Iqaluit business group decries city’s deficit, demands tax deferral
Iqaluit Chamber of Commerce wants deficit reduction plan prior to tax hikes
The Iqaluit Chamber of Commerce wants the City of Iqaluit to postpone its proposed property tax hikes this year, until council produces a plan to reduce the city’s budget deficit.
In a letter addressed to Iqaluit City Council, dated Jan. 30, the chamber’s president, Shawn Lester, writes that “based on the information available, it appears that the City is headed to being at least $10 million in the hole (debt) by the end of 2015,” and “without any plan for mitigating or eliminating” deficits accumulated from year to year.
Without a plan to eliminate its deficit, the city is breaching the Cities, Towns and Villages Act, the chamber states in the letter.
“This [deficit reduction] is prudent considering the City is in violation of the Cities, Towns and Villages Act and continual abuse of the Act may open the door for the Government of Nunavut to put the City under Administration similar to the early 1990s,” the letter says.
(The letter refers to a financial crisis in 1993 and 1994, when the territorial government removed Iqaluit’s mayor, council and CAO and replaced them with an appointed administrator after discovering the municipality had misused funds intended to help finance a new subdivision.)
The city projected a $4.19 million deficit in the general fund of its 2015 draft budget, which council’s finance committee of the whole passed Dec. 23.
The draft budget has been sent to city council for approval at regular council meetings. The document must pass three readings.
The draft budget also proposes to raise taxes on commercial, industrial, institutional, and multiple-residential units by about 24 per cent, and increase property taxes on private homes by only 7.1 per cent.
The proposed tax increases alarmed Lester and other members of the chamber, most of whom run private businesses in Iqaluit and must bear the brunt of the tax hikes.
And the city’s projected deficit is just the latest in a string of deficits accumulated since 2013, Lester told Nunatsiaq News.
An accumulated deficit of $4.19 million after three years “doesn’t sound too bad,” said Lester, who is lead partner with the Iqaluit-based accounting form Lester Landau Chartered Accountants.
But that amount only covers 2015.
In his examination of the city’s financial statements for 2013 and 2014, in addition to 2015, Lester found that the city would record an accumulated deficit of at least $10 million by the end of the year.
City administrators said Feb. 3 that they could not answer questions on deficit figures until the following week.
Coun. Kenny Bell, chair of city council’s finance committee of the whole, told Nunatsiaq News Feb. 4 that council has not yet discussed the letter.
Asked if the $10 million accumulated deficit estimate by the end of 2015 is accurate, Bell said he doesn’t agree it’s that large.
“I read it [the chamber’s letter], and I don’t agree with what their assumption is,” he said.
Council will discuss the letter at a council meeting this month, he said.
For its part, the chamber will wait for a response from the city, Lester said.
According to Lester, the city is violating the territory’s Cities, Towns and Villages Act, which states that municipalities faced with a deficit at the opening of a new fiscal year must create a budget to eliminate the budget by year’s end.
“If you’re budgeting for deficits, then you’re not achieving what the act says,” Lester told Nunatsiaq News.
“That’s where it’s quite possible they are in contravention of the act.”
And a breach of the CTV Act could open the door for the Government of Nunavut to put an appointed administrator in charge of the city, the chamber’s letter said.
The chamber’s members agree that this year’s proposed tax increases on commercial properties will force businesses to raise prices and rents.
Council’s decision to limit this year’s tax increase on private homeowners to only seven per cent stands in stark contrast to the tax increases that businesses face.
These range from a 21.3 per cent increase on commercial properties, to an increase of 31.2 per cent on properties classified as industrial.
“Obviously, they’re protecting homeowners, and foisting the responsibility upon multiple residential, commercial, and industrial” properties, said Stuart Kennedy, co-owner of DJ Specialties grocery and convenience store, and part-owner of the Tumiit Development Corp.
The city has also reassessed property values in Iqaluit, which “confused a lot of people,” Kennedy said.
The total assessed value of all properties in Iqaluit jumped to $604.7 million for 2015 from just $391.8 million in 2014.
This suggests owners of commercial property will face increases much higher than 21.3 to 31.2 per cent.
Kennedy said this year’s proposed budget, if it passes as is, would increase taxes on the building that houses his convenience store, which includes a residence, by 64 per cent.
The tax on the DJ Specialties warehouse in the north end of the city would increase by 57 per cent.
“I would consider that more than considerable,” he said of the increases. “I would consider that alarming.”
Tumiit, which he owns in a partnership with Ambrose Livingstone of Livingstone Architect, would have to raise rents in each of its 62 units throughout Iqaluit by at least $42 a month to keep up with expenses, Kennedy said.
“I’ve talked to larger landlords, and I’ve received responses such as ‘this is impossible,’ and this is ridiculous,” he laughed.
“When you are in business and these costs are imposed upon you, you have to pass those costs on. I mean, we regularly see increases in costs for heating fuel, electricity, taxes.
“There’s an accumulation of costs that you have to consider. When one of those categories raises in an exponential fashion, it’s difficult to operate. You have to pass those costs on, otherwise you go out of business,” Kennedy said.
“The issue of high taxes, of a huge increase in one year is alarming. But the fact that they’re moving the city towards an even greater debt situation is scarier,” he said.
“We don’t know the end of this.”