The City of Orillia will be taking $628,000 from its tax rate stabilization reserve to ensure taxpayers don’t face a tax increase in 2021.
Budget committee - comprised of Mayor Steve Clarke and city councillors - wrapped up two days of budget deliberations Thursday by passing its $62.4-million operating budget, which is subject to ratification at a special Dec. 7 meeting of council.
Councillors Mason Ainsworth, Tim Lauer and Rob Kloostra voted against using reserve funds to freeze taxes amid concerns of a potentially negative impact on future budgets.
“I do not support that zero-per-cent tax increase (and) I don’t think it’s good planning for the future,” said Ainsworth. “We definitely should not be taking from the tax rate stabilization reserve at this particular time.”
If the city did not take $628,000 from its reserve, city taxpayers would have been looking at a 1% tax increase, noted city treasurer Jim Lang.
Coun. Lauer said he fears this plan is “setting ourselves up for problems” in future years.
He noted next year is an election-year budget when, typically, caution is the name of the game and politicians are wary of increasing taxes.
“That could put us in a bad place for two or three years,” Lauer cautioned.
In fact, Lang said staff predict a 3.4% tax increase will likely be necessary in 2022 because of this year’s tax freeze and other factors.
However, he said it’s impossible to predict the future and conceded that estimate is not taking into consideration potential mitigation measures council could opt to employ.
Coun. Ted Emond, echoing the sentiment of the majority of council, said a tax freeze this year is necessary.
He said it’s important “to deliver to our taxpayers a message that this council very, very much understands and appreciates the stress many are experiencing in this time of COVID,” adding taxpayers “understand this is a one-time opportunity for this council to demonstrate that.”
Emond noted council has done a “really great job” in recent years of rebuilding reserves and noted that the current, record-low borrowing rate would allow the city to finance future projects at lower-than-expected costs.
Coun. Ralph Cipolla agreed.
“A zero (per cent tax rate) is a necessity ... to help the citizens of this community deal with the shortfalls they’re going to have,” said Cipolla.
Coun. Jay Fallis inquired about the amount of money in the tax rate stabilization reserve.
Lang noted the reserve has a balance of about $5 million in addition to the $1 million (which is mostly unspent) that was set aside for the economic recovery task force and COVID-related emergency needs.
The treasurer cautioned that between $2-3 million should be kept in the reserve to deal with tax appeals and unexpected fiscal challenges.
Upon learning of the “healthy” balance, Fallis supported the plan. So, too, did Mayor Steve Clarke.
He commended staff for the foresight, several years ago, to recommend to council to resource the tax rate stabilization reserve and applauded council for following through.
The reserve has “proved invaluable” during the pandemic, noted the mayor. “It’s there to mitigate spikes and that kind of pressure on the taxpayer … (this is) a year of hardship and I think it’s probably justified to tap into that rainy day reserve.”
The amount required from the tax rate stabilization reserve is $50,000 more than expected because a majority of council voted to support two initiatives staff recommended against:
- Providing a $25,000 grant to Information Orillia; and
- Providing a one-time grant of $25,000 to improve accessibility at the Remember Every Name monument at the former Huronia Regional Centre.
On Monday, the city will begin sifting through its capital budget.
Watch for more budget-related stories in the coming days.