As a deadline for passing this year’s tax increase bylaw looms, Pitt Meadows hit a speed bump Tuesday that could see the city face an operating deficit by the end of 2013.
Director of finance Dean Rear advised council this week that an error in the property assessment for a parcel of land along Airport Way could mean a shortfall of $149,000.
The 23-hectare parcel, owned by Onni, was previously slotted in the business class. But the owners arranged for agricultural activity to take place on it while preparing for an industrial warehouse development.
Rear only stumbled on the error by chance. The city must adopt its tax rate bylaw for 2013 by May 15.
“What creates this potential reduction in taxation revenue is due to an error,” explained Rear.
“A change was not identified on either roll [by B.C. Assessment] and only came to light when I asked questions about other variances between the rolls.”
The city noted Onni is in the process of applying to develop the property, only the development might not begin until next year.
Rear believes the city is in a good position to handle short-term issues such as a potential deficit.
“The key is to not lose sight of the importance of long-term financial planning and not make decisions that compromise the future,” he said.
The possible deficit raised the spectre of a higher tax increase Tuesday as council debated how to cover it.
A one per cent tax increase would generate around $150,000 in revenue for the city.
Coun. Bruce Bell and his colleagues were surprised by the sudden shortfall.
Council has given preliminary readings to the 2013 budget and is set to formally pass the budget at its next meeting.
Among three councillors who did not support the budget, Bell believes the city could take a second look at it and trim it down some more.
“I’m not for deficit financing. If we have to re-tweak the budget, we should.”
Janis Elkerton, another councillor who did not support this year’s budget, agreed. She would like to take a look at all the projects under $25,000 since those were not scrutinized during the budget planning process.
“Maybe we can cut some projects,” said Elkerton. “It doesn’t need to be tax and spend, spend and tax.”
She even suggested the city could seize on a missed opportunity and deliver the “zero per cent” tax increase budget demanded last year by 1,300 residents who signed a petition.
The third councillor who did not support the 2013 budget or passing this year’s tax rate bylaw was Dave Murray.
The city’s mayor, however, isn’t panicking and noted the pain is only short-term since the property will eventually house a light industrial development.
“We are in good shape financially because of our reserves, because of our long-term planning,” said Deb Walters.
“I don’t see us raising taxes to cover this, even though it was suggested by some of the councillors who didn’t want to support the budget originally. I was shocked actually.”
The city has plenty of money in its reserves, as well as cash from the sale of land. It is also projecting a $208,000 surplus for 2012.
Walters doesn’t anticipate slashing any projects planned for 2013 to compensate for the deficit.
Although the shortfall was a surprise, Walters is relieved the city’s director of finance noticed it so early in the year.
“Thank goodness Dean [Rear] caught it and thank goodness we are in a position where we can handle it,” added Walters.
“I know we get criticized sometimes when we put money away in reserves, but these are the reasons we put money away in reserves.”
Council will discuss ways to make up for the operating deficit in detail at a workshop next week.