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1. In the recent virtual presentation the Consultant stated that by year 7 there would be about $14 million in reserves. How will those reserves be funded?

The key document to address this question is the Capital Reserves Schedule (PDF). This schedule shows that at the beginning of 2023, a Sorrento-Blind Bay Municipality would receive financial reserve transfers from the CSRD valued at $5,070,928. $3,994,352 of this amount are funds in place for local Fire, Water, and Parks services that are currently under the responsibility of the CSRD, but would become the responsibility of the municipality. The remaining $1,076,576 would be the Sorrento-Blind Bay portion of the existing Electoral Area C Community Works Fund reserve.

The Capital Reserves schedule also shows that new funds, raised through municipal taxes, would be added to the reserves each year, or used to create new reserves, beginning in 2023. Specifically:

• $250,000 would be added each year to the Fire Service reserve fund
• $200,000 would be set aside each year for a Municipal Hall reserve fund
• $70,000 would be set aside each year for Park Service capital expenses
• The amount added to Water Service reserves would be $163,300 in 2023, but would gradually increase to reach $375,000 in 2029
• $1,226,000 would be added to a Local Roads Service reserve each year beginning 2023 for five years, after which the annual transfer would be reduced to $200,000

At the beginning of 2029, after all, scheduled additions to and withdrawals from the reserves have been made, and a modest amount of investment income has been added (calculated at 1.4% interest), the total reserve fund balance for all of the funds combined would be $14.9 million.

All of the additions to the reserve funds are identified in the individual Service and Issue Sheets for the relevant services. As well, it is important to note that the annual taxes that would be charged by the new municipality, and that are profiled under Budgets and Property Taxes, all take into account the need to raise sufficient funds to make the annual transfers to reserves.

2. Would residents in a new Sorrento-Blind Bay Municipality continue to receive the Home Owner Grant that they receive today in Electoral Area C?

Yes.  The provincial government offers Home Owner Grants to qualifying homeowners in electoral areas and municipalities throughout all of British Columbia.  To qualify, a homeowner must:

• be the registered owner of the residence
• be a Canadian citizen or permanent resident of Canada
• live in British Columbia
• occupy the home as his or her principal residence

In Sorrento and Blind Bay, a regular Home Owner Grant of $770 is provided to each homeowner whose residence is assessed at $1,625,000 or less.  Seniors over the age of 65 receive an additional $275 (for a total Home Owner Grant of $1,045) on residences assessed at $1,625,000 or less.  All Home Owner Grants are presented on homeowners' property tax bills and serve to reduce the total property taxes owing. 

It is important to understand that Home Owner Grants paid to homeowners in electoral areas are exactly the same as Grants paid to homeowners in municipalities.  It should also be noted that the sample residential property tax notices available online do not show the Home Owner Grants.  The total taxes owned on the tax notices for both the Incorporation and Area C1 options, therefore, would be reduced by $770 (or $1,045 in the case of seniors 65 years and older) in all cases.

3. Would local non-profit societies that benefit the community receive the same tax exemptions in a Sorrento-Blind Bay Municipality as they do today in Electoral Area C (and as they would in Area C1)?

Section 15(q) of the Local Government Act states that in electoral areas, properties (lands and improvements) owned and used exclusively by a local non-profit organization for "activities that are of demonstrable benefit to all members of the community" are exempt from taxation.  In municipalities, which are subject to the terms of the Community Charter, these properties are not automatically exempt from taxation.  Under section 224(2)(a) of the Charter, however, Municipal councils may provide permissive tax exemptions each year to non-profit organizations that use their properties for purposes that are directly related to the organizations' purposes.  The same properties would be exempted from taxes levied for regional district services that are provided to the properties.

It is important to note that tax exemptions for non-profit groups, while not automatic in municipalities, are provided each year as permissive exemptions by all municipal councils, including the Councils of Salmon Arm, Sicamous, Revelstoke, and Golden.  It is reasonable to assume that local non-profit groups in Blind Bay and Sorrento that are exempted from property taxes today would be provided permissive tax exemptions in a future municipality.

Non-profit organizations benefit in electoral areas and municipalities from local government grants.  In the Sorrento-Blind Bay Incorporation Study, the budget projections for the incorporation option assume that a new municipality would provide the same amount of local government grants-in-aid as are provided now under the Electoral Area C Grants-in-Aid service.

4. How do the projected taxes for Sorrento and Blind Bay compare to taxes in small municipalities elsewhere?

Caution needs to be exercised when answering this question because each community is different.  Each community has a different assessment base, a different number of road kilometers, a different amount of non-residential assessment, some unique services and ways of delivering services, a different population, and different service needs.  Local taxes in each jurisdiction will vary based on all of these differences.

Local taxes will also vary based on residents' expectations for services, demands for different service levels, ability to pay for services, and willingness to pay.  Locally-elected municipal councils make decisions and are held accountable for those decisions, based on all of these factors.

Local conditions and differences among communities notwithstanding, it can be useful to consider what homeowners in other small municipalities are paying in local property taxes.  The accompanying table presents a range of places in the BC Interior and shows the total local property taxes paid by the owner of a representative home in each.  All figures are from 2020 and include all property taxes paid for municipal services, regional district services, and provincial/other services (including police and school).  The figures do not include the Home Owner Grant (which would reduce the total amount owing in all cases), and do not include parcel taxes or user fees. 

The table shows the total projected property for a representative home ($400,000) in Sorrento-Blind Bay under both the incorporation and the Area C1 option.  These figures are also shown for Blind Bay without the Home Owner Grant, parcel taxes or user fees.  The figures assume a population of 4,550, which is below the 5,000 population-level after which a Sorrento-Blind Bay Municipality would become responsible for local policing.

Municipality	Assessed Value (Representative home)	Total Property Taxes (Actual 2020)
Armstong	$414,548	$3,302
Barriere	$242,693	$1,652
Chase	$291,576	$2,315
Clearwater	$249,847	$2,185
Enderby	$314,039	$2,159
Golden	$321,339	$2,677
Merritt	$289,346	$2,466
Revelstoke	$495,477	$2,979
Salmon Arm	$405,543	$2,710
Sicamous	$330,132	$2,691

Sorrento-Blind Bay	Assessed Value (Representative home)	Total Property Taxes (Projected on 2020 figures)
Sorrento
Electoral Area C1	$400,000	$1,994
SBB Municipality	$400,000	$2,176

Note: the Sorrento home is slightly higher in both scenarios than the Blind Bay home because of some small differences in street lighting services.

5. The Local Roads Service Sheet, in Figure 5, shows two scenarios for road service costs. What additional services would be provided for the higher "Municipal Level Operations" budget?

The Local Roads Service Sheet (PDF) begins by presenting and explaining the costs incurred by the Ministry of Transportation and Infrastructure (MOTI) to provide maintain the local road network in Sorrento and Blind Bay today.  It was shown in the service sheet that MOTI spends approximately $7,500 per road kilometre to maintain the network. It was explained that this figure, which translates into an annual tax impact on a $400,000 home of $188.00, is considered quite low on account of the significant economies of scale that are available to MOTI, and the considerable purchasing power MOTI has to negotiate competitive maintenance contract rates.

It was noted in the service sheet that the same economies of scale and purchasing power would not be available to a new municipality in Blind Bay and Sorrento.  It was estimated that the cost to a new municipality to achieve the current maintenance standards, provided by MOTI, would also certainly be higher — a range of $8,000 to $10,000 per kilometre of the paved road was estimated.  The mid-point of this range — $9,000 per road km — is presented in Figure 5 as one scenario. The rate translates into an annual tax impact of $178.35 for a $400,000 home.

The service sheet went on to explain that, while a per km rate of $9,000 might be possible, experiences of other small municipalities suggest that it would be unlikely.  Figure 4 in the service sheet showed the costs per road kilometre paid by seven small municipalities in the Interior — costs that ranged in 2020 from $11,295 to $23,250 per road km. In recognition of these higher actual costs incurred today in small municipalities, the consultants created a second scenario that envisions a per-kilometre road maintenance cost of $13,500, and that adds a further $200,000 per year to assist with road capital works. This second scenario, which would translate into an annual tax of $319.67, was accepted by the Committee.

Would the community receive a higher level or broader range of road maintenance services for the higher amount? The municipality would provide the same range of services (e.g., surface treatments, drainage maintenance, snow removal, roadside maintenance, traffic signage and markings) as MOTI.  Based on the experiences of small municipalities, however, the services would be provided at a higher level than that which the community is receiving today. The change in level would be attributable, in part, to having local staff or locally-accountable contractors involved in delivering the services.  These staff/contractors would, based on experiences elsewhere, be able and expected to respond more quickly than at present.  Maintenance and service standards are also higher in the small municipalities surveyed than those in place today in Sorrento and Blind Bay. 

It may be important to note, as well, that infrastructure and transportation planning would be undertaken by the municipality upon incorporation, rather than centrally by the Ministry. This localization of the road planning function is perceived by many as important and may result in a higher level of service.

6. How many admin staff would the municipality require? In one answer you state seven; then in another you state 15. Also, what admin positions are needed and what are the corresponding salaries for each

As shown in the Administration Services Sheet, an estimated 7.0 FTE (full-time equivalent) administration positions would be required by the new municipality.  These positions would likely include:

• a Chief Administrative Officer (CAO)
• a Deputy Corporate Administrator (i.e., Municipal Clerk)
• a Municipal Treasurer (CFO)
• two staff in Finance to handle payroll, accounts receivable, accounts payable, and other Finance functions
• two staff in Administration to assist with minute taking, human resources, Council agendas, support for the CAO and Council, reception, correspondence, and other administrative functions.

Salaries for these positions would be set to be comparable to other small municipalities and similar positions at the CSRD.  By way of example, the published 2020 salary for the CAO position in Sicamous is $141,000; for the CFO is $119,000; for the Deputy, Treasurer is $88,000.  Support staff salaries would be substantially lower.

It is estimated that the municipality would require a total of 15.0 FTE overall, for Administration and all other functions.

7. Why do all of the studies use a $400,000 average home price? If the average home price were $800,000 instead of $400,000 what would that change do to all of your examples in the documents? Would the i

The $400,000 estimate is a 2020 figure that was chosen to reflect 2020 residential assessment values in the Study Area, as well as the value of "representative home values", as determined by the Province, in a variety of nearby communities, including Salmon Arm. 

To understand the tax impact on a higher home value it is important to understand, first, how taxes paid by the residential properties are determined. To that end, note the following points:

• Every year, a municipal government estimates all of the costs it will incur to provide its full range of services. The government then determines how much revenue it will be able to raise from sources other than property taxes to pay the charges (such sources may include provincial grants, sales of services, and others). The difference between the total costs and the total non-tax revenues will equal the amount that the municipality needs to raise from property taxes.
• Most services provided by the local government are paid for using property value taxes — that is, the taxes that are calculated depending on the assessed value of a property. Some services such as water and sewer systems are typically paid using property parcel taxes (or a combination of parcel taxes and user fees). Parcel taxes tend to be charged as one flat rate for every parcel of property, irrespective of assessed value.
• The municipality must collect enough property value tax revenue to pay all of the service costs that are remaining after non-tax and parcel tax revenues have been taken into account. The municipality takes this amount required and allocates it across different property classes — e.g., residential (Class 1), light industrial (Class 5), business (Class 6), etc.  The total amount to collect from the residential class (Class 1) is applied against the total assessed value of all residential properties in the municipality to determine the residential (Class 1) property tax rate. That rate is then applied to the assessed value of each individual residential property to determine how much the owner of that property must pay in property tax that year.

Because the same Class 1 property tax rate is applied to all residential properties, owners of homes that are assessed at a higher value will pay more tax than owners of homes assessed at a lower value. If one home is assessed at $800,000 and another at $400,000, the owner of the $800,000 home will, at the same tax rate, pay twice the amount of the owner of the $400,000 home for services that are funded using parcel value taxes. The total tax bill for the owner will not be exactly two times the size of the bill for the lower-value place because some services, as noted earlier, are funded using parcel taxes that do not change based on assessed value.  But the total will be close to twice the amount since most services are funded using property value taxes.

The consultants have not created a sample residential tax notice for a home assessed at $800,000; they have, however, created a sample tax notice for a residential property valued at $600,000, which is 50% higher than the typical $400,000 value. The notice shows that the total tax owing (without the Home Owner Grant applied), would be 47% higher than the total tax owing on the same property assessed at $400,000.  The comparison suggests that a residence valued at $800,000 — or, twice the $400,000 value — would pay close to two times the property tax.

On a related point, it is important to note that an increase in the value of all residential properties would not translate into a tax hike for everyone. If all properties increased in value, the property value tax rate would be adjusted downward to enable the municipality to raise the same amount of tax revenue (not more).

8. If a person has commercial property in the proposed incorporation area from which they run a business, but their personal residential property is outside the proposed incorporation area, does that per

British Columbia does not allow corporate or business votes in local elections.  If the property owned inside the Study Area is owned by and registered to a business, then the answer to the question is no. 

It is important to clarify that the province does allow non-resident property electors to vote.  Specifically, if a person lives in one jurisdiction and owns the property, registered in their own name, in another jurisdiction, they may vote once in the other jurisdiction, provided they:

• are 18 years or age or older
• are a Canadian citizen
• have been a resident of BC for at least six months
• have lived or owned property in the jurisdiction in which they intend to vote for at least 30 days
• are not disqualified from voting in a local election

This voter eligibility provision for "non-resident property electors" would apply to any Sorrento-Blind Bay Incorporation Referendum.  Therefore, if the property owned within the Study Area is owned by a person and registered in the person's name, the person would be able to vote in a referendum.

9. With the recent increase in RCMP salaries by an average of 23% across Canada, is the Committee planning to have the consultant revise the policing service sheets and tax notices?

Yes.  The consultants are working with staff from the Ministry of Public Safety and Solicitor General to understand the specific salary increases and their implications for a new municipality.  The consultants are also working with the Ministry to identify changes to the Police Tax that would apply under the Two Electoral Areas option, and to a new municipality with fewer than 5,000 people.

Please stay tuned.