YK proposes modest tax hike, warns council to control debt

The City of Yellowknife proposed a 1.44 percent tax increase in its draft 2019 budget, warning new councillors there are big decisions ahead to avoid an ‘unprecedented’ debt burden.

A 1.44 percent property tax hike is well within the usual range of annual increases. Staff said the additional revenue would help the City to cover growing infrastructure and program costs, meet regulatory requirements, and address the downtown core’s problems.

You can also expect increased water and sewer fees and dump charges.

As examples, the tax increase is forecast to mean an extra $22 if your home is valued at $250,000, or an extra $57 if your home is assessed as being worth $650,000.

This draft, based on staff input and feedback received from residents, is not the final budget. Councillors now get a chance to scrutinize and debate line items in a series of evening sessions to come.

Residents can provide feedback up until the November 19 council meeting. The budget is set to be finalized by December 10.

Debt control

Sharolynn Woodward, the City’s director of corporate services, told councillors this year’s budget is looking good but future years could be dicey if borrowing for big projects gets out of hand.

If council goes ahead with both a new aquatic centre and replacement water pipeline to the Yellowknife River – at their current estimated costs of more than $75 million in total – and, crucially, fails to attract any additional funding for those projects, the City would have to borrow $11 million in 2019 and $43 million in 2020.

Woodward called that the “worst-case scenario.” The City is hoping to receive federal funding to help with the pipeline replacement, which is in part necessary to avoid drawing water from the vicinity of the Giant Mine remediation – a federal project.

“There are a lot of moving parts,” said Woodward.

The Moody’s credit ratings agency recently slightly downgraded Yellowknife’s baseline credit assessment to A1 from AA3 based on what could happen if the City does have to borrow all of that money.

That represents a one-tier reduction to the fifth-highest rating the agency awards.

Moody’s also changed Yellowknife’s credit outlook to negative, based on the projected debt burden “if its long-term capital plan and debt financing go ahead as planned without other sources of financing.”

Explaining the impact of that move, Woodward said: “The implications are, in some respects, theoretical. However, because they are an internationally respected ratings organization, it does help determine where we fit compared to other municipalities … and how well-managed our finances are.

“The downgrading we received this year is very-much based on our apparent plans to borrow heavily to fund both the aquatic centre and the pipeline replacement. They are reflecting the worst that might have to happen.”

Operations ‘pressured’

Moody’s has also been critical of Yellowknife’s tax freezes and tax reductions in the past, Woodward said – years like the 2015 budget, in which councillors threw residents a bone but increased pressure on the City to do more with no extra resources.

“The City’s operations are pressured due to multiple years of low or no tax increases,” Woodward told councillors at a presentation on Monday.

“Either taxes have to go up to meet the increased costs, or programs and services have to be cut.”

Alongside big-ticket projects and maintaining everything that’s already in place, the City is facing a range of other pressures on its finances.

Woodward said new safety regulations will be ‘welcome’ but costly to implement; the City’s water licence must soon be renewed “under the most stringent conditions ever,” requiring a lot of staff resource; and the Giant Mine remediation is “requiring significant amounts of City resources to respond to the associated opportunities and issues.”

Cannabis “created more work for the City and will continue to do so,” Woodward added, while noting the territorial government is not allowing the City to access any of the associated revenues.

Similarly, Woodward reiterated the City’s standard complaint that the territorial government is underfunding Yellowknife to the tune of $11.4 million – which the territory has acknowledged but is yet to conclusively address.

Taxes went up 1.86 percent last year, councillors settling on that figure after a far higher 5.64 percent increase was proposed by City administrators.

The year before, the increase was 1.23 percent. The largest increase in recent years was a tax hike of 5.7 percent in 2010.

Among 2019’s budget line items:

$7.5M on more detailed engineering and design preparation for the new aquatic centre

$1.2M on fleet replacement

5.7 new staff positions (down from an initial request for 13)

$60K on more enhancements to the Tommy Forrest ballpark

Almost $600K on barrier removal and accessibility improvements at City facilities

$450K on trail enhancements

$200K to rehabilitate the Folk on the Rocks main stage, which has structural issues

$56K on printers and multifunction devices

$320K on replacing the City’s old Toshiba phone system

Correction – November 6 2018, 15:14 MT. This article initially listed, in the selection of budget items, $200,000 for Tommy Forrest ballpark enhancements. While this is the figure shown in the City’s draft budget, $140,000 of this figure comes from a contribution from the local fastball league, leaving $60,000 to be contributed by the City itself. This article has been amended accordingly.