Defense and Taxes
-Esquimalt set for 3.9 % tax increase while bracing for hard hit from DND decrease
There is an old joke about taxes. “People who complain about taxes can be divided into two groups: men and women.”
Talking taxes is never easy. Putting together Esquimalt’s 2010-11 municipal budget has required some tricky stick-handling by Esquimalt Council. The final verdict is that both Esquimalt residents and business owners alike will be facing a 3.90% increase in tax rates for the coming year.
When the budget process began earlier this spring, the first draft projected a 5% residential increase almost identical to last year’s hike in residential property taxes. Council, however, seemed determined to come in under last year’s percentages.
“We did go forward with 3.9 % across all classes,” says Councillor Alison Gaul. “Earlier there was debate back and forth around whether or not to increase the amount for light industry (class 4). In the end, we were able to increase the same across all classes which I am really happy about.” Gaul was speaking in reference to an option to increase industry tax rates as high as 6.49% that the majority of Council felt was unfair, particularly in the midst of tough economic times.
This year’s budget making became particularly challenging when it was discovered half-way through the budget process that PILT (Payments in Lieu of Taxes) revenue received from the Department of National Defense had suddenly decreased in the amount of almost half a million dollars. As Esquimalt is home to a military base, we receive about 40% of our municipal revenues from the federal government in direct payments rather than property taxes. The cause of the budget’s big hole was that the assessment of one of the DND’s properties had decreased substantially over last year.
In order to minimize both budget cuts and tax increases, Council opted to transfer significant funds from the municipality’s Working Capital Reserve to help top up the budget shortfalls.
“One thing that is interesting to note is that this money was set aside years ago in a special working capital reserve fund specifically in case we have difficulty with an unanticipated depreciation on one of our PILT properties,” explains Gaul. “That is what happened this year – so we were able to access the fund. We are fortunate today that past decision-makers had the wisdom to set aside money in case this happened.”
“Esquimalt has made good choices over the years about setting aside reserve funds,” says Gaul. “This has allowed us to apply for grants when they have come available like the Archie Browning Upgrade and the sidewalks in the industrial area.”
“We have plans established as to how to replenish each fund when it is depleted as well,” adds Gaul.
Hence, while we as taxpayers will be facing only a modest rate increase, we will still be on the hook to pay back the capital reserve fund in the coming years. What we spend today will certainly have to be paid tomorrow.