The town of Wawa is facing a big tax problem — and it could mean that police and other public services don't get paid.

Mayor Linda Nowicki said the province is scaling back a program called the Power Dam Special Payment program that was put into place about 10 years ago, when the province decided that hydro dams didn't have to pay taxes to municipalities.

The province has since been offsetting the tax revenue and paying communities with dams, but that's now under review.

If the province scales back the payments, the town will lose close to $550,000 next year, she said.

Financial woes in Wawa2:33

Nowicki added Wawa is still waiting for money from the provincial program for this year.

"So we have run out of cash. At least the power company always paid their tax bills in February and in April, just like every other tax payer. But we haven't received any money from the province yet,” she said.

"I will put to council that, until we receive our $2.3 million [from the province], we stop all outside payments which would be any payment to the Ontario Provincial Police, our social services area board, our public health board."

Nowicki said even if taxes were raised and services were cut, the town would still face a financial shortfall if the province were to cut the program.

“If we have to go out and borrow $2.3 million until October to meet our obligations, we can't afford the interest payments on that.”

Wawa council was expected to meet on Tuesday about the issue.