City’s inability to economize sticks taxpayers with a bigger bill

The last person I met who agreed he liked taxes thought I was asking about the Lone Star State.

On this matter, we need to accept consensus: Houston, we have a problem.

The City of Vancouver has this year joined other communities in declaring a climate emergency. Our infrastructure needs fixing for the decades ahead.

But more imminently we have a budgetary emergency. Our balance sheet needs fixing for a negligent decade-plus.

It’s complicated.

The news sending people a-Twitter last week was council alligator-wrangling a proposed 8.2% property tax increase (9.3% including utilities) starting next April, following a 4.5% increase this year and 4.24% a year earlier. A decision on the extent of the increase – a slight shaving of the proposal at best – is due within days.

Even so, numbers do not tell the story. History helps.

We have had a housing affordability crisis in the city for some time. Our house-cost-to-income ratio is absurd. Land and construction costs make prohibitive unsubsidized affordable development. And the most substantial taxes on property – to deal with speculation and foreign ownership, and to process property transfers – head to the coffers of the province instead of staying put.

The municipal taxes and the proposed budget do little or nothing to address the challenges for those struggling with rising rents or for those navigating the labyrinth to build homes within reach of most of those who would wish to own.

At least a couple of other issues linger for renters and rentees: families will pay nearly $500 more for their food next year, and landlords will absorb much of any tax increase because rents may rise no more than 2.6% in 2020. If interest rates ever climb again, there will be hell to pay.

But before we go all anti-tax here, let us be reminded of a few other elements to provide context.  Arguably the largest was how land values rose in a feverish market of high demand in the last decade or so and taxes did not commensurately reflect the true worth of what we held. Even in boom times, residential tax increases were kept low for politically expedient reasons. Commercial taxes were oversized by comparison, a cause of no small problems for the local merchants. Meanwhile, the city grew dependent on construction-associated community amenity contributions, better known as CACs, to deflect the burden of new and maintained services on to builders and on to homebuyers. Any gesture now to suddenly tackle that land-to-tax incongruence would correctly strike people as retroactive confiscation of paper wealth. Even if other cities have higher rates, the framework for taxes in this city is essentially set in an unaffordable context in which other expenses have usurped what the city might have taken and can no longer. The ship has sailed.

The next option is the largest possible grab of what council divines owners can bear. Trouble is, it is taking steps without tracing the path predecessors pursued, where there are bound to be efficiencies.

At senior levels of government, programs face regular value-for-money audits. But there has not been a single transparent review in memory of how our community spends. Even this 659-page document doesn’t get tough on anything the city has done to propose a $1.62 billion budget. But there are “investments,” including $23.8 million called for by the new council, which has opted initially for a path of self-interest over self-critique.

There may well be intelligent initiatives in the spending measures, but the process loses credibility when it isn’t accompanied by equally intelligent efforts to economize. 

The next chapter is predictable: an easing in the final document to make us feel we have been heard. Any government conscious of its constituents would know few will experience even half of a 9.3% income growth. Its willingness to even countenance discussion of a budget like this conveys indifference to economic reality and compliance of previous administrations and current senior staff, an abrogation of the mandate from the electorate.

A year ago they were wet behind the ears; now they just lack them.

Kirk LaPointe is editor-in-chief of Business in Vancouver and vice-president, editorial, at Glacier Media.