Sunday, April 01, 2012

13.6% property tax increase in Campbell River

While here in the CRD we are seeing tax increases in the 3-4% range, with a few exceptions, in Campbell River they are looking at a 13.6% property tax increase.   I am choosing this case because it highlights one of the major problems in BC, the very heavy property tax burden on the business sector.

Campbell River was, like so many rural communities, very dependent on the tax revenues from industry.   The Elk Falls mill was a major source of the communities finances but it is now closed.   The loss of the mill leaves a $1.8 million gap in the budget that has to be made up by the rest of the community.   The tax increase is about $160 per average house in Campbell River.   This means the property tax burden per property is not as bad in Campbell River as it is in most of the CRD.  

The city staff has tried to find ways to reduce the burden for this year though the impact was only to reduce the cost increase by $24 per average house.

The financial plan for Campbell River is suggesting another large increase next year, 8.3%.

Local governments in BC have used the business sector as a cash cow to provide services to residents.   There is no connection between the scale of property taxes charged and the services delivered.   This is not good governance because the voters do not pay the bill.   In the case of Victoria, half of the property taxes are paid by business and more or less none of them get the vote.   When we go further and look at who actually has to pay the taxes and who is allowed to vote, the majority of the City of Victoria electors do not pay any taxes directly to the city.

Local governments have a fairly clear mandate and do a good job of cost recovery for many things.   Garbage, water and sewer seem to all be on a cost recovery basis.   Building permits would seem to cover the costs of building inspections.   There are services that are not done on a cost recovery basis, but this is what the property taxes should be covering.  

When I look around at local governments there are three approaches I see in which they are dealing with their fiscal issues - raising property taxes, large scale development and boundary expansion.

The first, raising taxes, seems to be the most common response by councils around BC.   If you can get enough development happening you can collect enough in new taxes on the developments to keep ahead of the curve - this is what is going on in Langford.   In rural BC the way many councils have dealt with the financial problems is to expand their boundaries to take in mills, mines or other industrial properties.   Looking the boundary map of Campbell River, I suspect they took in the mill many years ago and have not done it recently.

All in all local governments in BC need to have hard look at what they are doing and how they are doing it.   The costs of local government are rising faster than the rate of inflation and have done so for many years.

We also need to rethink how we fund local governments.   There is no reason we could not assign a portion of income taxes to municipal governments.   We know for all tax returns in which municipality people live.   We could also create VAT for local governments and link it to the GST.   Allow local governments to choose 1%-3% as their VAT and apply it to all business transactions in their municipality.   The federal government is capable of tracking GST based on location of the businesses and could easily collect and remit the money to the municipalities.   They already do this for a number of First Nations in BC.

It would be ideal if we could move away from taxing a fixed asset like property just for existing and shift it to the actual incomes and expenditures made by the public.
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