The President of the North Bay and District Chamber of Commerce says it’s always tempting for a city council to use money from its reserve fund to offset a tax increase.
However, Peter Chirico says elected officials have to resist that temptation.
Chirico says council digs a hole for itself when it uses money from reserves to lower taxes.
He says when reserves bring down a tax increase in one year, he asks what happens the following year and the year after that when council is again faced with a large tax increase.
North Bay city council is staring at a potential tax increase of 7.93 percent and one suggestion was to get that increase down with the use of reserves.
But Chirico says reserve funds are for a rainy day, like emergencies and one-time use to pay for the unexpected.
He emphasizes tax increases don’t qualify.
Chirico says what may qualify is the snow removal budget.
He says with all the snow the city has received this season, the current snow removal budget may be feeling pressure and to avoid going into a deficit situation, the reserve fund could be used to help alleviate the additional cost.
Chirico says if council takes a million dollars out of reserves to lower taxes and then is faced with a snow removal budget shortfall, it has few options left.
“That’s the slippery slope past councils have fallen into, said Chirico who is also a former Deputy Mayor and former chairman of the city’s budget.
Chirico says when he was elected Deputy Mayor in 2004 the city had one of the lowest reserves in the entire province because past councils had a habit of offsetting tax increases with the rainy day fund.
He says the 2004 council had to build the reserve fund back up and did that by introducing a tax increase of 6.9 percent the first year and more than 5.5 percent the following year.
He says by 2015 the reserve fund had grown to a healthy level until now.
Chirico says it’s not a popular thing to do, but council either has to raise taxes by a reasonable amount or look at cutting services.
The chamber president admits cutting services is very easy to say but hard to execute.
“When you try and take away services from taxpayers, that’s when you get the presentations at council with people coming up who say you’re not going to cut this service,” he said.
Chirico says the chamber will make a budget presentation to council in the near future and explain the choice is either reduced services or higher taxes and that using reserves is not an option.
“This council will have to make tough decisions,” he said.
“Do I like an 8 percent increase, absolutely not. A reasonable increase is in the four to five percent area. This is acceptable. It’s not popular, but it’s acceptable.”
Chirico says the city needs to implement strategic investments through its tax levy to grow the city which he says will create jobs, sell houses and create new assessments.
“You can grow your way out of the problem, and that’s really the only way,” he said.
“But if you keep using reserves and deplete them, there will be a day of reckoning. So you may as well make the hard choices now and get the pain over with and figure it out from there.”
Chirico says delaying projects also yields negative results because “when you defer, you’re just pushing the problem into the future”.
“Any project that’s pushed off, you’re still going to have to deal with it at some point in time,” he said.
“Council needs to figure out its plan, stick to it and move along.”
