City of Charlottetown running $1.5 million deficit

Dave Stewart dstewart@theguardian.pe.ca
Published on March 30, 2016

Charlottetown City Councilor Melissa Hilton delivers the budget at City Hall Wednesday during a lunch hour sitting.

The only thing the minister responsible for municipalities in P.E.I. didn't do Wednesday was write a cheque for the City of Charlottetown.

Communities, Land and Environment Minister Robert Mitchell attended the city's annual budget address, telling the media afterwards that he's very optimistic a new revenue-sharing model with municipalities can be worked out in time for next year's municipal budget.

For the first time in 23 years, the City of Charlottetown is carrying a deficit in 2017 — $1.5 million. The city says it was either run a deficit or raise taxes by five per cent.

The total deficit the city was facing for 2016 was $3 million, pointing to factors such as the extraordinary snowfalls over the past two years and a revenue-sharing model with the province.

Under provincial legislation, the city is not allowed to carry a deficit, but it doesn't appear there will be any penalties.

Mitchell says the formula will be changed.

"In some ways, I'm not totally surprised,'' Mitchell said following the budget address. "I have to commend the City of Charlottetown and all municipalities across the Island being able to reach balanced budgets over the last number of years.

"We are discussing a new revenue formula. I think we're making good strides and do believe we will be ready for (the) next fiscal (year).''

The province collects property taxes for the city and then returns the revenue. The problem is, because the formula was changed in 2008 from a tax credit system to a grant system, where the return can fluctuate, this means the province has collected more than $12 million that has not come back into the city's coffers.

Mitchell said the goal is to return to the more stable tax credit system.

"Absolutely,'' Mitchell said when asked if he feels the current system creates an imbalance. "It is something that has been escaping them over the last number of years when they didn't get the full value of growth.''

Mayor Clifford Lee, who has been fighting to have the formula changed almost since day one, is very optimistic.

"I anticipate a year from now we will have a new funding model in place,'' Lee said.

There is no tax increase and no rate hike in water and sewer. The city will pull in about $550,000 from hiking things like parking meter rates and fines as well as increases for ice rentals.

The city has made cuts, too.

Two vacant sergeants positions with Charlottetown Police Services won't be filled. Two vacant directors positions with the city corporation, fiscal services and development and public services also won't be filled. They've been vacant since the departures of Phil Handrahan and Joe Coady.

The deficit also comes on the heels of pay increases for mayor and council last July. Salary and benefits have increased from $360,000 to $458,186.

Coun. Melissa Hilton, chairwoman of the finance, audit and tendering committee, said she doesn't think it's bad optics.

"In all honesty, this was something we dealt with nine months ago,'' Hilton said, referring to a report on compensation last July. "I do hope the residents of this city do support the work that we do and what we receive for the tremendous amount of work that we do.''

dstewart@theguardian.pe.ca

Twitter.com/DveStewart

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By the numbers

$47.55 million - city budget for 2016

$9.66 million - budget for water and sewer utility

$3 million - city's deficit before hikes for things like parking meters and fines

$550,000 - what the city will pull in on additional fees and fines

$1.5 million - final deficit being carried into 2017 after additional fees and fines