New Nanaimo reserve 'forces' council to fund infrastructure: taxpayer advocate

By Dominic Abassi
December 22, 2016 - 4:31pm

NANAIMO — A move by city council to bank money for future strategic priorities will drive up property taxes by at least three per cent over the next four years.

On Dec. 19, council approved the creation of a strategic infrastructure reserve fund. The fund will be filled by redirecting annual casino and Fortis revenues into it and out of general revenues, where they currently go.

"I wish we started this about 20 years ago," said Coun. Bill Bestwick in conversation with NanaimoNewsNOW. "When you know that you have the resources to do certain things over time in planning for a city's growth, it makes it certainly a lot easier for the politicians and for the administration to say 'here's the amount of monies we will be able to generate.'"

Bestwick calls the money going into the fund "free money" because it's third party cash that comes into the city and isn't taxpayer generated.

Each year, the city gets about $2.4-million in casino revenues and $525,000 from a Fortis operating agreement, according to a staff report. The report states in the past the gaming revenue has been used, among other things, "for property tax reduction for a number of years."

In order to offset the money being pulled out of general revenue, staff recommended that the RCMP budget be reduced by three per cent, or about $700,000 annually. Council agreed to that provision. Chief Financial Officer Victora Mema says that won't impact service levels with the Mounties because the city has been over-funding that budget for years.

The staff report shows that the amount of casino revenue being shifted into the new fund will increase leading up to 2021. Initially, the money being taken out of general revenue will be offset by the reduction in the RCMP budget. However, as the casino money being pulled out reaches its full amount, there's a shortfall that will have to be made up by property tax increases.

"There's a line in the report that talks about where the gaming money has gone over the years and one of the places it went was to hold down property taxes," said Jordan Bateman, B.C. director for the Canadian Taxpayers Federation. "My suspicion is staff don't like that. They would rather see it go to infrastructure rather than hold down property taxes...they're wanting to force this council and future councils to invest in infrastructure, not just ease the pain of operating costs."

Bateman says there's some "spin" involved in the way the report was written to downplay the impact this will have in the future on property taxes. He says funds like this are typically a way to "force" councils to fund infrastructure.

Both Bateman and Mema downplayed the concept that the new fund could be used to help council avoid electoral approval on borrowing money for the proposed events centre. Mema says "the numbers just don't work."

Bateman says planing for future infrastructure is a prudent approach, but warns against using the fund to leverage borrowed money.

"Let that money begin to accumulate in there and then instead of borrowing money and paying interest costs...to fast-track certain infrastructure, spend the money as you've actually saved it," said Bateman. "That would be a much stronger legacy for future taxpayers because it would be more about the current generation paying for things they want."

Mema says staff are recommending that council use the fund for legacy projects or debt servicing, but council can suggest any other uses.

Bestwick says as the city grows, the infrastructure is aging and they need money available to replace things.

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