03/21/2014 07:50 EDT | Updated 05/21/2014 05:59 EDT

Cape Breton mayor says budget halted because of cost pressures from province

SYDNEY, N.S. - The mayor of Nova Scotia's second largest municipality says it is postponing its budget process because of an inability to deal with costs downloaded by the province.

Cape Breton Regional Municipality Mayor Cecil Clarke has declared a budget impasse, saying the municipality can't balance its budget without tax increases or cuts and reductions to services.

Clarke says the municipality is looking at up to $5 million in additional costs it can't afford because of such things as a $317,000 reduction in provincial equalization and a $1.8 million increase due to collective agreements and arbitrated wages.

He says the municipality's revenues are also lower than expected because of the impact of the provincial assessment cap, which is growing at a rate of only 0.9 per cent this year.

Clarke says the situation leaves the municipality with no ability to fund capital projects out of its operating budget and with no reserve funds for unforeseen costs such as extreme weather.

He says the municipality will not be able to conclude its budget process next week as expected.