City passes $272-M budget

Daniel
Daniel MacEachern
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No tax increases, spending increases in water treatment, pensions, transit

St. John’s city council’s 2014 budget boosts spending by nine per cent, driven by increases in spending on water management — and the city warns of a growing fiscal imbalance with the province.

St. John’s Coun. Danny Breen answers questions about the city’s latest budget in the Green-Foran Room at St. John’s City Hall Monday evening. — Photo by Rhonda Hayward/The Telegram

St. John’s city council’s 2014 budget boosts spending by nine per cent, driven by increases in spending on water management — and the city warns of a growing fiscal imbalance with the province.

Council approved the $272-million budget — up 9.4 per cent from the $249-million 2013 budget — Monday evening with no residential or commercial tax increases. The tax rates remain 8.1 and 26.2 mills respectively, but council is forecasting greater tax revenue, as happened in 2013. This past year, city revenue was $260 million, up from the budgeted $249 million, while the city’s expenditures, $250 million, were $1.2 million over budget. Water taxes remain stable at $615 for residences and commercial properties not on water meters, while metered rates remain the same as 2013.

Coun. Danny Breen said Monday the city is expecting, when all the numbers are in, a 2013 surplus of between $9 million and $11 million, largely from residential and business realty tax revenue being higher than anticipated.

“There’s also a higher surplus in the water tax that we’ve reinvested in the water tax accounts, so that we cannot have an increase in water tax either this year.”

On the expenditure side, the increase in spending is largely due to wastewater and water treatment, said Breen, who is chairman of the city’s finance and administration committee. Spending in the water department is going from $33.7 million budgeted in 2013 to $39.1 million in 2014. The city will also pay $3.8 million more in pension funding and more than $3 million more on public transit.

“It’s a little bit exaggerated because we do manage the regional wastewater and regional water for the whole region,” he said. “So we’re bringing on Bay Bulls Big Pond, Petty Harbour Long Pond, and regional wastewater treatment plant at Riverhead will be fully operational, so they’ve added to that cost.”

Breen acknowledged pedestrians and drivers faced many frustrations as the city began its $270-million multi-year infrastructure plan this past year, and said it’s not likely to improve in 2014, but he characterized it as “short-term pain for long-term gain.” The city is budgeting $35 million for work on aging water mains and $40 million on streets and sidewalks. Projects include water main replacement on Portugal Cove Road, underground water infrastructure work on the Mayor-Bonaventure avenues corridor and sewer replacement on Topsail Road-Craigmillar Avenue.

“There’s going to be a lot of work done next summer, plus the usual street rehab and sidewalk rehabilitation, so pack a lunch,” he joked.

The increase in spending on core services from last year is up

$5.4 million, about three per cent, added city manager Bob Smart, who said some of the increase in water spending will be recovered from other municipalities. Smart noted the loss of the municipal operating grant — about $3.4 million — as well as the cancellation of the Newfoundland and Labrador Liquor Corp. $100,000 grant-in-lieu tax. The conversion of the Battery Hotel and Johnson Insurance building to tax-exempt status means a loss of about $300,000, but what Smart said is “more striking” than the loss of nearly $4 million in provincial revenue is how much the city pays the province.

“At the same time that the support from the province is declining, we’re paying in tens of million dollars in payroll tax, our public transit system is taxed, we pay HST every time we do anything, so there’s a very significant flow of revenue back to the province from the city,” said Smart.

There’s going to be a lot of work done next summer, plus the usual street rehab and sidewalk rehabilitation, so pack a lunch St. John’s Coun. Danny Breen, chairman, finance and administration committee

Without a better fiscal arrangement from the province, warns the budget, the residential tax rate may go to 8.6 mills in 2015 and to 9.1 mills in 2016, with commercial tax rate going to 27.2 mills in 2015 and 28.2 mils in 2016.

“I think it’s obvious from the numbers that there’s a significant lack of recognition of the burden that certain provincial services, provincial government organizations have on the city, thus on the taxpayers of St. John’s,” Smart said. “You talk about schools and hospitals, you can see that, but look at the Newfoundland Liquor Corp. That’s a profit-generating business that, in my opinion, is not paying its fair share of its taxes in the city, compared with other businesses, for sure.”

Smart criticized the provincial government’s refusal to pay property tax on its buildings in the city while requiring St. John’s to pay all provincial taxes, such as the provincial portion of the HST. “That’s where the major imbalance is. You will find, in most other jurisdictions, that the provincial government either forgives the tax on municipality or rebates it back,” he said. “We don’t pay the federal portion of sales tax. The federal government forgives it, as they do right across the country. But we do have to pay the provincial portion of sales tax, and in most other jurisdictions, municipalities don’t have to pay that tax.”

Mayor Dennis O’Keefe said although the city has a good relationship with the province — noting the provincial government’s increase in spending on capital expenditures last year — it’s clear a new arrangement is needed.

“There’s room there for continuing stability in our tax rates if certain things happen, and the certain things will continue to be good fiscal management, good operational management, increase in revenues because of growth in development in the city, both residentially and commercially,” he said. “But the other major part of the puzzle is the fact that we are losing our (municipal operating grant). It’s probably gone forever.”

Sharon Horan, senior vice-chairwoman of the St. John’s Board of Trade, said the board is pleased to see there are no tax increases in the 2014 budget, and a commitment from council to find solutions for the city’s $92.1-million unfunded pension liability, costing the city about $10.4 million per year in servicing.

“We are anxious to hear more about what they’re going to do with the surplus. That didn’t seem to be in the documents today,” she said. “While there is a $9- to $11-million projected surplus, we’re interested in seeing the plan for how that money’s going to be spent.”

O’Keefe said the surplus in water taxes — about $2.3 million — in 2013 goes back into the water department to keep water taxes from going up. The balance of the surplus will go into different programs financed by the city throughout the year.

 

 

Organizations: Newfoundland and Labrador Liquor, Battery Hotel and Johnson Insurance, Newfoundland Liquor Corp. That Board of Trade

Geographic location: Portugal Cove Road, Topsail Road-Craigmillar Avenue

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  • Joe
    December 10, 2013 - 08:37

    "Without a better fiscal arrangement from the province, warns the budget, the residential tax rate may go to 8.6 mills in 2015 and to 9.1 mills in 2016, with commercial tax rate going to 27.2 mills in 2015 and 28.2 mils in 2016." Can someone explain this paragraph? Was the budget at the meeting? With all these numbers, there is no breakdown between operating and capital costs. Is that because the news release did not have an figures to quote? On the CBC article Danny was quoted as saying they were "staying the course". With a ten percent increase in spending I think he is in sink with Kathy's definition of the phrase.