District of Squamish councillors began the long process Tuesday (Feb. 6) of balancing this year's budget - a budget that is currently $3 million in the red.
"As long as I've been here we've never been faced with a challenge like this, this will be a very difficult budget," said Coun. Corinne Lonsdale.
"This has been called a challenge. I would definitely call it a crisis," added Coun. Greg Gardner.
The $3 million shortfall stems from the loss of $1.9 million in tax revenue from the defunct Woodfibre pulp mill coupled with ever-increasing labour costs and an increased obligation for the district to pay for community policing.
Councillors spent the morning looking at numerous ways of covering the potential deficit. These included suggestions of major spending cuts, as much as $2 million, increasing user fees for services like recreational facilities or business licenses, and dramatically increasing property taxes.
"This will be a very difficult process," said Mayor Ian Sutherland. "It is not a position anyone would like to be in."
Council was presented with two working budget proposals for consideration. Both balanced the budget through substantial tax increases, and both strategies predict the assessed property values for both businesses and residences will increase for the 2007 fiscal year. Assessed values for residential properties are expected to increase by 5.25 per cent on average, with businesses seeing their average property value go up by 43.89 per cent.
The first of the two strategies brought forth by Ralph Hughes, financial officer for the district, calls for a 17.5 per cent increase to the mill rate for all tax classes. The mill rate is the rate per thousand that is paid on assessed property values.
"This is a way to be equitable to everyone," said Hughes.
The rise in the mill rate coupled with the increase in assessed values would mean that under this strategy a homeowner whose property was assessed at the average rate in each of the last two years would pay $1,528 this year, up from $1,245 last year. That is an increase of 22.73 per cent. Businesses would see the average tax burden increase to $5,779 versus $3,440 last year, a 64 per cent rise.
The second proposal calls for the district to set their mill rates at the average for the Lower Mainland. Under this plan the residential mill rate would increase by 6.17 per cent. This means the average homeowner would be charged an average of $1,391 for 2007.
Businesses, however, would see a much more substantial increase, with the mill climbing by 42 per cent. This would cause the average tax burden for businesses to more than double to $7,029, an increase of 104 per cent.
"Percentage wise, this would be substantial. However, it would put us in line with the rest of the Lower Mainland," said Hughes. "We would be equal to our neighbours."
At first glance, neither of these strategies were appealing to the business community.
"If council goes ahead with either one of those proposals they can get a big for sale sign and put it right at the beginning of Squamish," said Gregory Fischer, director of the Business Improvement Association, and owner of Gelato Carina.
"This just can't happen." Continued Fischer. "Businesses are already the hand that feeds them, and now they want to take more?"
With the process of making this year's budget far from over, business leaders have pledged to keep a close eye on the process.
"We're concerned, very concerned," said Ron Anderson, president of the Chamber of Commerce.
The board of directors met on Tuesday (Feb. 6) for their regular meeting and discussed a potential course of action for the Chamber.
"We want to have a serious look at how this starts to unfold," said Anderson, who pledged that the Chamber will be taking a proactive approach in discussions on the tax rates.
"We're not just going to lay back and wait. We need to give council a chance to fix it, but the concern about this is expressed right across the board.
"We will address council at some point on this, and it will likely be sooner rather than later," said Anderson.A tax increase is not the only method council may use to balance the budget.
"I would suggest we look at a 7 or 8 per cent increase which is still substantial," said Gardner. "By my calculations that would raise about $1 million in revenue. The other $2 million could be made through substantial spending cuts."
The potential of using budget cuts to offset spending increases was a well-received idea from the majority of councillors. Sutherland directed district department heads to look at their own budgets and identify ways they could possibly make cuts. However, cutting the budget will not be an easy process.
"Where will the cuts come from?" said Coun. Raj Kahlon. "There's not much to cut."
Another way that council could offset the deficit, at least partially, would be through an increase to user fees.
"That is something that we will have to seriously consider," said Sutherland, noting that council will look at possible increases to recreational fees or business licences.
"It will be a difficult process. We have a lot to consider," said Sutherland.
"I feel a little embarrassed, because this has happened while I've been on council," said Gardner.
