The City of Fernie has begun preliminary budget discussions for the 2025 to 2029 Financial Plan.
Budget talks kicked off in late November and have continued into December, with council being presented with an initial draft for tax rate increase, that will be revisited and revised over the course of the next few months.
Preliminary estimates based on escalating costs show a 7.5 per cent tax rate increase in 2025, largely based on inflationary pressures. This number is not final however, and could be subject to change over the coming months.
Councillor Harsh Ramadass said he's concerned about what this could mean for residents, given that a 7.5 per cent increase could result in property taxes for the average house being has high as $5,500, and increase the cost of rent dramatically.
"It is going to be a tough pill to swallow for some of us," he said.
"We should be open to all the opportunities that we have to reduce our expenses. I think we should leave no stone unturned," he said, adding that his main concern going forward will be to keep a healthy surplus in reserves.
"I don't want to draw down our reserve funds. We need to be fixing our roads, sewers, pipes, infrastructure, waterlines. There's a million things that need to be fixed right now," he explained.
Reports show the city is running a sizable $50 million infrastructure deficit, carrying over from previous decades, and Mayor Milligan said one of the driving factors is a lack of reserve money saved for future projects.
"Communities have grown more quickly in recent decades. It's difficult because of the cost of the infrastructure. It's typically born by a developer, but then the tax money that is required to maintain or save for the future of that infrastructure, it generally doesn't pay for itself," Milligan explained. "It's a bit of a sink hole. You put stuff in the ground and if you're not putting the requisite amount of reserves away, it just accumulates deficit."
Ramadass said he's worried about the firehall project's impact on deficit in years to come.
"This is where the struggle for giving the go-ahead for the firehall comes along," Ramadass said. "We prioritize firehall over capital expense that will be staring at us in the next several years and decades. For some reason, we are so ok with this $20 million gigantic outlay for a firehall."
"If you look at some of our preliminary numbers here, we would be paying a humongous amount of interest just for borrowing on that $20 million. What that will do is that it will crowd out every other capital investment and we would be raising taxes, and yet, not being able to deliver on many of these capital projects," Ramadass added.
City staff presented council with a few potential options for helping reduce the burden on taxpayers, including applying for grants for major projects, increasing reserve contributions, taking a more cautious approach for selection of capital projects and advocating politically for additional funding streams.
Milligan said they'll be a great deal of discussion on which options will be most viable.
"The challenge with grants is that they're unpredictable. It takes resources to apply," Milligan said. "When you get them, they're great because they'll fund projects, but there are reporting requirements that you have to respond to. As any community will tell you, you'll never know you're going to get it until you get it."
"Taxation has the benefit of being predictable, but I very much appreciate and understand it impacts the homes and business owners in our community," Milligan added.
Inflation may mean the city will have to reduce certain services in order to keep the tax rate low. Milligan said council and the City will be looking to engage with the residents of Fernie to get a better sense of what service reductions they would be willing to tolerate.
"Those are things we want to hear from the community," said Milligan. "Where can we tighten the belt such that it doesn't impact our community as a whole? Or where can people tolerate a reduced level of service?"
Ramadass said he'd like to explore reductions in operating expenses on the part of the city as well, including for wages, training and travel — what he deems "non essentials." He argued that adopting more virtual communication for training and meetings could be a way of cutting back on expenses.
"I just don't think this is the time to be spending money on all these things," Ramadass said.
"It's the duty of council to figure out a way to keep tax hikes manageable, while also fixing our core infrastructure and also not drawing down our reserves. That's the three things we need to juggle," Ramadass added.
