Unless our city councillors decide to go on a last-minute spending spree, Sault Ste. Marie ratepayers could enjoy a lower-than-expected property tax increase in the coming year.
The preliminary 2025 city operating budget to be presented to city council on Monday originally called for a 5.27 per cent increase in the tax levy to $148.2 million.
But three weeks ago, the Ontario government announced an immediate increase of $50 million in unconditional funding it provides to 390 municipalities through its Ontario Municipal Partnership Fund (OMPF).
OMPF is the province's main general assistance grant to municipalities.
For the most part, it's intended to support small, northern and rural municipalities across the province, targeting places with more challenging fiscal circumstances including limited property assessment.
Sault Ste. Marie's share of that newly designated $50 million is $2.15 million.
If council resists the temptation to spend it as mad money, the new cash brings the tax levy hike proposed in the Sault's 2025 preliminary budget down to 3.74 per cent.
And the city is just starting its annual budget deliberations on Monday.
The preliminary budget is just a starting point and councillors usually come prepared to slash any fat they find in the numbers.
Here are the average annual tax levy hikes for previous city councils:
- 2003 to 2006 - 5.84 per cent
- 2007 to 2010 - 3.56 per cent
- 2011 to 2014 - 3.32 per cent
- 2015 to 2018 - 2.70 per cent
- 2019 to 2022 - 3.63 per cent
- 2023 to 2024 - 4.85 per cent
Shelley Schell, the city's chief financial officer, is already signalling that our city has assessment issues.
"The city’s assessment growth has been very low in the last several years," Schell says in the preliminary budget she'll present on Monday.
"There is a growth trend that started in 2022 and with the anticipated incentives to increase housing units in the community, the trend is anticipated to continue in the near term.
"The cost to provide services continues to increase at a greater rate than assessment growth and will put additional burden on the assessment base.
"The province has paused the four-year reassessment cycle, which was slated to be updated for 2021, up to and including 2025, noting that it will provide stability to the taxpayer.
"The province has begun a consultation process for assessment cycle and taxation. At this time there is no update on potential changes or outcomes," Schell says.
Here, in her own words, are some of the other challenges she sees possibly affecting the Sault's ability to maintain its current level of service to ratepayers:
Existing municipal funding framework does not meet current needs
The current municipal funding model relies on property taxation and constrains the ability to generate revenue to fund the operations and capital infrastructure requirements. Until a change in the framework occurs, the city will struggle to maintain the affordability of property taxes
Asset condition and infrastructure deficit funding
The city’s updated asset management plans reflect infrastructure deficits. There is a risk that assets could further deteriorate or fail resulting in service level reductions. Development of a long term investment strategy, which considers the acceptable level of service and funding requirements, is needed. Additional investment will be required. This will be a continued priority for the next few years
Impact of climate change
Climate change is a growing global concern and its effects are experienced at the local level. Municipalities are impacted by climate change: from ice storms to flooding to forest fires
Municipalities become responsible for funding mitigation efforts as well as rebuilding infrastructure to sustain extreme weather events. This has the potential to affect the city budget with the increase in costs for adaption and mitigation efforts
Grants from other levels of government
Other provincial and federal funding for various programs and infrastructure renewal greatly assist the city in achieving its priorities as well. There is a risk that this level of funding may not be maintained in future years, placing additional burden on the municipal tax levy or requiring service level adjustments
City council's budget deliberations are scheduled for Dec. 9 and 10.
Tax policy, rate options and other recommendations will be presented to city council in March/April of next year for consideration and approval.
This Monday's city council meeting will be livestreamed on SooToday starting at 5 p.m.