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  • Local Government Finance

    A presentation to Metro Vancouvers Sustainability Community Breakfast:

    Paying for our Cities

    Gary MacIsaac, Executive Director

    Union of British Columbia Municipalities

    @garymacisaac

  • Presentation Outline

    What do cities cost and what are the trends?

    How is this paid for and what are the trends?

    Whats the problem: context and perspectives

    Whats UBCM doing?

    Where might the solutions lie?

  • 2011 Municipal/RD Expenses and Changes in Equity$9 Billion

  • Municipal Operating Spending as a % of BC GDP

  • 2011 Municipal and RD Revenues $9.3 Billion

  • Municipal Revenue Sources 1986-2010

  • Spending and taxes of BC local governments is way out of line

    they are spending and taxing much more than in other provinces

    FALSE

  • BC municipal expenses compared to other selected provinces

  • Canada: interprovincial comparisons

    in municipal spending (average per capita $ - 2008)

    BC Alberta Ontario Quebec Canada

    General Government 206 267 193 244 216

    Fire & Police 361 362 421 329 364

    Roads & Transit 338 766 425 551 476

    Water/sewer/garbage 425 472 353 399 385

    Recreation & Culture 362 430 234 281 276

    Total 1,692 2,297 1,626 1,804 1,717

    (courtesy Dr. Harry Kitchen)

  • Municipal Revenue in Selected Provinces (average per capita $-2008)

    BC Alberta Ontario Quebec Canada

    Property Tax 874 1,252 1,238 1,137 1,096

    User Fees 535 715 569 280 481

    Total Own Source Revenue 1,590 2,265 1,995 1,500 1,739

    Grants 106 564 750 242 475

    Total 1,696 2,830 2,745 1,742 2,214

    (courtesy Dr. Harry Kitchen)

  • Municipal property taxes represent a big percentage of

    businesss overall tax load

    FALSE

  • Selected taxes on businesses in BC

  • High property taxes deter business investment and affect business decisions

    PARTLY TRUE; PARTLY FALSE

  • Are property taxes a factor in industrial business decisions?

    Not a major competitive issue under typical operating conditions

    Not a significant factor in investments in major capital projects

    Affect decisions on re-investment in existing facilities, which may affect the long term viability of operations

    Major factor for firms in financial distress due to structural or cyclical factors

  • One Small Business: property taxes compared to total

    operating costs

    1%

    7%

    92%

    1985

    Property tax

    Building lease

    All other operating

    2%

    9%

    89%

    2010

    Property Tax

    Building Lease

    All other operating

  • Property tax is the primary source of revenue for local

    governments

    TRUE IN CANADA BUT NOT NECESSARILY INTERNATIONALLY

  • International comparison (cont.d)

    Property taxes:

    Account for more than 90% of all local tax revenue in five countries - Australia, Canada, Ireland, New Zealand, and the United Kingdom.

    Local governments in ten countries get less than 10% of their tax revenue from the property tax.

    (courtesy Dr. Harry Kitchen)

  • International comparison of

    municipal tax sources

    Income taxation (corporate and personal):

    Largest source of local tax rev. in 14 countries. In Denmark, Finland, Norway, Sweden, Luxembourg, and the Czech Republic, it accounts for more than 90% of local revenue.

    Not used in Australia, Canada, Mexico, France, Greece, Hungary, Ireland, Netherlands, New Zealand and the United Kingdom.

    Cities/towns/counties/special districts in 14 states in the U.S. are permitted to use a local income tax.

    (courtesy Dr. Harry Kitchen)

  • International comparison (cont.d)

    Consumption taxes (in various forms):

    Generate between 20% and 75% of local tax revenue in ten countries.

    Local sales taxes are non-existent in five countries and produce less than 10% of local revenue in another twelve countries.

    (courtesy Dr. Harry Kitchen)

  • International: what does it

    tell us?

    The evidence does not suggest that local governments are more efficient, effective and accountable under one tax vs. another tax.

    Access to one or more taxes mainly depends on: - local governments administrative capacity; - types of expenditures that must be funded; - willingness of a senior government to assign taxes to local government;

    - constitutional and legislative requirements.(courtesy Dr. Harry Kitchen)

  • Select Committee on Local Government Finance

    UB

    CM

    Sel

    ect

    Co

    mm

    itte

    e o

    n

    Loca

    l Go

    vern

    men

    t Fi

    nan

    ce

    Chair Al Richmond; Committee Co-Chair

    Mayor Greg Moore; Committee Co-Chair

    Mayor Frank Leonard

    Mayor Taylor Bachrach

    Mr. Paul Macklem

    Ms. Carol Mason

  • Timelines and Mandate

    Mandate: Consider whether local governments have the right revenue tools for the services they now deliver, or whether changes are indicated?

    Committee Meetings: November 2012 through to July 2013

    Committee to report to UBCM Executive by July 2013

  • BCs Local Government Finance System

    Strengths Weaknesses

    Property tax doesnt grow with economy or

    distribute fairly

    Significant infrastructure

    upgrades needed soon

    Low levels of Provincial support

    Property tax is stable and predictable

    Low per capita costs

    Competitive tax levels

  • Where might the solutions lie?

    Build on system strengths and

    overcome weaknesses

    Recognize the importance of building the

    economy

    Lead and share innovative practices to

    improve system performance

    Find solutions that resonate

    with all governments

    and with taxpayers

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