Property taxes have gone up 26% over the last six years. Good tax policy and living within our means is needed to create an affordable city for Victoria’s residents and businesses alike. I have a plan to keep property taxes in line with inflation, or better for the next four years. I also have thoughts on the impact that freezing the property tax ‘mill rate’ for four years would have – both on commercial property owners and on the fiscal management of City Hall.
Before I share my plan to keep property taxes in line with inflation, and look more closely at the impact of freezing the property tax mill rate, here’s a property tax primer. What is the mill rate anyways?
Property Taxes 101
The City divides property owners into six classes. Residential and business make up the vast majority of property. To create its annual budget, the City multiplies the assessed value (which is produced independently by BC Assessment every January) by a ‘mill rate’ for each class of property. The ‘mill rate’ is set independently by the City to produce the amount of revenue required for the City’s operations.
The City runs a surplus annually. Unlike other levels of government, municipalities are not allowed to run deficits. The surplus varies from year to year and is transferred to the City’s infrastructure reserve fund at the end of the year. This reserve fund is important to the City’s long-term sustainability. The City uses its reserves for important infrastructure like water and sewer pipes, parks, roads and greenways. With reduced or no surpluses in the annual budget, infrastructure reserves would shrink. This would compromise the City’s ability to care for its infrastructure for the long term.
Taxes collected make up roughly 55% of the City’s annual budgeted revenues. User fees for water, sewer and garbage are other ways the city earns revenue to provide services.
New tax revenue from new growth is based on re-assessments of properties on which there is construction – new buildings and building improvements. New tax revenue has decreased significantly in the last five years. The last two years are dire:
2009: $1,958,701
2010: $1,878,822
2011: $1,659,973
2012: $328,105
2013: $108,640
These numbers show what I hear a lot – that it’s hard and slow to get through the processes at City Hall to build or improve a building in Victoria.
My Plan
Fix City Hall so it works and so that in can play a role in creating a beautiful, vibrant city and new tax revenue. Foster and support new, sensitive, beautiful buildings and enterprises in Victoria by creating an Economic Development Office (start up funding to come through the City’s Economic Development Reserve Fund). Support small business and reduce downtown retail and commercial vacancies through the creation of an Enterprise Facilitator position in the Economic Development Office. More details here.
Overhaul City Hall and create an innovative, creative work culture where front-line staff are empowered to innovate and look for cost savings. Working with The Pacific Institute, the City of Saskatoon did this between 2004 and 2009. In 2009, the Canadian Federation of Independent Businesses named Saskatoon the most business friendly city in Canada. And, between 2004 and 2009 Saskatoon saved $56 million dollars. Not by cutting and slashing services, but by working smarter and encouraging cooperation and innovation throughout the organization. And yes, it’s a unionized workplace, just like the City of Victoria.
With City Hall working and new revenue from new development coming in and with innovation, creativity and cost-savings realized, I will work with Council and city management to keep property taxes in line with inflation, or better.
Freezing the Mill Rate is Not Freezing Taxes
Freezing the mill rate means that if the assessed value of properties goes up, taxes will go up. If the assessed value of property goes down, taxes will go down. In both cases, control of city finances is surrendered to the vagaries of the market. Property owners could find themselves paying dramatically more, or the City’s budget might have a hole blown in it. And, worst of all, we wouldn’t know it until the year in question. Remember, the City only gets the assessment information in January of the budget year. This is no way to govern an organization that is run with public dollars.
Finally, freezing the mill rate would prevent the City from continuing to re-balance between residential and business taxes. In 2010, the business mill rate was 3.59 to 1 versus the residential mill rate. Today it is 3.18 to 1. We’ve made a bit of progress in the past few years and I will keep working on this for the next four.
Sensible Tax Policy
What I’m hearing over and over again is that Victorians want to live in a place they can afford. And they want a city government that takes into consideration their ability to pay as it sets its budget and tax rate each year and decides how to spend their money.