The Union of B.C. Municipalities approved a paper on B.C. local governments’ finance system at their convention this month. I was pleased to be one of the authors of this report, which evaluates the strengths and weaknesses of our current tax system.
We found the current situation is sound, but has some weaknesses due to a dependency on property taxes, which is less responsive to economic change and distributes costs unfairly across income groups. These weaknesses will become more apparent over the next 10 to 20 years as infrastructure pressures continue to mount.
The report recommends taking action on both sides of the fiscal equation – revenues and expenditures. Titled “Strong Fiscal Futures,” it sets out five key directions for change: resiliency, value, responsiveness, fairness and excellence.
Resiliency: we want to safeguard the effective elements of the current revenue system. Programs such as the federal gas tax fund, federal/provincial infrastructure programs, and provincial traffic fine revenue sharing and small community grants will be critical to the local government system in the decades ahead. Quite simply, the report urges that existing revenue streams not be lost.
Value: improve value to taxpayers by tightening the management of local-provincial mandates. We want to make sure that the benefits of new regulations exceed their costs. And it’s about working together to find ways to manage costs of joint mandates such as policing and emergency response.
Responsiveness and fairness: the report urges local governments to partner with the province to improve the economy, and begin a dialogue towards fairer, more responsive revenue tools. A key component of our proposal would see revenues delivered to the local government system in years of high economic performance – revenue that could be used to build communities. This will help reduce reliance on the property tax – a tax that does not adequately reflect changes in the B.C. economy – by providing revenues that do respond to economic growth.
This specific proposal is the only significant new revenue proposed for local government. It does not advocate that the province transfer existing revenues – this would be unrealistic as they seek to balance their budgets in challenging economic times. Nor does it advocate for more taxes from existing taxpayers – taxpayers are also facing these same challenges. What it does propose is for local governments to work with the province to grow the economy, create new taxpayers and new tax revenue – and when revenues are above average that a portion be shared with an Infrastructure and Community Development Bank for local governments in B.C.
Excellence: lead an initiative to help local governments learn from each other to build tools and resources that support spending and taxing decisions. The initiative can build on excellence already in the system, develop innovative and collaborative mechanisms to achieve greater efficiencies, and deliver critical information like business taxation benchmarks and indicators.
These priorities respect the intention of the province for balanced budgets and institutes measures that can reduce local government costs, help avoid further reliance on the property tax and bring needed economic activity to the province and our communities. Later, as the economy improves, we will be ready to implement these improvements, including a local government share of economic growth.
We expect this report to attract considerable attention, questions and quite likely some debate – not only within the membership of the UBCM, but from citizens and business groups at large.
Find the report at http://bit.ly/16JgvRR.
Frank Leonard is mayor of Saanich.