PEC Property Taxes Reserves and the Cost of Catching Up

A modest tax increase sounds reassuring when the household budget is already stretched. Rebuilding municipal reserves sounds reassuring when roads need work and unexpected expenses arrive. At the mayoral debate, the candidates were asked which reassurance they would prioritize.

Their answers exposed a difficult question for Prince Edward County: how much can we reasonably expect the municipality to repair, maintain and save while keeping increases near the cost of living?

Residents deserve spending discipline. They also deserve a clear explanation of what their taxes can buy. A low increase becomes harder to celebrate if the work it postpones leaves the next council, or the next generation, with a larger problem.

Terry Shortt offered the most definite figure: “I would propose a 4% increase per year, which is basically cost of living.” He would direct departments to bring back budgets within that increase. After the moderator repeated the question, Shortt explicitly prioritized rebuilding reserves, explaining that “without reserve funds we're just walking a tightwire and living day-to-day.”

There is value in setting expectations early. However, a departmental ceiling does not establish how much money would remain for reserves after existing obligations are covered. Would every department face the same limit? What services, purchases or staffing arrangements would change if some costs rose faster?

Ernie Margetson drew a distinction between an operating-budget goal tied to cost of living and the pressures coming through capital investment and debt. He cautioned against “end-of-budget cutting without looking at the long-term ramifications” and identified the forthcoming financing transition for the McFarland long-term care redevelopment.

That distinction matters, although taxpayers ultimately need to understand the combined effect on their bills. Holding one part of the budget close to inflation could still accompany a larger overall increase.

Brad Nieman described residents’ preference for increases around 2–3%, but explicitly declined to guarantee that outcome: “I'm not going to sit here and say we're going to keep that 2% or 3%.” He emphasized the urgency of rebuilding reserves and suggested redirecting money from other spending.

The next useful step would be identifying that spending and estimating the recurring savings. Without those details, residents cannot judge whether the proposal would meaningfully improve the County’s financial position.

Across the three answers, the missing piece was a high-level explanation connecting the preferred tax approach to the work that needs funding.

Even the phrase “cost of living” needs some clarification. Statistics Canada reports that national annual-average consumer inflation was 2.1% in 2025. That describes a past period and a consumer basket; it neither forecasts inflation throughout the next council term nor establishes the price of municipal services. Shortt’s 4% should therefore be understood as his proposed increase, rather than an independently established inflation benchmark.

The County’s asset-management analysis provides a more specific financial test. It identifies a $35.7-million annual lifecycle funding target for tax-supported infrastructure, compared with approximately $11.5 million allocated to corresponding capital-related needs in the 2025 budget. The resulting $24.2-million annual gap measures sustainable funding, rather than an overdue bill or an operating deficit.

Its model anticipates 7.28% annual growth in the general levy, translating into approximately 5.45% annual increases in the County portion of individual property-tax bills, assuming 1.74% assessment growth. It assumes 2.2% operating-cost inflation and 4.5% capital-cost inflation. These are planning assumptions, not predetermined increases.

Even this funding path leaves some lifecycle work deferred beyond 2035. Closing the annual funding gap would not clear the entire backlog within ten years.

Those figures do not make every lower-tax proposal unworkable. They do make it reasonable to ask what would bridge the difference: additional revenue, recurring savings, different service expectations or a longer repair schedule? Voters should be able to understand which combination a candidate favours.

The reserve discussion requires similar care. The 2025 financial statements presented to the Audit Committee show approximately $45 million in Council-designated reserves and reserve funds at year-end, compared with $41.3 million in 2024. Within the 2025 total, about $17.1 million was in water and sewer reserve funds. The working-capital reserve was much smaller: $184,970, down from $604,670.

These year-end balances are neither a current cash forecast nor a calculation of funds available for any purpose. The County’s budget guidance distinguishes discretionary reserves from obligatory funds, which are restricted to particular uses.

Consequently, neither a large aggregate balance nor a broad warning that reserves are nearly exhausted tells residents enough. Which accounts are under pressure? How much is committed to approved work? What remains available for unexpected needs?

Finance staff could help by publishing a simple reconciliation of current balances, existing commitments and available amounts, separating tax-supported funds from water and wastewater funds. That would make the reserve debate easier to assess.

Some accounts also operate differently from an emergency savings cushion. The January 2026 budget report explains that the Rural Roads Construction Reserve functions largely as a pay-as-you-go account. It also identifies potential future budget pressure from reduced levy-supported contributions, despite using other funding to support the 2026 program.

Funding this year’s road work and building dependable funding for future years are related responsibilities. Residents need visibility into both.

January offered a concrete example of the affordability choice. The official Council minutes confirm that Nieman moved an amendment, seconded by Councillor Grosso, to use $390,479 from three reserves to offset additional OPP costs. The amendment carried.

That decision provided immediate tax relief. It also deserves a forward-looking question: when reserves absorb an annual expense, how will subsequent budgets fund that expense and restore financial flexibility? A reserve withdrawal can be reasonable; its justification is stronger when the intended duration and replenishment approach are clear.

Margetson’s McFarland reference points to another obligation. The August 2026 debt analysis reports approved construction financing of approximately $80.4 million for the redevelopment, with conversion to long-term financing expected around substantial completion in June 2027. That is a financing approval, not a statement that the whole amount has already been borrowed.

Residents need to know the expected annual repayment burden and how much will fall on property taxpayers after other funding. Debt can spread the cost of a long-lived asset across its users; it still creates future payment obligations.

There is room to examine spending choices alongside those obligations. The approved service-level approach already includes reducing priority buildings by 25% and extending corporate fleet lifecycles by 25%.

Candidates proposing further efficiencies should explain what is additional, what could realistically be saved, and what residents would experience. Selling a property might provide a one-time contribution; avoiding its ongoing upkeep could produce recurring savings. Those are different benefits and should be counted separately.

Public feedback reflects this tension. On the County’s asset-management consultation page, one resident questioned the assumption that maintaining services requires higher taxes, while another proposed disposing of underused, expensive buildings. These are individual views, not a representative survey or proof of achievable savings. They nevertheless raise legitimate questions about value and priorities.

Additional revenue also belongs in the discussion. Candidates could identify realistic opportunities, their timing and any restrictions. A hoped-for grant should be distinguished from confirmed funding; a fee increase should explain who would bear the cost. Moving an expense away from property taxes does not necessarily remove it from residents’ budgets.

Affordability deserves more than a passing acknowledgement. Supporting necessary investment does not mean assuming every household can absorb the increase. The Municipal Financial Relief Program offers an existing mechanism, although its grant amounts depend on applications and its 2026 application period has closed.

Residents and community organizations can help explain where assistance works and where households remain exposed. Any rebuilding approach should show how hardship will be addressed alongside the spending itself.

We do not need a fully costed four-year platform to continue this conversation. A high-level plan would help: which work comes first, what mix of taxes and other revenue would fund it, how reserves would become more resilient, and how progress would be reported.

For Shortt, that means explaining how 4% accommodates both existing costs and replenishment. For Margetson, it means connecting the operating target to the total taxpayer impact. For Nieman, it means identifying the spending that could be redirected and its likely scale.

This is a community discussion, and PEC Connect welcomes clarification from candidates and municipal staff, alongside residents’ experiences and practical suggestions. Please comment publicly or send us a private message; we will update the article as information becomes available.

The question worth carrying into the voting booth is what each proposed approach would leave the County able to deliver, and what obligations it would leave for those who come after us.