Taxes Rise to Hold Service Status Quo in 2022 St. John’s Budget

Facing a $13 million deficit, St. John’s City Council opted to raise mil rates in order to avoid serious service cuts in Budget 2022.

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With little enthusiasm from anyone involved, the newly-elected St. John’s City Council delivered its first budget on December 13. In order to avoid service cuts in the face of a projected $13 million deficit—and fund modest improvements to sidewalk snow clearing and public transit—the City has approved marginal increases to both residential and commercial mil rates.

For the upcoming year, the City is projecting a balanced budget of $319.6 million—a 2.4 percent increase from last year’s $312.3 million.

The City initially projected a $13 million deficit for the upcoming year. This stemmed from a $3 million revenue shortfall following the city’s 2021 property assessments—a 4.5 percent decrease and 2.8 percent decrease to residential and commercial property values, respectively.

Expenditures were also expected to increase by $10 million, due mainly to payroll costs, debt payments, fleet maintenance, and prior program and community commitments.

Mil Rates and Water Taxes Increasing

To make up for this shortfall, Council has signed off on a 0.6 mil increase for residential properties and a 0.8 mil increase for commercial properties. This brings the residential mil rate from 7.7 to 8.3, and the commercial mil rate from 26.1 to 26.9. It will be the first mil rate increase in three years.

There are approximately 41,000 residential properties in St. Johns, and roughly 1900 commercial properties. According to the 2020 Citizen Satisfaction survey, 74 percent of city residents are homeowners, while 26 percent are renters.

Because they are based on property value assessments, these mil rate increases won’t impact everyone the same way. 30 percent of homeowners won’t see any change in their property taxes (and may even see a decrease). 51 percent will see an increase of between $0 and $10 per month in their annual taxes, while 19 percent will see an increase of $10 or more. The City forecasts the residential mil rate increase will generate $3.4 million in revenue.

Meanwhile, 45 percent of commercial property owners either won’t see a change in what they pay now, or will see a decrease. 34 percent will see an increase between 2.5 and 5 percent per month in their annual taxes, and 21 percent will see an increase of more than 5 percent. The City forecasts that the commercial mil rate increase will generate $4.15 million.

(The City uses a different methodology for estimating mil rate revenues between residential and commercial properties [$ vs %] to account for the wide variety of different commercial properties—from small cafes to larger buildings like hotels or malls.)

Water taxes will also be increasing by $5 per year, from $620 in 2021 to $625 in 2022—so not a big dig into the wallet. This increase is expected to generate $1.2 million, and all revenue from water taxes go directly towards funding water system expenditures.

The City also forecasts that paid parking revenues, parking permits, and fines from parking violations will increase by more than $1 million.

Faster Sidewalk Snow Clearing, Faster Metrobus Routes… and a Bigger City Payroll

Snow clearing is the hottest ticket in town—especially now that we’ve had our first major snowfall for the season.

People who wanted to see an increase in the amount of sidewalks cleared by the City will probably be disappointed. But Budget 2022 is adding a third shift to its current sidewalk clearing route—roughly 161 km, or 10 percent of total sidewalks—to the tune of $510,000, which would increase the speed of post-snowfall clearing. This translates to 3.66 new Full-Time Equivalent (FTE) staff positions being hired for the work. A further increase of $576,949 to the snow clearing budget covers the increased cost of salt, fuel, and parts.

Council has also approved $500,000 to increase the frequency of high demand Metrobus routes (Routes 1, 2, 3, and 10) in the New Year. With ridership returning to pre-pandemic levels, expenditures on the GoBus and paratransit services have also increased.

In total, the city is hiring 6.27 new FTE staff positions. In addition to the third sidewalk snow clearing shift, the City is increasing operations at the Visitor Welcome Centre, as well as hiring an internal auditor and a marketing officer.

Payroll costs at the City—primarily Canada Pension Plan contributions, Employment Insurance, and other mandatory pension contributions—have gone up by roughly $1.9 million, which represents an increase of 231 percent over the 2021 budget. This increase would have been roughly $3.8 million higher, but the City approved the use of $11.6 million from previous years’ surplus to pay down pension debt. (Roughly $9.2 million remains in the City’s unallotted surplus.)

The City employs roughly 1100 FTE staff.

No Appetite for Change at the Mary Brown’s Centre (Yet)

After a tumultuous year at the sports centre formerly known as Mile One, St. John’s Sports & Entertainment is getting the same net operating amount as it got last year: $5.1 million.

Cllr Ron Ellsworth speaks to reporters following approval of Budget 2022.
Cllr Ron Ellsworth speaks to reporters following approval of Budget 2022.

“There was no decision by Council on how to deal with the Mary Brown’s Centre,” Cllr Ron Ellsworth explained in a scrum after the budget meeting. “The decision was made to keep the funding at the current level.”

“Obviously with the other issues going on at St. John’s Sports & Entertainment, we have some work to do over there,” he continued. “But the decision was to do our best to maintain where we are. Then, as we move forward, Council has to make some decisions: is this an economic development piece? Is this a piece of business that we should be in or not?” 

“That’s a discussion Council will be having before the next budget year, for sure.”

Some departments saw small budget increases: Transportation Services went up 5.7 percent, and Environmental Health went up 2 percent. (The City did not make any general allowances for the cost of inflation.)

Otherwise, while the overall budget has increased by 2.4 percent over 2021, the City has managed to shave small costs here and there as well. General administration is down 1 percent; Parks, Recreation & Cultural spending is down 1.8 percent; Environmental Development is down 3.4 percent; and Recreation is also down 0.4 percent.

Municipal Tax Reform Needed: Ridgeley

All councilors voted unanimously—if not enthusiastically—for the budget on Monday afternoon, and all seemed to be more or less satisfied with it. But despite unanimous support, Ward 5 Cllr Carl Ridgeley voiced some objections to the municipal tax system.

“My biggest issue with the budget is the way taxes are set and the demographics that it affects,” Ridgeley explained. “78 percent of homes in this city are valued at $350,000 or less.” He said these properties will probably maintain or increase their value based on real estate trends.

“Municipal taxes in this province are based on the value of your home. Because these properties are increasing in value they don’t put more money in your pocket. The complete opposite actually—it makes your taxes higher and don’t reflect your ability to pay it.”

He pointed out many of our older citizens live on fixed incomes.

While Cllr Ridgeley said he would support the budget, he’d like to see more engagement with the Province and other municipalities to find a system that reflects a person’s ability to pay and not the value of their home.

St. John's City Council Chambers. Left-to-Right: Cllrs Carl Ridgeley, Ian Froude, Jamie Korab, Ophelia Ravencroft, Jill Bruce, Debbie Hanlon, Ron Ellsworth, Sandy Hickman, Maggie Burton, Deputy Mayor Sheilagh O'Leary.
St. John’s City Council prepares to discuss Budget 2022, 13 December 2021.

Mayor Breen then jumped in to add his own comments. He said this budget process has been challenging, beginning with new councillors that had to get up to speed. There was a public engagement process that started back in the summer, prior to the outcome of September’s municipal election.

Mayor Breen said they had to balance their fiscal realities, expectation of public and information from public engagement, as well as balance the deficit they were facing without compromising service levels, as well as the challenges individual and businesses are facing.

“To pick up on Cllr Ridgeley’s comment—he is exactly right,” Breen said. 

“One of the issues that we certainly have here is a system of taxation based on property assessments that is regressive. It doesn’t reflect people’s ability to pay or the value of your home is not directly proportional to that.”

Breen said in a recent meeting with Municipalities Newfoundland and Labrador it was brought up that we need to get back to the pre-pandemic discussion with the Province on how to reform municipal revenue streams.

“I’ll say it: the lack of payment of property taxes by the provincial government for properties is a major impact here as well,” the Mayor noted. “What we need to do is find ways to lessen the reliance on property taxes as our main source of revenue.”

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