Budget Challenges Facing North Cowichan

UPDATE:  Council's next budget discussion will occur on Monday, February 6, 2012, from 6pm to 9pm. Council invites residents to attend to listen to the discussion. There will be opportunity for members of the public to ask questions and to provide constructive input for Council's consideration.

On January 23, 2012, North Cowichans Administration & Finance Committee met to discuss the financial challenges facing North Cowichan as it prepares its 2012 2016 Financial Plan. The main challenge is the vulnerability of North Cowichan should its major industrial taxpayer, Catalyst Paper Corporation, be unable to continue to pay its annual property taxes given the highly-competitive global market Catalyst operates in.

As has been reported, Catalyst is currently in a process to restructure its debt, and recently filed for Chapter 15 creditor protection in the United States. In 2011, Catalyst paid North Cowichan $5.6 million in general municipal property taxes. This represented 26% of all property taxes used in North Cowichan to fund the valuable core services provided to our residents and businesses.

The Catalyst mill in Crofton has been a valued employer in the Cowichan Valley for over 50 years, and currently provides hundreds of direct and indirect jobs that drive the local economy. The Municipality cannot by itself save this company and protect these jobs. The Municipality can, however, limit its own financial risk by reducing its reliance on Class 4 Major Industry to a more sustainable amount, and in the process do its part to make industry more viable in the Cowichan Valley.

During this budget process, Council will thoroughly review its options to reduce the costs of providing its core services (Protective Services 22%, Recreation and Culture 16%, Roads and Transportation 15%, Capital 13%, Utilities (sewer and water) 10%, Environmental (e.g. garbage) Services 8%, Administration 8% of costs, Debt Servicing 5%, and Planning and Development 3%. Unfortunately, without a dramatic cut in the services we all receive today, there will not be enough savings found internally to limit the financial risks associated with a default of a major taxpayer on 26% of the property tax revenues generated annually. It is for this reason that the Municipality will be considering a tax shift from Class 4 Major Industry to the other property classes, including Class 1 Residential.

The Municipal Council will be considering up to a $350 per average home (approximately $1 per day, per household) shift in property taxes from Class 4 Major Industry to Class 1 Residential. In 2011, the average family home in North Cowichan (excluding sewer and water utility charges) paid $2,049 in property taxes. In 2011, the average residential home on Vancouver Island paid $2,886. Of the $2,049, $969 (47.3%) was paid to the Municipality to provide municipal services while the remainder ($1,080) was paid to Provincial School Taxes ($744 or 36.3%), Cowichan Valley Regional District ($215 or 10.5%), Regional Hospital ($100 or 4.9%) and others ($21 or 1%). If Council decided to transfer $350 of property taxes to the average home it would reduce North Cowichans reliance on Class 4 - Major Industry from $6.3 million to $2.6 million dollars annually.

It is worth noting that the Class 1 - Residential tax rate would increase from $2.854 per $1,000 of assessment paid in 2011 to approximately $4.1 per $1,000. This is very comparable to the City of Duncans $4.2067 and Ladysmiths $4.1616 per $1,000 of assessment.

The most significant challenge facing the Municipality in 2012 is whether it makes sense to reduce North Cowichans reliance on Class 4 - Major Industry to ensure the Municipality can operate from a sound financial position moving forward. In order to have meaningful input into this process, Council encourages the public to attend the next budget meeting scheduled for January 30, 2012, from 6pm to 9pm in the Council Chambers of Municipal Hall.