City uses surplus to reduce taxes

After lengthy discussions at Wednesday night’s budget meeting between city council and staff, council decided to go against initial recommendations from staff and it will result in a tax increase of 2.42 percent for the average taxpayer.

City staff originally recommended a 3.79 percent ($89.22) increase in taxes paid, but council decided to lower that total.

The average homeowner will experience a raise of $58.22 - meaning the average taxpayer will dole out $2464.22 in municipal taxes.

Initially, city staff advised council to allocate $1.5 million of their $2,174,205 surplus to complete a financial commitment made previously to Algoma University and Sault College.

CAO Joe Fratesi had cautioned council about making a “perilous move” in regards to using the city's first surplus of over $2 million since 1997 to pay down the tax levy.

Fratesi said a large redirection of funds to the levy could result in a $1 million tax increase next year; which could see the tax rate increase by a full percent.

"We can't reiterate strongly enough that we believe it would be regressive to start introducing more than you already have in the budget by way of the surplus to bring the tax levy down this year, because next year you will have to find that much more to get to a starting point," Fratesi said.

He attributed the unusually large surplus to MPAC completing previously property assessments that needed to be done, along with the "soft" winter we experienced.

"I'm not so sure you can expect this surplus to repeat itself," Fratesi said.

One thing which could contribute to a surplus in 2013 would be the renting of the space left empty by the provincial court after it moved back to its space on Queen Street East.

Fratesi said they hope to entice a government agency to fill the space previously used by the provincial court and is optimistic after experiencing a positive relationship with court staff.

"That good will should go a long way with other government agencies," he said.

Council debated a number of motions before finally deciding to take just $500,000 out of the surplus for the levy.

Ward 2 Councilor Susan Myers and Ward 1 Councilor Steve Butland initially introduced a motion that would have seen $297,000 taken from the Sault Ste. Marie Economic Development Corporation in order to help lower the tax rate.

Ward 4 Councilor Rick Niro and Ward 2 Councilor Terry Sheehan also put forward a motion that would have withdrawn funds from the $900,000 winter maintenance reserve to help fulfill council’s commitment to Algoma University and Sault College.

Both motions were eventually withdrawn after Fratesi, Bill Freiburger (Commissioner of Finance and Treasurer) and Mayor Debbie Amaroso advised against them.

"It's not a sound principal,” said Amaroso. “It puts us behind the eight ball next year and that concerns me because we don't yet know the impact that the federal and provincial budgets are going to have on residents. We'll be facing that reality next year.”

When asked why the city doesn’t reimburse taxpayers the entire amount of the surplus, Fratesi said the money is used to help meet the needs of residents.

The motion council did approve will see them pay out $1 million to the Sault's post-secondary institutions this year and, in an effort to lower taxes, Council will give the remaining $500,000 to the institutions in 2014 – after the city’s commitment to the Sault Area Hospital fund is complete.

Also helping to lower taxes is $800,000 in adjustments to the budget - including the cutting of 18 summer student jobs - saving $118,000.

In his address to council, Fratesi defended the city’s method of taxation – calling it the fairest way of doing things.

Sault Ste. Marie uses statistics from the BMA Group, a consultant providing data on property taxes across the province that offers comparisons based on home size and not value.

The company bases its study on a 1,200 square foot, three-bedroom, single-storey home on a lot of approximately 5,500 square feet.

"Our messaging is different from other cities, it's probably more fair," said Fratesi. "You have seen historically how we compare with other municipalities. We are the lowest for the average taxpayer in the North and amongst the lowest in the province. That's not because we say so, it's because an independent consultant firm shows this to be true."

According to the BMA, municipal taxes in 2011 for the average local home (worth $124,000) amounted to $2,528 - the lowest in Northern Ontario.

Sudbury came second at $2,656, Timmins at $2,959, Thunder Bay at $3,096 and North Bay at $3,207.

The city uses a “blended” form of taxation; which sees the average 8% property increase blend with the tax rate to get the finally tally.

Heated throughout the meeting, Ward One Councilor Frank Manzo scolded his fellow council mates for considering a budget that would result in a tax increase - while slight - for most residents.

Manzo said it’s “not right to gouge taxpayers” and was the lone councilor to vote against the budget.