The average residential tax bill in Halifax Regional Municipality is projected to increase by $30 or 1.5 per cent for the 2020-21 fiscal year.
That’s the fiscal framework that regional council agreed to work with Tuesday, although numbers and calculations can change as each of the municipality’s business units digs down to present budgets during the coming months.
“We are seeing our costs outpacing assessment growth so this means that there is going to be upward pressure on the tax rate,” Jane Fraser, chief financial officer for the municipality, explained at a budget meeting Tuesday.
“We are going to need to explore other taxing options to ensure sustainability in the longer term and to maintain our competitive position.”
Total municipal revenues for the upcoming fiscal year - March 31, 2020, to April 30, 2021, - are projected to close in on the $1-billion plateau.
Of that projected $989 million in revenue, 80 per cent comes from a combination of general tax rate, transit property and area rates.
“We’re not heavily diversified and that’s something we really need to keep our eye on,” Fraser said.
On the other side of the ledger, almost half of the combined $820.5 million in municipal expenditures and the $168.5 million in mandatory provincial expenditures goes toward compensation. Salaries, overtime and shift differential all combine for a $419-million cost.
“Compensation continues to be our largest cost driver,” Fraser said. “The vast majority of our budget is wages as well as contracts and services so changes in inflation has quite an impact and we tend to monitor it quite closely.”
The municipality is projecting a 2.2 inflation rate for the 2020-21 fiscal year.
“Of all the economic indicators, inflation is the one that has the most direct impact on the municipality from a budget point of view. It puts upward pressure on collective agreements, contracts, goods and services.”
Residential assessments remain strong, Fraser said, but commercial assessment tends to lag behind construction activity.
“We see a lot of cranes in the sky,” she said. “There is all sorts of construction activity going on but every time I am in front of you and speaking about revenue, I am always saying that commercial growth is flat. While you can see that there is lots of good construction going on, it does take a while to trickle to commercial assessment.”
While the average residential bill is expected to rise from $1,976 to $2,006, the average commercial bill is projected to go up by $643, an increase of 1.5 per cent from $42,600, to $43,243.
Personal income and real gross domestic product values are expected to rise moderately. The municipality’s population is expected to balloon to 440,599 and the number of housing units is projected to rise to 202,624 to meet the population demand.
Fraser said the forecast identifies a $34.5-million gap between expenditures and revenue for the fiscal year, attributed primarily to compensation, capital from operating, inflation and other pressures.
“We looked at the pressures, the next thing is how are we going to close this gap and what’s our ability to do that,” Fraser said. “We’ve been able to identify $22.5-million in savings. That leaves a gap of $12 million that has to be addressed in tax bill increases.’
With fee revenues projected to increase by a million dollars, fuel prices to fall by $1.4 million (forecast before the Middle East crisis in Iran) and the business units asked to reduce their budget requests by $4 million, the remainder of the shortfall will be made up by the increased tax bill.
A suggested funding initiative that would increase the municipal debt by $22 million over the next three years had already been brought before council.
“Debt’s a tool that we use,” Fraser said Tuesday. “For me, what’s important is what our debt-service ratio is. It’s not our absolute amount of debt, it’s how much principal and interest are we paying on our operating budget. We’re very low. 4.9 per cent.”
The province recommends municipalities keep debt-service ratios below 15 per cent.
