Cuts plus tax hike equals balanced Iqaluit budget

Iqaluit City Council passed a balanced budget for its 2005 fiscal year this past Wednesday, wiping out a looming deficit by combining nearly half a million dollars worth of spending cuts with a small property tax increase.

The city has also budgeted an extra $175,000 to defray an expected increase in power rates, and will lose $115,000 in revenue because of a decision this year to reduce the interest rate paid by delinquent taxpayers.

The biggest program change that Iqaluit residents will notice – eventually – is the demise of the city’s public transit system.

Ian Fremantle, the municipality’s chief administrative officer, said that according to a recent study done by Dillon Consulting, public use of the bus system has dropped from 300 to only 200 riders a week.

By the end of this year, the city will have spent $155,000 on its contract with the Iqaluit business that provides the under-used service.

“At 200 people a week, you could accommodate all those people in taxis at one-third of the cost,” Coun. Stuart Kennedy said.

This year, the city’s budget still contains a $100,000 line item marked “Transit.” But Fremantle said the city intends to negotiate an end to that deal, after giving the contractor 30 days’ notice.

The city will also reduce the frequency of garbage pick-up to once a week. Fremantle said garbage truck drivers would then spend their surplus hours on water and sewer trucks to reduce overtime costs.

To achieve most of the cuts, all city department heads moved their spending budgets back to 2004 levels. A summary sheet handed out by city officials shows 19 separate cuts made to city program budgets, affecting most departments, for a total of $437, 800.

At the same time, the city will raise its property tax rate by 1.75 mills. That will be added to another increase of .75 mills required by the city’s capital agreement with the Nunavut government, for total rate increase of 2.5 mills for all taxpayers in 2005.

(The amount of tax payable by a property owner is calculated by multiplying the mill rate by the assessed value of a property and dividing by 1,000.)

This means that for a family owning a house with an assessed value of $200,000, property taxes would go up by $450 next year, for a total of $8,438.

Coun. Stuart Kennedy pointed out, however, that this tax increase will be partially offset by the GN’s decision earlier this year to eliminate its school tax.

“It does help to soften the blow. It gives me some comfort in facing the taxpayers,” Kennedy said.

Based on their new mill rates, and on new property assessment figures gathered in November 2004, the city expects to take in about $8.1 million in property taxes in 2005.

The city also expects to receive $9.1 million in revenue from other sources, mostly contributions from the GN.

After paying for the city’s operations next year, and putting more money into its badly depleted reserve funds, all that will produce a theoretical surplus of $666,450.

But Fremantle said that entire surplus will be held for 2006 and 2007, so that it can be used to help pay down annual deficits expected to arise within the city’s capital plan: $65,300 in 2005, $451,439 in 2006 and $637,900 in 2007.

“It’s basically a zero budget. The budget will be balanced and we will be able to put $665,000 into our capital projects,” Fremantle said.

Coun. Nancy Gillis said she’s not happy with the many budget cuts the city was forced to make.

“I think it’s a sin that we cut so much money from the budget,” Gillis said.

But Kennedy, and Coun. Chris Wilson said the city had few other options.

“Yes, I want a transit service and environmental programs, but we have to make some choices. We have to balance the budget,” Wilson said.

Kennedy said council must ensure that all the city’s efforts, especially the capital plan, are managed well to ensure that other deficits don’t arise.

Coun. Simanuk Kilabuk said he hopes that the decision to reduce garbage pick up won’t create more unsightly garbage lying around Iqaluit, especially plastic bags.