The city is facing a nearly half-million dollar shortfall due to new legislation exempting non-profit long-term care homes from paying property taxes.

The unexpected deficit will result in an additional tax hike, unless council can find another solution to offset the lost revenue, warned treasurer Jim Lang.

“The lost tax revenue to the city is approximately $473,000, based on 2015 tax rates and assessment,” Lang said in a report to council committee.

A provincial regulation filed last December exempts non-profit long-term care homes from property taxes.

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One local operation – Spencer House on West Ridge Boulevard – qualifies for the exemption.

Lang said the new regulation was introduced without the usual consultation process and “very little warning.”

Orillia and most other municipalities approved their budgets prior to learning of the change.

To cover the lost tax revenue, the city will either have to raise property taxes, cut costs or find other sources of revenue.

A one per cent tax increase would be required to offset the shortfall, bringing the average tax rate increase to 4.8 per cent.

When estimated education rates are factored in, the blended increase amounts to 3.7 per cent, Lang said.