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Mayor steps up with plan to cut tax increase, provide 'modest relief' to residents

'It’s clear that this is not the year for a significant tax increase,' says Lehman
2020-11-13 Mayor Jeff Lehman crop
Mayor Jeff Lehman. Photo supplied

Mayor Jeff Lehman has sharpened his pencil ahead of Monday’s city budget talks with a plan to cut Barrie’s 2021 property tax increase to just less than one per cent.

“It’s clear that this is not the year for a significant tax increase, and our residents are currently facing a new and deeper round of economic uncertainty due to the pandemic,” he said. “While city finances are similarly at risk, staff did an excellent job of managing costs in 2020 and have positioned us well to flex with fiscal impacts in 2021.”

Budget talks will begin with homeowners facing a 3.59 per cent property tax increase this year, or paying another $160 on a typical house assessed at $367,550, bringing 2021’s taxes on that property to $4,614 from $4,454 in 2020.

The mayor’s plan would cut the property tax increase to 0.9 per cent, or $40 more for that typical home, bringing its 2021 property taxes to $4,494.

“Although my changes would get us to 0.9 per cent, I don't expect that to be where we end even if council supports the nine amendments,” Lehman said. “I know there is considerable interest in some of the service level changes included in the draft budget and so I expect there will still be additions and subtraction.”

To reduce the property tax increase, Lehman is proposing to apply Safe Restart (federal/provincial) funding to offset service partner (police, library, county) and corporate costs due to COVID-19. He wants to fund the city’s growth strategy from Barrie Hydro Holdings dividends and the tax rate stabilization reserve, reduce the dedicated infrastructure renewal fund from one per cent to 0.25 percent in 2021, and set a target of 0.5 per cent in 2022. And remove the additional operating budget contribution to the fleet replacement project.

The plan would also create a two-year strategy to reduce tax increases by applying a portion of the 2021 and 2022 Barrie Hydro Holdings dividends to the operating budget and draw upon the tax rate stabilization reserve. 

“I’m also recommending to council that we pursue several new fiscal measures for 2021 that will help with COVID recovery, specifically small business tax relief and a support program for water customers who can’t pay their bills,” he said.

Lehman’s plan also includes earmarking funds to offset any 2022 tax increase, changing the funding mix in the capital plan to reduce borrowing costs and potentially advance strategic projects. 

“To provide further if modest relief to our residents, I would propose freezing wastewater rates for 2021,” Lehman said. “The overall impact of these proposed changes would be to reduce the tax increase to 0.9 per cent, and reduce by a little over 50 percent the proposed increase in water/wastewater bills, resulting in an increase of about 1.1 per cent to the average water bill in 2021 instead of the proposed 2.4 per cent.”

Water and wastewater rates are proposed by city staff to increase by 2.48 per cent and 2.41 per cent respectfully, for a total impact on that bill of $21 this year.

“The water and wastewater budgets are built to generate substantial reserve contributions to pay for capital projects,” Lehman said. “This reserve is in relatively good condition and as only roughly $650,000 of the $1.5 million in additional revenue is due to the rate increase  the other $850,000 results from growth  there will still be an increase of $350,000 in the contribution to reserve even if rates are frozen. This reduces the increase in the overall bill to $9 annually, or 75 cents a month.”

In total, Lehman’s plan would cut $7.1 million in spending  and includes using $1.3 million in Safe Restart funding, funding the city’s growth strategy with $500,000 from Barrie Hydro Holdings, saving $1.88 million from the dedicated infrastructure renewal fund, saving $460,000 from fleet replacement, using $1.75 million from Barrie Hydro Holdings and $1.25 million from tax rate stabilization reserves.

The mayor’s plan doesn’t leave out help for small business.

“The province has provided the ability to create a new tax class for small business, to allow them to receive a lower property tax rate,” Lehman said. “While there are many details to come on this, I believe it would be appropriate.

“A key issue will be whether this new tax classification shifts substantial additional costs onto homeowners," he added. "While a discount that applies to a relatively modest number of lower-cost properties would likely not cause a significant tax shift, this relief program will need to be carefully designed so it does not burden homeowners.

“That said, it creates the potential to incentivize startups and small businesses at a time when this is needed,” Lehman said. “Barrie’s small business community has borne the brunt of COVID lockdown impacts and would very much value the support. Council could direct staff to prepare a plan for implementing a small business tax subclass including assessing its financial impacts for both benefitting businesses and all other tax classes, and report back to finance or general committee.” 

Because interest rates are so low, Lehman says it’s an opportune time to advance some capital spending. 

“This could produce millions in savings for our residents, and allow us to proceed more swiftly with both needed growth and renewal projects, as well as delivering on key strategic priorities such as economic development, affordable housing and population health,” Lehman said.   

Coun. Sergio Morales, chairman of Barrie’s finance and corporate services committee, has floated the possibility of no property tax increase this year. His plan uses a combination of the city’s federal/provincial funding to battle COVID-19, lowering city operating costs while on pandemic shutdown, using any 2020 property tax surplus against this year’s tax increase, reserves and dividends from the city’s stake in electricity provider Alectra to get to zero per cent.

Monday’s virtual general committee meeting on the operating and capital budget is scheduled to begin at 7 p.m. Council is expected to give final approval to the 2021 budget at its Jan. 25 meeting.