The provincewide transition from the HST back to the PST/GST system has spelled budget pain for some large municipal capital projects in the Nanaimo.
But most the city's speadsheets have remained relatively unscathed by the policy change, according to finance director Brian Clemens.
Officials revealed last week that the cost of the new water treatment facility of South Forks Road had climbed by $1 million, thanks in large part to the return of the GST/PST system approved in the 2011 provincial referendum.
The split tax system came back into effect April 1 of this year, after the city had submitted tenders for major new projects like the water treatment facility. The change meant that the seven per cent provincial sales tax would apply to construction materials required for city projects, therefore driving up costs to the municipality.
Water resources manager Bill Sims said the tax changes also resulted in a cost increase of approximately $200,000 on the city's new water reservoir project, although he said the impact of that increase was easier to manage and fell entirely or mostly within the budget contingency. That was not the case with the water treatment plant.
Sims said the city put out the tender for the project and began construction before the province had clarified how the rules governing the transition back to the GST/PST system would work, "a fairly major detail that wasn't released until after the tender came in to play."
"In fact, I don't think we had a clear understanding of how (the project) would be impacted until the change took place," Sims said.
Clemens said the financial effects of the switch are "probably most obvious in those (projects) where we'd already developed the budget before the changeover, and in some projects, the budget is obviously tighter than others, so it may be more prominent there too."
But, he added, "We think that overall, as it impacts the entire city, the changeover probably has relatively minimal impact, because even though the PST is higher, it's not on as many (items)."
Clemens said sales taxes are also not included in tenders for projects, since they are not controlled by either the city or a contractor.
