WATERLOO REGION — Provincial funding cuts and payment for regional services, combined with debt servicing costs, expenses for rapid transit and inflationary increases have regional staff projecting a tax hike that could top 4.6 per cent next year.

"I would say based on the combination of internal budget pressures and changes in funding arrangements from provincial government this will be the toughest budget since the Mike Harris years," said Coun. Sean Strickland, chair of Waterloo Region's administration and finance committee.

An estimated shortfall of between $7.4 million and $9.4 million in provincial funding is expected to contribute 1.4 per cent to 1.7 per cent to the tax increase.

Increases for regional services make up most of the anticipated hike. Typically, regional services require annual tax hikes between two and 2.5 per cent.

A tax increase for light rail transit and express buses adds another 0.4 per cent to the total.

That leaves an estimated tax increase of between 3.8 per cent and 4.6 per cent, without accounting for any increase for the Waterloo Regional Police.

Between $20.9 million and $25.3 million more would flow into regional coffers.

The average home assessed at $344,200 would pay between $79.80 and $96.60 more to the region.

Craig Dyer, the region's chief financial officer, said politicians will receive an updated report in August that will further refine the numbers.

"We're going to seek some direction from committee as to what they envision in terms of a target," he said.

The next step would be to figure out how to close the gap between council goals and funding pressures. Part of that will involve updating a regional service review completed in 2015.

"What we would expect are opportunities for cost savings," Dyer said. "Basically what are some of the approaches we can take to deal with this as we head into the 2020 budget."

The service review looked at regional services and their cost, and indicated which were mandatory services and which the region was choosing to deliver, or deliver above government-mandated standards.

It concluded that all the easy cuts and efficiencies had already been made by staff and that cuts needed to be deeper.

Consultants suggested several cost-saving items, including the closing of regional child care centres.

There was outcry from parents and ultimately council, with Strickland opposed, voted to keep the centres open.

"This council has been pretty consistent on wanting to maintain service levels at the level to which our community is accustomed," Strickland said. "So I think our approach going into this budget is what can we do to maintain service levels ... by being innovative in the way we deliver those programs more cost effectively."

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The region is waiting on provincial funding for the review. If it goes ahead the review would be finished in November, early in the region's budget process.

Regional council approved a 2.97 per cent tax hike in 2019, with one per cent for police services. For 2018 taxes were increased 2.7 per cent, including about 0.5 per cent for police services.

Pressure on the regional budget include:

•$7.4 million to 9.4 million in lost provincial funding, including up to $4 million for child care, $2.3 million for public health and $2 million for paramedic services;

•$3.7 million for the capital asset renewal fund;

•$3.3 million to annualize service expansions approved in 2019, including debt servicing related to those expansions;

•$1.8 million for light rail transit and express buses;

•$1 million in incremental debt servicing for capital projects;

•$750,000 in additional funding for the regional development charge exemption fund.

pdesmond@therecord.com

Twitter: @DesmondRecord