West Shore Parks and Recreation Funding Strategy
A report proposing a transition of funding for West Shore Parks and Recreation from volatile casino revenue to more stable property taxation.
TOWN OF VIEW ROYAL COMMITTEE OF THE WHOLE REPORT
TO: Committee of the Whole DATE: January 5, 2021 FROM: D. Christenson, Director of Finance MEETING DATE: January 12, 2021
West Shore Parks and Recreation Funding Strategy
RECOMMENDATION:
THAT the Committee recommend Council approve a strategy to transition funding for West Shore Parks and Recreation from casino revenue to taxation.
CHIEF ADMINISTRATIVE OFFICER’S COMMENTS:
I concur with the recommendation.
PURPOSE OF REPORT:
To consider strategies to reduce reliance on casino revenue for funding West Shore Parks and Recreation annual requisition.
BACKGROUND:
View Royal has long had an awareness of the potential volatility of casino revenue and has in recent practice limited its use to funding expenses of a capital or one-time operational nature. One notable exception to this policy is the funding for the West Shore Parks and Recreation (WSPR) annual requisition, which has continued to be funded by casino revenue. WSPR’s requisition is expected to be $764,000 in 2021, not including extraordinary requests.
Due to restrictions ordered by the Provincial Public Health Officer, Elements Casino was shut down mid-March 2020, resulting in a revenue shortfall of $1.66 million to View Royal. A reopening date has not yet been announced. While the Casino revenue reserve has enough to fund the 2020 WSPR payment, adjustments will be required for future years to ensure the sufficiency of the reserve to meet the 2021 WSPR requisition and other future funding needs.
DISCUSSION:
View Royal could improve its financial sustainability and resilience by transitioning funding for the WSPR annual requisition to a more stable revenue source, such as taxation. This transition could occur over the course of several years to ease the impact to property owners.
The following table describes estimated results of various possible scenarios if a strategy of transitioning funding for WSPR from casino revenue to taxation was implemented starting in 2021. The estimates assume that the WSPR annual requisition increases by 2% per year and the tax base grows by 1% each year.
| Annual tax % increase | Year requisition is 100% funded by taxation |
|---|---|
| 1.00% | 2030 |
| 0.75% | 2034 |
| 0.50% | 2044 |
As an example, total tax revenue in 2020 was $9.06 million. A 1% tax increase on this tax base would generate $90,600 in 2021. If the WSPR requisition in 2021 is $764,054, adopting this strategy would result in over half of WSPR funding coming from taxation by 2025:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| WSPR requisition estimate | $764,054 | $779,300 | $794,900 | $810,800 | $827,000 |
| Tax funding | 90,600 | 182,100 | 274,500 | 367,800 | 462,000 |
| % Tax funded | 12% | 23% | 35% | 45% | 56% |
| Casino funding | 673,454 | 597,200 | 520,400 | 443,000 | 365,000 |
| % Casino funded | 88% | 77% | 65% | 55% | 44% |
An alternative to the strategy described above could be to increase the annual contribution to the Future Expenditures reserve specifically to supplement shortfalls in Casino revenue. One of the stated purposes of this reserve is to offset unrealized revenue, however the current balance of this reserve (about $935,000) may be insufficient to meet the future need of such a volatile revenue. The extent to which this reserve is depended on to offset Casino revenue shortfalls may limit funds available to smooth future fluctuations in other types of revenue, such as taxation and development fees. This strategy is not recommended.
RECOMMENDATION:
THAT the Committee recommend Council approve a strategy to transition funding for West Shore Parks and Recreation from casino revenue to taxation.
SUBMITTED BY:
D. Christenson, Director of Finance
REVIEWED BY:
K. Anema, Chief Administrative Officer
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