The folks at municipal hall are sending early warning signals that some tough decisions will have to be made in order to balance next year’s municipal budget and the five-year financial plan, and one of those tough decisions may be raising property taxes.
That should get people’s attention. Nothing induces boredom and drowsiness like a municipal budget, but few things get property owners more excited than an increase in their taxes. It may be a surprise to some, but the two are related.
For every year but one in the last decade, municipal tax increases in Whistler have been limited to the rate of inflation, roughly 2 per cent. Meanwhile, other municipalities have been increasing property taxes on average four to five percent annually.
“Whistler residents can consider themselves fortunate that through good fiscal planning and the success of the resort, Whistler taxpayers have been spared from tax increases,” Mayor Ken Melamed said this week.
But a combination of factors is messing with the matrix. Labour costs, which make up about half of the municipality’s operating budget, are increasing. Construction costs seem to jump 50 per cent every month or two, and the municipality is in the middle of one of its biggest capital programs ever. And there is the condo-hotel issue, where some units were taxed as commercial properties and some as residential. The provincial government’s solution is not popular with the municipality as it is expected to mean reduced revenues of $1.8 million to $2.5 million annually.
While these factors are affecting the budget negatively, there are also some positives. The municipality is now getting an additional 4 per cent of the hotel tax. This has been described as an additional $6 million per year, but it could be more if occupancy rates exceed projections.
Property values are also on the increase again, after a couple of years where they were stagnant, which means additional revenue for the municipality even if tax rates aren’t increased.
However, Whistler is missing out on some tax revenue, having exempted some of the larger new developments from property taxes. The Peak to Peak gondola, the Olympic sliding centre and the Squamish Lil’wat Cultural Centre come to mind.
Whistler, and many other municipalities across the country, have long bemoaned the fact that under the Canadian system property taxes are their primary source of revenue. While senior levels of government have the ability to tax income and spending, and often work out of sight and out of mind of most Canadians, municipalities are nearer to taxpayers and present them with an annual bill that’s based on the value of something near and dear to them, their home. (Or, in the case of many Whistler property owners, one of their homes.) The Federation of Canadian Municipalities, among others, has called for a share of other senior government tax revenues to reduce municipalities’ dependence on property taxes.
But a Toronto-based real estate research firm says municipalities have only themselves to blame for insufficient revenues. Personal incomes and spending — the source of tax revenue for senior governments — have grown fairly steadily over the last 15 years, according to Altus Clayton, but the market value of real estate has kept pace or exceeded growth in income and spending.
“…the real reason for the failure of property taxes to provide adequate revenue to cities is that the effective tax rate — taxes as a percent of the market value of real property — has declined significantly in recent years, leading to a significant loss of potential revenue,” the firm stated in its latest monthly housing report.
Whether that softens the blow for Whistler taxpayers enough that council can consider a tax increase remains to be seen. High property values, at least partially induced by a cap on development, and the resulting high tax bills have long been an issue in Whistler. Battles have been fought over the disproportionate contribution to school taxes Whistler used to make, based on higher property values than the rest of the corridor. And long-time Whistler residents who might be considered “land-rich” but no longer had a regular income led the fight to increase the cap on the Homeowner Grant.
Raising taxes also goes against the municipality’s efforts — modest to date, but increasing — to put together an affordability strategy. As many renters can testify, you don’t have to be a property owner to feel the impact of an increase in property taxes.
So increasing property tax rates is not going to be a popular solution for the municipality’s budget problems. The other option, of course, is to cut spending. That too is easier said than done, given people’s expectations of the municipality and the commitments made to the Olympics.