Vancouver Sun
Friday, February 16, 2007
Page: A13
By: Harvey Enchin
Budget blues: Vancouver's municipal finances are conducted on a basis of tax increases into infinity. It's time to try something else
A line from the City of Vancouver's interim budget suggests much of what is wrong with municipal finances: "Council needs to assess the 2007 additional funding requests in relation to existing services and provide support for only those requests that are of significant priority to council."
To some, this statement might sound like prudent fiscal management. It is not because it doesn't challenge the existing services. The underlying assumption is that not only will existing services continue, but that some will get more funding, and additional services will be considered.
This is a recipe for tax increases into infinity.
If the city adopted zero-based budgeting, councillors would have to justify the existence of those services every year rather than simply doling out their budget allocations based on the previous year's funding. Imagine the discipline that could come from planning a budget that starts with no authorized funds.
The reason zero-based budgeting -- or something like it -- is necessary is that municipal spending is out of control. The city's own numbers tell the tale.
In 2006, Vancouver increased its operating budget from $773.1 million to $813.3 million, or 5.2 per cent. Cities with more infrastructure to maintain, employees to pay and snow to remove managed to keep a tighter lid on spending. Operating expenditures in Montreal rose by 4.9 per cent (to $1.9 billion) and Toronto increased its budget by just 3.5 per cent (to $7.6 billion.)
Over the past 10 years, Vancouver's operating budget has grown by 49 per cent (33 per cent in the last six years alone) and the capital budget has climbed 72.3 per cent to $118.9 million. The city's population in that time has increased by only 9.5 per cent, while inflation in Vancouver has ranged from 0.5 per cent to 2.2 per cent a year. This evidence shows clearly that spending in the past decade has been far in excess of what population growth and inflation warranted.
In the past six years, the number of full- and part-time civic employees, excluding temporary and auxiliary staff, has jumped by 521, or 11.3 per cent, to 5,123, and salaries have soared by 30 per cent to $304.4 million. That works out to an average of $60,000 per city worker, comfortably above the median income in Vancouver of $58,100.
The average price of a Vancouver house has more than doubled from $270,650 in 2000 to $575,000 last year, and assessed values have increased in lockstep. In samples provided by BC Assessment, the increase in the 2007 assessed value of a typical west-side single-family home was up 22.9 per cent to $869,900 from $670,900 in 2006; for an east-side home, 27.1 per cent to $675,400 from $531,400. This follows a 17-per-cent increase for both east and west over the prior year's levels.
Now, city officials claim assessments are revenue neutral, that higher values don't generate more taxes because the tax rate is lowered to mitigate the increase. But the municipal tax rate declined by just 5.8 per cent from 2005 to 2006, offsetting a meaningless fraction of the actual hike in assessed values.
Besides, since 1997, tax revenue from residential property has gone up by 42 per cent. Only a bureaucrat could see such a massive increase as revenue neutral.
This tax grab has allowed city hall to spend without limits or accountability since there is no auditor-general -- as there is at the federal and provincial levels of government -- to determine whether the taxpayer is getting value for money.
Had the City of Vancouver held its operating budget increases to the rate of inflation and population growth over the past six years, the actual 2006 budget would have been nearly $100 million less.
One might argue that the final tax rate is affected by factors beyond the city's control -- levies by TransLink and the Greater Vancouver Regional District, for instance; that the general tax rate is $2.66 per $1,000 of assessed value, just as it was in 1996.
But the enormous increase in property values makes this point moot. The city is collecting an ever-rising amount of money from taxpayers.
At the same time, business carries an unfair share of the tax burden. Business pays more than half of the tax levy but represents only 16 per cent of the assessed value.
This imbalance will eventually drive out businesses, particularly the small businesses that are the backbone of Vancouver's plan to nurture sustainable communities.
A sustainable community needs local food stores, dry cleaners, bakeries, restaurants, book shops and other commercial enterprises. Without them, everyone will be forced to drive to the big box stores in more tax-friendly jurisdictions.
Council has to rethink its budgeting process. Rather than calculating how much it will have to raise taxes to realize its ambitions, it must ask what the city can afford.
The Non-Partisan Association campaigned on a platform of fiscal responsibility. It has not delivered.
The city cries poor and alleges that senior levels of government have off-loaded responsibilities without providing financial resources. But new agreements have freed up federal and provincial funds that are now flowing into the community chest.
In fact, Vancouver is awash in money -- our money -- and it should manage it better.
And while local politicians and city hall staff sharpen their pencils, review programs and start cutting the fat, consultants can get busy on reforming the archaic system of financing local government and propose something better before we're all taxed out of our homes and out of town.
henchin@png.canwest.com
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