Comparisons a taxing concern

State of the City: Setting the rate for another year

Michele Young / Kamloops Daily News
March 9, 2013 01:00 AM

Industrial taxes will be affected by the A-line closure at Domtar.

On Tuesday, Kamloops City council mulls over the budget for 2013 and sets the tax rate for another year.

Council has tried, over the years, to keep tax increases in the same range as inflation.

That's been a growing challenge for municipalities, as they are expected to provide a lengthening list of services beyond roads, water, sewer, police and fire. Senior governments have added to the list as well, offloading responsibilities on to civic governments.

Those expectations include airports, parks, recreation, arts facilities, museums, transit, animal control, social housing and emergency protection (flood, wildfires).

In the past decade, Kamloops City council has hiked taxes between 0.7 per cent (in 2006) and 3.66 per cent (in 2003). The inflation rate has varied between 0 per cent (in 2009) and 2.4 per cent (in 2011).

During those years, the City's tax increases averaged 2.14 per cent while inflation was at 1.67 per cent.

This year, council's target range is three per cent. The numbers are up for discussion Tuesday.

Cities have few sources of revenue; by far the majority of their money to pay for all those services comes from taxation. The tax burden is shared among residential, commercial, industrial (heavy and light), institutional and a few other types of classifications.

In 1990 the average municipality got 52 per cent of its tax money from homes, 32 per cent from business and 16 per cent from other.

In 2010, there was a slight shift in those figures, so that 59 per cent of taxes came from residents, 31 per cent from business and 10 per cent from other.

How does Kamloops stack up, taxwise, against its peers? The difficulty with comparing communities, even those of similar size, is they do not offer their residents the same amenities.

Kamloops residents, for example, voted several years ago to spend millions on the Tournament Capital of Canada sports facilities. Nanaimo is undergoing a major waterfront revitalization. Kelowna has a larger population. Prince George has more industry to tax.

But a look at how these communities tax their residents and businesses can still be a point of comparison. And so, we compare.

First, some basic information. According to the 2011 census, Kelowna is the largest of the four communities we're comparing, at 117,312. Kamloops comes second at 85,678, followed by Nanaimo at 83,810 and Prince George, 71,794.

All four cities charged homeowners close to the same amount in 2012.

Nanaimo residents paid out the most - $1,828 on an average house valued at $338,939. Kelowna came second, charging $1,689 on the average assessed home in that community which was $457,478. Kamloops was third, taxing $1,674 for an average home of $339,458. Last was Prince George, where taxes were $1,671 on the average home of $214,411.

"We're always within that ballpark of each other. There's no magic to it. The core services are a pretty constant cost. We're paying the same price for asphalt that Kelowna pays," said Mayor Peter Milobar.

There are differences, however. Kamloops held a referendum to spend tens of millions on sports facilities and is looking at a big bill for a performing arts centre in future.

Prince George just hiked its water, sewer and garbage rates by 25 per cent, while their taxes are going up 3.5 per cent, he said.

"This year they have some major infrastructure to deal with. We had to go through that when we went through with the water plant," he said.

"It doesn't make one a better-run city than the other, it just means the projects hit at different times."

Kelowna council just agreed to a provisional tax increase of 2.54 per cent for this year. Kamloops council has suggested something in the range of three per cent would be a palatable number.

Canadian Taxpayers' Federation B.C. director Jordan Bateman said it's difficult to compare property taxes in different communities, even if they are the same size, because they fund different things.

The federation has been holding Penticton up as an example for other municipalities to follow, he said.

A few years ago, that community faced a $7.7-million budget shortfall. Council got tough, with managers sitting down for five days to go through their budgets line by line to find places to cut or become more efficient.

The result, said Bateman, was a reduction in the number of staff paid $75,000 or more, going from 75 down to 59. The tax rate was frozen at zero per cent for two years, and actually went down by 0.5 per cent in another year.

Yet Kamloops, in the past decade, has seen its operating spending increase by 28 per cent, he said. Kelowna's went up even more, 48 per cent, while Nanaimo's jumped 13 per cent and Prince George's was hiked 23 per cent.

The question is, are Kamloops residents getting 28 per cent more value for their tax dollar?

Nothing at City Hall is frozen in time. There's always staff turnover, there's always attrition, opportunities to hire younger, cheaper staff, Bateman said.

"Taxation is about taking money by law. If you don't pay your property taxes, they take your house."

Cities also have to strike a balance among tax sources: residents, commercial business, industry and institutional make up the biggest categories.

Bateman didn't have a perfect formula to offer, but said his association wants a fair deal for businesses as well as residents.

"We rail against corporate welfare. But we don't buy into the idea you can increase business taxes and not expect things to happen," he said.

Several years ago, Weyerhaeuser lobbied City council to bring industrial taxes down. That was done, gradually, over a few years.

Now with Domtar's A-line shutting down, the assessed value of that major industry is bound to change. And with it, a large tax source that will be a focal point for the 2014 City of Kamloops budget.

"What that means to the average homeowner, that's going to come into focus in the next year," said Milobar.

"Heading into next year, we expect there will be some adjustment in that assessment pool. And how do we as City council deal with that? Will we have to look at the distribution of who pays what?

"That's probably going to be the thing that's going to be grappled with the most as we head into next year's budget."