Inflation has driven up the cost of groceries, gas and many other daily purchases.
Now it will increase your property taxes.
Oakville town council has made an annual habit of directing town staff to prepare a budget that increases property taxes at the rate of inflation.
But with the inflation rate forecast to hit 7.2 per cent this year and 4.6 per cent in 2023, councillors may be forced to consider another approach.
“Unlike the past decade of budgets where inflation has remained quite stable, the current economic and inflation environment makes it difficult to determine what the tax increase should be,” says the town's finance staff report. Councillors will receive it at their meeting on Aug. 9.
A 2023 budget that follows council’s budgetary direction would result in an 8.34 per cent increase in town property taxes.
The overall hit for taxpayers would drop to a 4.6 per cent increase once regional and educational taxes are factored in, allowing the tax increase to match inflation.
While the budget committee will be offered options for reducing that steep jump, staff are warning that the town is also dealing with its cost pressures.
The squeeze is already on spending, as the town’s 2022 budget was prepared to assume annual inflation of about 2 per cent.
Along with increasing costs for items including fuel, supplies and contracted services, the town will likely face demands for higher salaries when it heads to the bargaining table early in 2023.
Contracts with inside and outside workers, represented by CUPE 1329 and CUPE 136, respectively, will be up for negotiation and employees are expected to seek wage increases to address inflation.
Construction and material costs have also risen dramatically over the last year, which will put pressure on the town’s capital budget.
The impact of inflation on infrastructure spending has already been felt.
The budget for the new North Park library and community centre jumped by more than 30 per cent – or about $33 million –before a shovel ever broke ground.
Originally budgeted for $73 million, it’s now expected to cost just over $106 million – and that’s after the town abandoned plans to build a parking structure on the site.
As it deals with inflationary impacts, the town is still working to manage COVID-related costs.
Last December, as councillors entered an election year, they voted to keep the 2022 tax increase low by gambling that the federal or provincial government would cover more than $5 million in expected pandemic-related costs.
Not only has that support not yet materialized, but the town is also projecting a further $4.82 million in pandemic costs by the end of 2022.
With transit ridership slow to recover, staff anticipate an additional COVID-related shortfall of $3 million for 2023.
Other financial risks, notes the staff report, include provincial changes to development applications, staffing needs and a competitive labour market.
But despite the challenges, Ward 6 councillor and budget chair Tom Adams remains optimistic about the town's financial outlook.
"The town is well positioned to handle the impact of the financial challenges of inflation," he said, in an emailed statement.
"Council has kept overall property tax increases in line with inflation for over a decade and the town has enviably high reserves and low debt.
"As noted in the staff report, I expect council will be well positioned to consider a 2023 budget with an overall property tax increase of 3.46 per cent, which is significantly below the current and expected rates of inflation."
With council headed for an Oct. 24 election, final approval of the 2023 budget is not expected until late February or early March of next year.