Already facing tax implications for the Mission Aquatic Centre, City Director of Financial Services, Paul Macklem, painted a picture of more looming increases.

Macklem detailed a steady increase in costs incurred by the city over the past five years.

"We know there is a competitive market for labour goods and materials and there are a lot increasing market demands globally as well as nationally, provincially and inter-provincially," says Macklem.

"The result is that there is an above average cost in terms of increases in the city's largest cost drivers."

He says over the past five years, building and construction materials have increased well above the Consumer Price Index and municipal tax increases.

According to Macklem, City of Kelowna taxes have risen at the same rate as the CPI over the past seven years, at an average of just under 2% per year.

Macklem pointed to a number of construction materials that have shown a dramatic increase over the past five years:

• Sewer main installation - 110%
  
• Water main installation - 120%
  
• Concrete - 30%
  
• Gravel - 38%
  
• Asphalt paving - 108%
  
• Reinforced steel - 65%
  
• Land values - 116%
  
• Insurance - 50% increase over 2007

He says construction costs have risen from $135/per square foot in 2002 to $200 per square foot in 2007. Macklem adds costs for policing, city staff and consultants have also risen significantly.

"For the commodities we're looking at here, and even labour, if you were trying to equate tax increases to what's happening, then our tax increases have been pretty modest."

"We have been taking steps to manage that. When the City Manager has brought forward budgets and Council has approved them, you've done it in full knowledge that in some cases we were using reserve money that we had available."

Macklem says the City was pretty well positioned for times such as that.

"Those days are pretty much behind us now and we will have to do a little bit more, or perhaps a lot more, to try and keep things to current taxation and a lot less with reserves."

He says materials and labour costs will only continue to rise in 2008 and beyond as worldwide demands continue.

Councillor Andre Blanleil questioned whether it would be possible to hold off on a number of projects until after the 2010 Vancouver Olympics.

"The Chief Economist for RBC is suggesting the provincial government and municipalities consider moving some of their capital projects outside the 2010 window because costs for infrastructure will drop," says Blanleil.

"With the labour shortage, we're paying a premium to do this work now. Have we considered for the next two years maybe backing off the pay-as-you-go policy?"

Without wanting to take the steam out of City Manager Ron Mattiussi's budget plan due out Friday, Macklem indicated the City's pay-as-you-go capital program is not keeping up with the corporate strategy we have had in place.

"A lot of this is because we are trying to ensure that we are maintaining our physical assets in a reasonable form into the future so we will not have to replace them so quickly."

Macklem says some projects may have to be pushed back because of affordability.

"As the Finance Director, I do worry about what's happening in the United States and I worry very much about borrowing huge sums of money just prior to an economy adjusting itself. We need to be very careful about that."

He says once the decision is made to build a $60 million treatment plant, its too late to go back once you start construction.

Kelowna City Council will begin budget deliberations Thursday, December 13.