The City of Prince George will be looking at options ranging from no tax increase to a "status quo" option that maintains all services at current levels for 2021.
The city was facing a roughly $3 million budget shortfall in 2020 and a nearly $6.4 million shortfall for 2021 – equivalent to a 5.63 per cent tax increase – before city council approved reopening the Kin Centre arenas and Prince George Aquatic Centre on Monday night. That decision was expected to increase the city's budget shortfall by roughly $900,000 this year, and $2 million next year, city director of finance Kris Dalio said.
"These are some very high-level estimates, given the time of year we're in," Dalio said. "If we're going to make changes to combat these numbers, we need direction from council. To come up with big numbers is hard to do without impacting (service levels), including the big ones."
City staff, working with the city's finance and audit committee, will prepare options looking at potential zero, one and two per cent tax increases for 2021, as well as the status quo option that could end up close to 7.5 per cent with the added operational costs approved by council on Monday.
Each percentage point of taxes equals more than a million dollars of spending the city has to cut, Dalio said. To get from the initial 5.63 per cent tax increase down to a two per cent tax increase next year, the city will have to slash more than $3 million from its budget, he added.
Under special measures approved by the province, the city can borrow from its $50 million in reserves to make up budget shortfalls during the pandemic, Dalio said. However, that borrowing has to be repaid within five years.
In addition, those reserve funds also help finance the city's operations during the first half of the year before property taxes come in, he said. If the city borrows too much from its reserves, it could be forced to borrow money from the Municipal Finance Authority and pay interest charges in order to cover its expenses in the first half of 2021.
"We either need to raise taxes or cut services. That's really the difficult choice we need to make," Coun. Garth Frizzell said. "If we go up to a 5.63 per cent tax increase in 2021, while all this is still hitting, that's going to hurt people."
Many of the city's services – police, fire department, snow clearing, and road maintainance – are essential services residents rely on, he said.
"Are we going to roll back police? Not likely. What about snow clearing?" Frizzell said. "COVID is forcing us to do the unthinkable, the untenable and the unpalatable. But that's the choice we have to make."
Coun. Susan Scott said she's concerned about the impact budget cuts will have on maintenance of the city's infrastructure, like water mains and sewers.
"Any sort of profound reduction in all of that scares me a little bit," she said.
Coun. Kyle Sampson, who proposed adding the status quo option to be considered, said the city is going to have to find new ways to operate.
"There is no doubt COVID, for lack of a better word, kicked us in the ass," Sampson said. "Now is a great opportunity to reinvent, reimagine and be innovative. It doesn't mean we should stop providing the services we should be providing."
See this related story for more details on the shortfall facing the city.
