If politics is about choices, Saanich’s new council will face no shortage of difficult financial dilemmas, soon after they take the oath of office.
A 2017 report found Saanich faces the prospect of raising property taxes by almost five per cent in 2019 to help cover the cost of a new provincial tax and labour agreements among other circumstances.
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Key among is the Employer Health Tax (EHT) scheduled to come into effect Jan. 1, 2019, forcing Saanich to raise an additional $1.78 million to cover it.
“This equates to 1.3 per cent [property] tax increase, 0.4 per cent water rate increase and 0.2 per cent sewer rate increase,” said Valla Tinney, Saanich’s director of finance, in a presentation earlier this year. “In future years, the impact will be tied to collective agreement increases.”
Saanich is raising water and sewer rates to exclusively cover costs for staff who work in its utilities.
The EHT offsets revenues lost by the pending elimination of Medical Services Premiums (MSPs) effective January 1, 2020, with the province “double-dipping” in 2019 by charging individuals MSPs and employers the new tax according to key based on their payroll size.
The tax rate will start at 0.98 per cent for annual payrolls in excess of $500,000 and will gradually increase to 1.95 per cent for B.C. payrolls in excess of $1,500,000 per year.
Saanich has about 1,600 employees, including fire and police officers, with a payroll of $89.348 million based on 2017 figures, and was already contributing to the MSPs of employees.
Efforts to convince the provincial government of changes to the tax failed as the provincial government quietly tabled the legislation at the same time it tabled its more controversial speculation and home vacancy tax.
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The actual effects remain unknown, but a Union of British Columbia Municipalities (UBCM) report says warns local governments will feel a “significant” impact on their finances as the new tax creates a menu of politically unappetizing choices.
If Saanich were to absorb the increase by reducing operating budgets, it would have to cut at least 15 positions, leading to a corresponding cut in service levels. Saanich could also reverse past efforts to put aside away funding for future infrastructure replacements, according to the report.
Comments from chief administrative officer Paul Thorkelsson suggests Saanich would find it difficult to absorb the increase without raising taxes. “Saanich cannot manage a property tax increase [of 1.3 per cent] from this additional expense through simple ‘belt tightening,’” he said. “We would have to amputate a limb.”
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This rhetoric prompted a response from Grumpy Taxpayer$, a local citizens group, which accused Saanich of pushing an alarmist message. “There’s no need to cut off a limb, but simply a willingness to go on a diet,” said board member Bruce Kennedy.
Other known cost drivers include a hike of 2 per cent under Saanich’s agreement with employees represented by the Canadian Union of Public Employees (CUPE) and a hike of 2.5 per cent for employees represented by the International Association of Firefighters.
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Financial unknowns, meanwhile, include the cost of the homeless camp in Regina Park, which may lead to higher taxes.
Councillors will also eventually face a question that directly impacts them: should they raise their own remuneration rates to compensate the federal government’s decision to tax non-accountable allowances of certain municipal officers for work-related expenses as income?
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These expenses have historically made up one-third of council’s total remuneration, and some municipal organizations including the Capital Regional District (CRD) have already raised remuneration rates to compensate officers.
Saanich’s old council deferred that question to the new one.