Council Report: 2020-2024 FINANCIAL PLAN APPROVAL

TOWN OF VIEW ROYAL COUNCIL REPORT

TO: Council
DATE: April 7, 2020
FROM: Dawn Christenson, Director of Finance
MEETING DATE: April 14, 2020

2020-2024 FINANCIAL PLAN APPROVAL

RECOMMENDATION:

THAT the 2020-2024 Financial Plan be approved as amended, in principle, and further that the 2020-2024 Five-year Financial Plan bylaw be prepared for consideration at the next Council meeting.

CHIEF ADMINISTRATIVE OFFICER’S COMMENTS:

I concur with the recommendation.

PURPOSE OF REPORT:

To provide Council with a revised five-year financial plan for approval in principle.

BACKGROUND:

The proposed 2020-2024 Financial Plan was reviewed by Council at a series of budget meetings on February 18-20 and 25, 2020. At these sessions, Council considered the 2020 core operating budget, proposed non-core and capital items, ongoing costs of capital projects and reserve transfers. Council provided direction to staff regarding specific changes to the financial plan as outlined in Schedules A and B (attached).

The 2020-2024 Financial Plan includes a 2.9% or $259,000 tax increase for 2020, assuming approximately $229,000 in additional tax revenue will be available from new construction (non-market change). Schedule C (attached) provides details of tax-funded components for 2020 and 2021. Any further changes to tax-funded components will change the percentage tax increase. Estimates of future years’ taxation will be adjusted when the financial plan is reviewed again next year.

The changes made during the budget deliberations were incorporated into the financial plan documents distributed to Council and published on March 13, 2020 on View Royal’s website and available at the front counter at Town Hall. These budget documents were also linked through the new online Citizen Budget engagement tool that invited constituents to “share their view” through an informative and interactive journey through the budget. Citizen Budget was launched on March 13 and was open for input until March 31, 2020. View Royal residents were informed about the online opportunity through a household mailer, multiple social media messages, and View Royal’s website and RSS feeds.

Subsequent to the February 2020 budget workshops, Council approved the acquisition of parkland on Little Road for $750,000. This acquisition and related funding from Parkland Acquisition Development Cost Charges (DCCs) will be incorporated into the financial plan bylaw before it is returned to Council for consideration. Prior to approving the financial plan in principle, Council may direct further changes to the plan.

Due to the COVID-19 pandemic and ensuing economic difficulties facing many taxpayers, Council may wish to consider various property tax relief measures that are already in place or could be initiated. These measures are in addition to any financial support provided by the federal and provincial governments to help families and businesses survive through this challenging period.

DISCUSSION:

Property tax relief measures currently in place or announced

Deferral of CRD sewer charge In January, Council approved the restructuring of the sewer charge for the Capital Regional District’s (CRD’s) portion of the sanitary sewer system utilized by View Royal properties. This in effect removed the sewer tax from the tax notice to be issued in May, due July 2, 2020. The average assessed residential property will see a reduction of about $260 on their 2020 tax notice. Commercial properties will also see a reduction in proportion to their assessed values ($0.89 per $1000 of assessed value). The CRD’s sewer charge will be billed with View Royal’s sewer charge on the regular sewer bill in October, effectively deferring this payment for three months. The average assessed home with average water consumption (77 m³) will pay about the same amount as the 2019 sewer tax.

Provincial property tax deferral program The Provincial property tax deferral program has been in place for many years and moves to an online application process starting this year. This program allows homeowners to defer their property taxes if they are 55 or older, a surviving spouse of any age or a person with disabilities. Additionally, there is a deferment program for families with dependent children. Subsequent to the 2008 financial crisis, the Province offered a financial hardship tax deferment program for a discrete time period; it is unknown at this time whether that program will be available again. These programs defer property taxes through low-interest loans secured by the equity in the home for payment in part or in full at a future date or when there is a change in ownership. The Province pays the deferred property taxes to View Royal on behalf of the homeowner.

Reduction in Provincial school tax rates The Province recently announced that school tax rates for commercial properties (assessment classes 4, 5 and 6) will be reduced by 50% for the 2020 tax year. For a property assessed at $2 million, this represents a $3,700 savings.

Further property tax relief options

Reduce municipal property tax increase to 0% New construction in 2019 caused a shift in 2020 assessments from the commercial class to the residential class. With a greater residential tax base, a 0% tax increase would result in an estimated 3% property tax decrease for the representative home. The same is not true for the commercial class. With a smaller tax base in 2020, a 0% tax increase would result in an overall 1-2% increase for the average commercial property.

Looking beyond 2020, the financial plan predicts a 3% tax revenue increase to support ongoing programs and new initiatives in 2021, equating to a $70 increase for the representative home when we assume a minimal level of assessment growth. However, if the 2020 planned increase is rolled back, 2021 projected taxes more than doubles to $160 for the representative home.

A 0% tax increase in any given year comes with the risk that taxpayers will expect to pay the same property tax amount from one year to the next. In fact, property taxes are dependent on multiple factors such as the individual property’s assessment in relation to others within the class, shifts in assessments between classes and the effect of new construction on assessments. If this option is supported, Council may wish to consider additional communication with taxpayers to help manage these expectations.

Defer property tax due date(s) and/or reduce or eliminate property tax penalties View Royal uses the Province’s default tax collection scheme: property taxes are due on July 2 of each year and a 10% late payment penalty applies. The penalty would be about $267 on the representative home, assuming the homeowner’s grant is claimed on time. The penalty does not apply if a property tax deferment application is approved before the tax due date. It is yet unknown whether the Province intends to defer the property tax due date or to reduce or eliminate late payment penalties. View Royal collects approximately $40,000 in property tax penalties each year.

Legislation allows municipalities to establish an alternative tax collection scheme by bylaw. The alternative scheme may set out one or more due dates and establish penalties and interest to be applied if payments are not made when due. Taxpayers may elect the scheme that provides the best advantage to them. While Council may wish to consider this option, implementing this change would be quite difficult for 2020. Staff would need to communicate the change to View Royal taxpayers, redesign and reprint property tax notices, revise website information and implement and test the change in the property tax software. The majority of CRD municipalities use the default provincial tax collection scheme (July 2 due date with a 10% late payment penalty).