City of Red Deer administration is recommending city council boost taxes by nearly five per cent next year and by more than four per cent in 2024.
The tax hikes are among nine guidelines proposed by staff for the 2023 and 2024 budgets and will be debated by city council on Monday.
The first proposed guideline calls for a 4.7 per cent tax increase in 2023 and 4.3 per cent in 2024, based on economic projections, city finances and future spending plans.
“We know seeing these proposed increases for 2023 and 2024 can be unnerving, especially coming out of a slowed economy and with other costs rising,” says interim city manager Tara Lodewyk in a statement released along with the guidelines on Friday afternoon.
“I don’t like raising taxes but I also don’t like the alternative of continuing to hold the line. It is not sustainable or responsible and doing so will only hurt us later with large reductions in services, assets in disrepair, higher tax increases and not being prepared for any rainy days we may experience in the future,” says Lodewyk.
Guidelines must be approved by council so administration knows what it is working with as it builds the operating and capital budget proposals for the next two years. Council will consider the next operating and capital budgets in November.
Council narrowly voted to hold the line on taxes this year with a split 5-4 vote. Mayor Ken Johnston and Councillors Kraymer Barnstable, Bruce Buruma, Michael Dawe and Vesna Higham voted in favour of a zero tax increase — the second year taxes were frozen. They argued that it was a promise made to taxpayers, many of whom were still hurting because of the pandemic.
While city staff number crunchers said at the time not raising taxes was doable, they warned a tax increase of at least 3.42 per cent would be needed in 2023 unless the city opts for cutbacks and service reductions.
Coun. Lawrence Lee sees the proposed tax increases as a “good balance” considering city taxpayers could have been facing a much steeper tax hike given the financial pressures on the city, which only managed to hold off on a tax increase for another year by dipping into reserve funds.
“Actually, it’s encouraging. I would have anticipated a little bit higher tax increase than they’re asking for,” he said, adding he thought a seven per cent tax increase might have been coming for next year.
“I’m optimistic that they’ve found a way to (keep recommended tax increases lower).
Lee said administration appears to be phasing in the necessary tax increase over two years and sparing property owners a “tax shock.”
“I like that approach and we’ll have to see if council can find any more areas where we can trim that 4.7 down just a touch. I’m not 100 per cent optimistic we’ll be able to do that.”
In the last budget talks, Lee unsuccessfully proposed a two per cent increase for this year, to spare much higher increases in future years.
Lodewyk said that while Alberta’s economy is improving “it will take a while to realize this positive shift in our city budgets.
“In the meantime, these guidelines are about catching up and getting back on track after weathering the last two years by providing zero per cent municipal tax rate increases and using our reserves to keep us there.”
Red Deer has lower non-residential taxes than comparable Alberta municipalities and residential taxes are in line with other Alberta cities, says Lodewyk.
“We have always been competitive with our other comparable municipalities and our goal is to stay competitive.”
Among the challenges facing staff building coming year’s budgets is rising inflation and commodity prices and the need to replenish reserves.
Other guidelines recommended include: exploring ways to boost utility dividends to $3 million in 2023 and 2024, topping up reserve funds and setting aside $750,000 in each of the next two year’s to support council’s Strategic Plan initiatives.
It is also recommended that city council review user fees and charges and introduce an operating contingency policy and a policy to deal with operating reserves for urgent issues.