losses and business closures, the possibility of people defaulting on their property taxes is becoming an increasing cause for concern for local governments. For example, the City of Vancouver has projected it could experience a budget shortfall of up to half a billion dollars based on a worst-case scenario of one-third of residential taxpayers defaulting.

Town staff has not projected how much the municipality could potentially lose due to residential tax defaults, but Atrill is hopeful the latest announcement is just the beginning.

“It’s probably not exactly what I was hoping for, but the minister did say that we’re not done yet, so there may be something a little stronger for municipalities coming,” she said.

In the March 30 report to the Finance Committee, staff did recommend two measures to provide some direct relief to taxpayers.

The original 2020 budget included tax increases for roads and sidewalks and to fund a new RCMP position.

The report recommended reducing the roads and sidewalk tax by $440,000 from $620,000 to $180,000.

The $180,000 will be used to pave Mountain View Drive ($80,000) and upgrade sidewalks ($60,000). The remaining $40,000 is set aside for road patching, an increase of $29,500 with more major road maintenance projects put on hold for this year.

A motion to that effect was brought forward to the April 14 regular meeting of council and was passed.

A motion to defer the tax increase of $131,000 for the RCMP member and pay for it out of RCMP surplus was defeated at committee.

Two other motions were brought forward from committee and passed at the April 14 council meeting.

The first directs staff to write to the federal minister of transportation, copying Skeena-Bulkley Valley MP Taylor Bachrach, requesting a 75 per cent wage subsidy for the airport similar to that offered to businesses.

The second was to maintain the same tax percentage per assessment class for the majority of assessment classes, consistent with 2019. With total assessments going up this year from $750.5 million to $808.3 million, however, that represents a bump in revenue of $453,000.

The new 2020 budget will be presented to council at a special meeting May 5, one week later than usual, for first, second and third readings.

Council meetings are still open to the public although space is limited due to rearrangement of the council chamber to allow for physical distancing measures to be observed. The meetings are also live-streamed on the Town of Smithers Facebook page.

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