Nakusp preliminary budget outlines financial pressures facing all municipalities

Nakusp councillors got a sobering look at the Village’s budget projections for 2023 – and it’s a heads-up for taxpayers in any municipality.

At its December meeting, Village staff told council that with current spending plans, revenue projections, and estimates for the impact of inflation, the Village will need a 13.2% tax increase to balance next year’s budget. That would mean aan extra $134.41 for the average residential taxpayer.

“Never in my career would I think I would be advocating for a double-digit tax increase,” said Chief Administrative Officer Wayne Robinson. “But with inflation as it is, what do you do, cut services? No one would be happy with that.”

Last year, staff estimated a 4% tax increase would be needed in 2023. But the five-year financial plan has been knocked off kilter, especially because of inflation.

“Inflation is sitting at 7.8%, so the majority of the increase is coming from that,” he said. “Over half of what we’re asking for is coming for cost pressures that are tied to inflation.”

Higher burdens, higher cost

Other contributing factors include adding a half-time person to the public works department, increased council remuneration (approved by the previous council during the summer), and an increased training/conference budget.

Robinson says the extra staff is needed to meet requirements being passed down to the municipality by higher levels of government, from garbage and recycling pick-up to more robust asset management planning, zoning and environmental standards.

“We’re playing catch-up. We don’t have the work force to do the comparable workload compared to a few years ago, even though there were fewer people [then],” he said.

The cost of water and sewer is scheduled to increase 5% as well, to offset increasing costs and to ensure contributions are made to reserves for future capital expenditures.

The Village annually collects taxes not only for itself, but also for schools, hospitals, and regional government services. Not helping matters is slow or delinquent taxpayers, who owe the Village about a quarter-million dollars. And even though the Village hasn’t been paid, it has had to pay out the other government bodies’ share of those taxes in advance, leaving the Village holding the bag.

Ways to trim?

The Village has options. Reserve funds, a kind of savings account for municipalities, can be raided to offset the increase. Or more money could be taken from the revenue generated by the hot springs or campground. Or there could be layoffs, reduced grants to affiliated groups, or infrastructure projects delayed or downsized.

But all those options come with costs, he says.

“I’ve heard of some local governments considering dipping into reserves, in order to decrease the ask of people for one year, says Robinson. “But the problem with that is reserves are set back a lot, and every local government is having problems getting reserves up for asset management… you’re just kicking the can down the road.”

Robinson says the effects can be cumulative. Lower reserves not only mean less cushion against unforeseen problems, but there’s less money available to match funds for grants for projects that need to be done.

“You can run into a situation like the Village did years ago, when it had to borrow money to update the hot springs facility,” he said. “We don’t have to do that, and it’s important to stay on that track.”

And Robinson says it’s not advisable to just avoid a tax increase at any cost by cutting 7% or 8% out of the budget.

“You could do it – if everyone is willing to agree to lower service levels,” he said. “It’s shutting down facilities for a period of time, laying off or getting rid of staff. It would take much longer to complete our zoning bylaw, and we’d have to pay back the grant money because it wasn’t done in time.”

In the long run, cutting government can reduce the quality of life people enjoy by having a healthy municipal infrastructure.

“Can we do it, yes. Is it advisable? Absolutely not, because it will cost more than it will cost if we just proceed as we are planning.”

It’s all relative

Staff also point out that overall, the Village is in a good state financially. It is servicing a reasonably small debt – about $1.5 million, roughly a tenth of its legislated limit – and its current tax burden is below provincial averages.

“The Village's taxes are comparable to the average municipality in the region, but are approximately 25% lower than the average municipality across BC,” notes a staff report. “Even with this year's proposed tax increase, Nakusp Village taxes will be well below the average municipality in BC.”

Nakusp’s financial officer delivered the news early, says Robinson, to give political leadership a chance to plan, gather public opinion, and watch that decisions they make now don’t make matters worse. For instance, they can keep a lid on travel, or making commitments to outside organizations.

John Boivin, Local Journalism Initiative Reporter, Valley Voice