2009 RDOS budget

  • Posted on: 27 March 2009
  • By: Michael Brydon

Update: 29 July, 2009:

Some of us received a bit of a shock on our 2009 Rural Property Tax Notices.  The mill rate* for 2008 was 0.5084 but 0.8665 in 2009—a 70% tax increase for this year!  Thanks to Larry McNary for brining this to my attention.

This puzzles me because the total budget for Area 'F' (not including specific service areas, such as Faulder water, OK Regional Library, police tax, etc.) dropped from $312K in 2008 to $300K in 2009.  Of course, the total assessed value of Area 'F' also dropped due to the loss of Red Wing (see below). But still, the 70% increase does not (yet) make sense to me.

The problem is, as you will notice from the logo on the top of your Rural Property Tax Notice, the RDOS does not actually collect taxes, the provincial Ministry of Small Business and Revenue does. We are having a hard time accounting for the increase because there seems to be an information gap somewhere between our Chief Financial Officer's budgets and the Province.  We will keep working on this and will see if we can provide some answers.  Please stand by.


*Mill rate is the tax rate per $1,000 of assessed value.  Thus, if your house has an assessed value of $500,000 and the mill rate for RDOS Area 'F' is 0.8665, you pay $433.25 in property tax.

I recently received the following question via e-mail (see also a letter from D. Rudzcki in the Penticton Western News):

Good morning Michael:

I understand from various sources that the tax increase for 2009-10 (proposed or approved?) is 10.2%. Is this correct?

The short answer is no: It is far worse than 10.2% for Area F. Your rural tax bill includes several items that are not part of the RDOS budget, including some that are quite large, including school taxes, provincial rural taxes, hospital taxes, and fire protection (for some neighborhoods). The RDOS tax, which averaged about $343 per household in 2008 will jump to $470 in 2009. The average increase in mill rate (tax per $1,000 of assessed value) is a hefty 29%.

So what is going on?

The single biggest factor in Area F in 2009 is that we have effectively lost Red Wing Resorts. Because Red Wing is on Penticton Indian Band land, and because the PIB now has the authority to collect taxes (and pay the RDOS for services), Area F now has fewer households—368 fewer. Indeed, the total assessed value in property in Area F is down $122M, or 21%.

Naturally, all the district-wide costs that are allocated by assessed value have gone down proportionately. For example, Area F's share of RDOS "general government" has dropped from $40K in 2008 to $31K in 2009. This is actually a 22% decrease, reflecting the fact that the overall cost of "general government" has been reduced somewhat in the 2009 budget. However, there are a few costs that have remained roughly the same or increased, such as planning, electoral area administration, mosquito control, parks, and so on. More about this below. The good news is that this logic will be reversed when new developments such as Greata Ranch come on line (incidentally, the Greata Ranch project is currently a big commitment for RDOS planning and engineering staff).

So this leads to the next question:

Why haven't all our costs decreased by at least 21%?

In some cases, this is obvious. The parks and recreation budget hasn't decreased, for example, because we still have the same number of parks in and around the West Bench as before and they cost the same to mow, irrigate, maintain, and so on. Also, the costs for services with defined service areas outside of Red Wing have not changed. In the case of the Faulder water system, costs actually increased significantly (due to roughly $40K in consultant costs from last year). Naturally, these costs are assigned to residents of the service area only, although they show up in aggregate totals for Area F.

In most of the other cases, the issues are more complex. They basically boil down to two:

  1. Regional services have been added or expanded
  2. The 2008 tax requisition in the RDOS was "artificially" low due to grants and accumulated surpluses.

New/expanded services:

The big (e.g., > $5,000) increases in RDOS-wide services in 2009 are the following:

  • Invasive Plants/Noxious Weeds
  • 911 Emergency Call System (new equipment)
  • Solid Waste Management Plan (landfill planning: required by the province)
  • Air Quality (chipping of orchard waste to reduce smoke particulate)
  • Regional Trails
  • Sterile Insect Release Program (alternative to pesticide use)

We also have some increases in Area F-specific services:

  • Noise bylaw
  • Untidy and unsightly premises control (new in 2009)

Previous RDOS boards worked towards implementing these programs so the question is whether they should be cut in the face of more challenging economic circumstances.  My own view is no.  Most of these are environmental and/or livability initiatives and the census data is pretty clear: livability drives our economy. Pensioners as a group are responsible for a bigger portion of the RDOS economy than all other industries combined. If we fail to address senior-specific issues such as air quality, we jeapordize the economic foundations of the region.

Decreased grants and accumulated surplus

One problem with "percent increase" as a measure of performance is that it is a ratio of two numbers: a numerator (tax increase) and a denominator (last year's total tax requisition). Unfortunately, last year's taxes were relatively low because the RDOS had accumulated $380K in surpluses—roughly 6% of the regional services budget. The RDOS has cut 4.8% from its "general government" costs in 2009; however, there is significantly less revenue from grants and surpluses than in 2008. The result is the illusion that spending has shot way up. It has not.

Unlike municipalities, regional districts in British Columbia are generally prevented by law from squirreling away money to smooth out budgets from year to year. Thus, if the RDOS shows a surplus in one year, it must subtract the surplus from the tax requisition in the next. As it turns out, the RDOS "over-collected" less money in 2008 than it did in 2007. As such, we are carrying forward significantly smaller surpluses to 2009.


Just a clarification in relation to the following statement above:

In the case of the Faulder water system, costs actually increased significantly (due to roughly $40K in consultant costs from last year). Naturally, these costs are assigned to residents of the service area only, although they show up in aggregate totals for Area F.

Although costs for a project in a particular service area are typically charged to residents of that service area, the situation was a bit different for the Faulder water study. The previous Area F Director, Ron Perrie, managed to acquire some planning grants and covered the balance with revenue from the gas tax. So although the $40K showed up in budget for the Faulder water system, users of this system did not actually have to pay for the engineering study.