Budget Revisions in Light of COVID

Posted: April 17, 2020

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Budget Revision Summary
2020 Taxation reduced 19% over 2019

On April 30, 2020, Council directed staff to move forward with a revised Budget and Financial Plan which included immediate cost-saving measures while ensuring core and essential services remain available to the community now and in future years. 

See the Full Budget Presentation to Council

The 2020 municipal budget has been reduced by 19% over the previous year by deferring or removing many non-essential projects and expenditures funded by taxation, reducing staffing and service levels, and funding the Capital and Infrastructure Levy from previous years' surplus. 

To minimize taxation in the first several years of the District of Tofino’s 2020-2024 Financial Plan, Council directed staff to make the following changes (explained further below):

  • Reduce the 2020 Budget by 19% over 2019;
  • Freeze Utility Rates in 2020;
  • No taxation used to fund Capital and Infrastructure Levy in 2020; and reduce the Levy in further years of the plan;
  • Postpone late payment penalties for property taxes to October 1, 2020;
  • Transfer funds from the District's Financial Stability Reserve to cover emergency response and water utilities.

Learn More

Budget Reduced by 19% Over 2019

Typically, the District increases the base amount of taxation each year by 2% to keep up with the rising costs of administration, fuel, hydro, materials and supplies, however in 2020 this tax increase will be 0%. In order to make this possible, the District has reduced budgets across all areas including staffing, travel, training and other expenditures, and as a result the community has seen a reduction in some service levels.  For example, the District has closed the Community Children’s Centre and recreation services are on hold as we plan for online programming.

The District has also suspended hiring of all temporary positions in 2020 and delayed hiring of essential service positions to late 2020 or 2021.

The District of Tofino’s priority during the COVID-19 pandemic has been to maintain essential service levels, and the District continues to collect taxes for services such as Public Works, Utilities, Corporate and Financial Services, Bylaw, Planning and Development. In years 2021 to 2024 of the Financial Plan, taxation levels for general services will come back up to normal, with a 2% increase per year. These proposed increases will be reviewed annually, as the impacts of COVID-19 on future years becomes clearer. 

Examples of deferred or cancelled projects and expenditures include:

  • Community Hall kitchen upgrades removed from 5 year plan;
  • Significant reductions in all Council and staff travel and training budgets, with the exception of training required to maintain certification or professional designations;
  • Fire Department duty officer vehicle removed from the 5 year plan;
  • Drainage condition assessment deferred to 2021;
  • 2020 cultural initiatives budget reduced.

2020 Utility Rate Freeze

The District is expecting a 35% reduction in utility fee revenue in 2020 due to reduced consumption in 2020.  However, the majority of water and sewer operating costs are fixed and require stable user-fee revenue to continue.  To avoid a user-fee increase this year, a transfer from the Financial Stability Reserve, as well as 2018 and 2019 surpluses, will be used for operations in 2020.

No Capital and Infrastructure Levy from Property Taxation

The District has been setting aside money each year since 2010 to save for the cost of replacing aging infrastructure.  Shown on property tax notices as the “Capital and Infrastructure Levy” (C&I Levy), the annual amount to be collected is determined by the District’s Asset Management and Investment Plan. The C&I levy is part of a long term investment plan which includes a combination of reserve funds, debt and grants to ensure that the District is able to maintain and replace its assets.

This year, the levy has been adjusted to 10% of the proposed amount, and will be fully funded from 2018 general surplus, instead of property taxation. Staff is working on a gradual return to the optimal level of investment in infrastructure by 2023, and general surplus funds will be used towards a portion of the levy each year until then.  The investment calculation considers a level of risk that allows for emergent events to occur that may impact contribution levels in the short term without significantly impacting the long term goals of the plan.

C&I Levy Reductions in the Five Year Financial Plan:

  • 2021 - Reduced by 50%
  • 2022 and 2023 - Reduced by 25%

Tax Due Dates

The Province’s COVID-19 Action Plan, released in March, postponed the late payment penalty date to October 1, 2020 for commercial properties.

The District adopted an alternative tax collection scheme bylaw which also postpones the late payment penalty date for the remainder of the property tax classes to October 1, 2020.

The tax due date of July 2, 2020 remains in place for all property classes, however no late penalty will be applied until October 1, 2020, after which a 10% penalty will apply.  In order for the District to meet cash flow needs required to provide essential services to the community, the District is asking taxpayers, where possible, to pay by the due date of July 2, 2020. 

For the business sector, the Provincial Government has created a webpage for Provincial Tax Changes that have been announced to date, including a reduction of school taxes for Property Classes 4, 5, and 6. 

Options for Deferring Your Property Taxes

The provincial property tax deferment program provides low interest loans to qualified BC homeowners to pay taxes on their principal residence.  There are two options under the tax deferment program: one for seniors, surviving spouses or persons with disabilities, and another for families with children. 

If you think you will not be able to pay taxes on your principle residence by the due date, please consider deferring your taxes if you qualify under the program. 

To learn more about deferring your 2020 property taxes visit the Province of BC’s website or contact the District of Tofino’s Financial Services Department at (250) 725-3229 ext. 604.

Financial Stability Reserve

The Financial Stability Reserve Fund was established in 2019 to stabilize District revenues when there is an unexpected downturn in revenues and operating cost increases that are temporary.

In early 2020, the District transferred $20,000 from this reserve fund to pay for emergency response costs in relation to COVID-19.  Many of these costs will be reimbursed by the Province however some expenses must be covered by the District.  A further $60,000 will be transferred to the Water Fund in 2020 to assist with meeting operating costs.  These funds made it possible to freeze utility rates for 2020 and minimize property taxation.

Funds from prior years’ surplus will further contribute to the Financial Stability Reserve Fund in order to ensure the resiliency of the municipality in the face of future economic downturns or emergencies.

Next Steps

Financial Plan and Taxation Bylaws will be brought forward at the May 12, 2020 regular Council meeting.

Learn More about Municipal Budgets: www.tofino.ca/budget


Contact:

Nyla Attiana
Director of Financial Services
(E) nattiana@tofino.ca
(T) 250-725-3229