Fernie budget: City council amends tax rate for 5 percent increase

City of Fernie councillors have opted to up the tax increase for Fernie residents to 5 percent from an originally proposed 4 percent as a way to limit cuts to community groups and funnel more into reserves.

At a special meeting of council on Thursday night mayor and council factored in community feedback to the proposed measures from late March, with the community - and the councillors - having had two weeks to mull over the impact of the proposed budget.

READ MORE: Fernie budget meeting tonight

Councillors chose to go back on a proposal to cut 20 percent of the operational grants the city awards to community partners such as the Seniors Drop-in Centre, the Arts Station and the Fernie Museum, instead going for a 10 percent reduction in response to opposition.

Under the previous proposed budget, a $546,755 budget deficit identified by an audit of financial record keeping would have been bridged by a 4 percent increase to taxes, a 20 percent decrease to funding to community groups and reductions in payments to reserves.

A 5 percent tax increase was decided to be a better option, given it would permit a shallower funding cut for the community partners and have some additional funds leftover to pour into reserves, which need to be topped up in order to secure future asset renewal.

Financial contractor, Linda Tynan said that the municipal reserves needed to be significantly higher given the number of assets the municipality owns - 42.

Currently, reserves are projected to be $11 million by the end of 2021.

No-one on council voted against the new budget amendments, which must be adopted before May 15.

During discussion, councillors indicated push-back from community groups had been robust, prompting Mayor and Council to consider not cutting any operational grant funding for 2021, but they decided to go for 10 percent, with the difference to the budget being around $15,000 - all of which would instead go to reserves.

Mayor and Council also nixed plans to add the construction of gates at two city parks from the budget.

Councillor Kyle Hamilton re-iterated that he believed the originally proposed 4 percent was not enough given the financial hardship the city was facing.

Mayor Qualizza agreed, saying she did not believe 4 percent got the city on the right track.

With a status-quo budget with few changes to operational expenses or additions in services, the city would have been working on a $546,755 deficit, which according to Tynan was the result of long-standing poor financial record keeping which had obscured differences in the tax rate and expenses, leading to the tax rate lagging behind expenses year-on-year.

Discussion on the longer-term impact of insufficient taxes was limited however, with most discussion being around community groups, service levels and reserves. Councillors did touch briefly on the potential of divesting ownership of assets such as older buildings with high maintenance costs, but it was not explored in detail.

Councillor Morgan Pulsifer noted that while community engagement had been limited (with only 60 formal submissions/engagements online), he said that the originally proposed reductions to community groups was not palatable, and if it were any other year “the door would have been kicked in” by proponents of those groups. While he said anything other than the historical grants to those groups was not ideal, he voted for the 10 percent reduction. Councillor Phil Iddon also said that the reductions were unreasonable given that the groups were over three months into their operational year, but ended up voting for the 10 percent reduction.

All councillors who spoke to the issue said that while the reduction in grants to groups would be limited in 2021, all of those groups would need to be on notice that going forward there may be more reviews of their funding as the city’s financial troubles would not be solved by the 2021 budget.

While there had been two options of 0 percent decrease to community groups or a 10 percent decrease, Mayor and Council settled on 10 percent with no public discussion on the difference.

Under a 10 percent cut, the Seniors Drop-In Centre will have its operational grant cut from $30,000 to $27,000 (instead of $24,000), while the Arts Station will go from $46,274 to $41,646, and the Fernie Museum would fall to $48,427.

On top of the increase in ratepayer taxes, the City of Fernie has also levied a 2 percent increase on its water and garbage rates, and a 4 percent increase in sewer rates.