10% property tax hike in 2023 possible as city of Vancouver spending increases
The financial situation of the City of Vancouver over the next few years is very uncertain insofar as substantial consecutive increases in its property tax would be necessary to make up the shortfall.
Simply put, municipal government spending is really starting to add up, and it’s slowly growing at a faster rate than revenue growth.
An increasing proportion of the costs are the result of costly initiatives that are the by-product of dozens of motions presented and approved by the current Vancouver City Council. Other costs are deemed ‘out of control’, such as the union-mandated deals for wage increases for the city’s workforce and the rising costs to replace critical water and water supply infrastructure. aging sewer.
City staff provided budget outlook updates to city council last summer and again earlier this fall as part of its 2022 budget development process, and established a baseline, though fragile, for years to come.
City staff told city council that an average property tax increase from 9% to 10% in 2023 and an annual average of 7% for the five-year period from 2022 to 2026 are needed to cover costs. croissants. These increases help cover the growing structural costs of the budget.
Compare this with recent average Vancouver property tax increases of 2.3% in 2016, 3.9% in 2017, 4.2% in 2018, 4.9% in 2019, 7% in 2020 and 5%. in 2021, as well as various increases in utility charges.
Earlier this year, city council asked city staff to create a budget that keeps the city’s share of the 2022 property tax at a maximum of 5 percent. City staff returned to city council this fall with a proposed operational budget of $ 1.7 billion in 2022 that requires cuts of $ 45 million, achieved by identifying some savings, delaying some initiatives and postponing the scope. of certain projects. Additionally, postponements to 2022 put more pressure on budgets for 2023 and beyond.
It also explains the prediction that the city’s revenue from 2022 will return to pre-pandemic levels, after declines in 2020, and earlier in 2021. It is expected that both casino revenue and rights revenue from license will not return to normal levels until 2023.
Three city councilors have expressed their concerns about this troubling tax trend. There is also a landslide in what the City of Vancouver has taken on its shoulders, which has resulted in a decrease in the focus on basic services and core responsibilities of the municipal level of government.
“Years of the city’s financial forecast have told us that current spending is unsustainable and that steps must be taken to offset growing cost pressures,” independent city councilor Lisa Dominato said.
“Vancouverites expect us to be responsible stewards of their tax dollars and have told us this year that their top priorities are basic service delivery, affordability, housing and homelessness, community safety and city finances. The budget proposal does not adequately prioritize the services that residents and businesses have told us are important. “
Municipal government costs have also increased as a result of its willingness to shift costs that were previously the direct responsibility of the provincial and federal governments, particularly in the areas of financing the construction and operation of affordable housing buildings. , various homeless support services, opioid overdose crisis resources and child care.
In July, city council approved a motion directing city staff to compile full expenses made by the city government that can be considered downloaded services that were previously traditionally provided by the provincial and federal governments.
“Residents wonder if they are getting their money’s worth. Year after year, residents seek consistent improvements based on investments in minimum basic services, let alone begin to address the broader challenges that fall to the provincial and federal governments, and our engagement survey shows that we are not meeting expectations in terms of basic service terms, ”said Independent City Councilor Rebecca Bligh.
“Affordability is getting worse in our city, while downloading by top governments has resulted in programs underfunded from limited tax revenues – in other words, we have taken 100% of the responsibility with less than 10%. funding required. “
And that’s just the City of Vancouver’s property tax portion. Additional portions of property tax may come from the provincial government school tax, TransLink, Metro Vancouver Regional District, BC Assessment, and the Municipal Finance Authority. Right now, the property tax and other entity fee portions represent about 46% of the total taxes and fees for a median single-family home in Vancouver.
Independent City Councilor Sarah Kirby-Yung suggests city needs to consider rising cost of living for residents and rising operating costs for businesses as housing affordability continues to deteriorate and recent inflation in the costs of goods, transportation, services, labor, and logistics.
Further, councilors suggest that the city government should focus on replenishing its general income stabilization reserve, which currently sits at an all-time low of around $ 50 million.
This contingency fund is dedicated to unforeseen operational costs resulting from emergencies, such as inclement weather, catastrophic events, environmental risks, extraordinary public safety situations and economic downturns.
The stabilization reserve was tapped during the COVID-19 peak when the city’s revenue suddenly plummeted and when it saw new pandemic-related response spending.
Just before the pandemic, the municipal government’s stabilization reserve exceeded $ 146 million.
“We need to recognize that overall affordability in the city is deteriorating. People are affected by the rising costs of food, shelter, utilities and transportation and we should not add disproportionate tax increases to this burden, especially if people feel the value of taxes is decreasing. ”Kirby-Yung said.
“We need to align spending with what residents and our small businesses consider most important to them: clean and safe, well-maintained streets, public spaces and sidewalks, quality services, affordable housing and homelessness, and public safety. “
So far, these discussions have focused mainly on the operating budget, but there is also the multi-billion dollar investment budget (for the construction of new infrastructure and facilities, and major maintenance projects) to consider. .
During the first discussions this year on the 2022 budget, several other city councilors suggested they would like to see less spending cuts and higher property taxes.
In addition, just yesterday, Vancouver Mayor Kennedy Stewart announced that he would formally present his proposal to create a new “progressive” levy to fund the 32 initiatives of the Climate Emergency Action Plan (CEAP) of the United Nations. city. The levy would raise $ 100 million over 10 years and would be used to cover CEAP costs totaling $ 500 million. Specific details of the Stewart levy mechanism have not been released.
All of these budget considerations for 2022 and beyond, including Stewart’s tax, will come to a head early next month – on December 1, when the public is invited to speak to city council, and on December 7, when the city council makes a decision. on the finances of the municipality including the rate of increase of the property tax.