You are here: Archive » Taxes and the economy - September, 2010

Our taxes and Kingston's economy. 

Taxes pay for services, which influences our quality of life That is becoming increasingly important in attracting new business, which in turn is important for our economy. A healthy economy helps the tax base. At first glance that seems simple. However the province sets the rules by which municipalities tax and in Kingston the playing field is not level.

The problem is the large amount of land owned by the province or by the federal government that is tax exempt. Senior governments make “payments in lieu of taxes” at rates they determine. The province also makes payments in lieu of taxes on behalf of universities, colleges and hospitals. Known as the “heads and beds tax”, it remains unchanged since at 1987 at $75 per student and hospital bed. When in 2007 Councillor Foster and I brought forward a motion calling on the province to increase this rate, staff calculated that the difference between what was being paid and what should be paid according to property assessment was almost $5 million. The federal government payment shortfall is approximately $1 million. After the April, 2010 unanimous Supreme Court ruling requiring the federal government to make appropriate payments, Councillor Foster seconded my motion calling on the province to follow the spirit of the ruling.

Kingston has a $6 million shortfall.

If all the exempt land was paying property taxes on the same basis as residential and commercial properties are, in accordance with assessed value, Kingston’s revenues would increase by about $6 million. As 1% on the tax bill raises $1.5 million, that shortfall represents a sizable amount on our taxes.

How is the tax rate set? Municipalities cannot have an operating budget deficit, so we must meet expenses. Tax rates reflect a 1% charge to fund infrastructure renewal, and an amount to cover inflation.

Continuing infrastructure renewal vital.

To address infrastructure decay and neglect, in 1999 Council adopted a policy of adding 1% to the tax bill each year to fund infrastructure renewal. We now spend about $16 million a year on that, and we need to spend about $20 million. It would be irresponsible to stop that. It affects the way we live, and the companies thinking about locating here look hard at things such as infrastructure.

The tax bill also reflects the Bank of Canada’s projected inflation rate. If that was not included, services would have to be scaled back. Some would say “city wages are too high.” Many of our employees have union agreements. As we know with large unions, settlements tend to follow province-wide trends. We cannot arbitrarily break an existing agreement. Nor can we afford the loss of experienced personnel if we settled at below provincial standards. To do so would directly affect our quality of life and impact our ability to attract new business to Kingston.

What can we do? My May 25, 2010 motion called on the provincial government to follow the April, 2010 Supreme Court decision with respect to all properties for which it makes payment in lieu of taxes, including "heads and beds." If the province complies, it would mean an additional annual revenue of about $5 million for Kingston. This Council has called on the province to act, but to date John Gerretsen and his government have only acknowledged receipt of our motions.

This Council has a very good record of controlling spending.

What about controlling spending? This Council has had a very good record of doing just that. Many of you remember the Maclean's article that rated Kingston badly. The data they used was largely from the 2001 - 2006 time period, that of the last Council. Since then senior staff levels have been reduced, and we have introduced multi-year budgeting for capital projects, ten-year planning for operating budgets and much tighter project management have been introduced with resulting economies.

Some might advocate simply cutting taxes. The provincial rules created tax classes or categories, such as residential, commercial and farm land. The tax rates of the various categories are directly related to the private residential rate. A tax cut across the board means some combination of a reduction of services or not renewing infrastructure. Lowering one ratio means increasing another.

A reduction of taxes without an offsetting increase in revenues of necessity means a reduction of service levels. That in turn would have a direct impact on our quality of life. I believe that would be as short-sighted as the failure of earlier Councils to invest in infrastructure renewal. We are paying for that mistake now.

What can a city do to stimulate the local economy? Again, the province has specified municipalities’ powers. It has also been explicit about what we cannot do, such as giving preferential treatment or bonuses to one company or business. Whatever we do must apply equally except that to stimulate a specific geographic area, a Council may adopt a “community improvement area.” (This must be used very carefully, for it could create competition between areas, with negative consequences in one part offsetting advantages in another.)

One of the most important things a Council does is regulating land use through the Official Plan and the zoning by-law. We have completed the new Official Plan. The next Council will have to finish the zoning by-law. As we do that, we must be aware of how zoning may affect economic activity.

The zoning by-law must be reviewed with eyes firmly fixed on the future. Rather than simply repeating what is currently being done, what changes should be introduced to reflect the needs of sustainability? Are there improvements we can make to help achieve infill and intensification goals? Are we aware of the best practices and examples of other communities?

Change is difficult. However, with the new Official Plan and other documents such as the Residential Intensification/New Community Design Guidelines, this Council has demonstrated that it can be done.

The Guidelines provide an example of the challenge. Some developers objected to the loss of land for sidewalks and wider roads. But how else do we provide for pedestrians and public transit ? Neighbourhoods where people cannot walk safely, and with roads too narrow for a bus to turn corners or get around parked cars, will continue the dependence on cars and defeat our goals of sustainability.

The relationship between taxes, quality of life and the economy is one of balance. We must work within provincial law and external factors such as evolving marketing trends and consumer preference. To achieve a real balance, we also need to ensure that the decision makers at our table truly reflect the community rather than a particular interest or lobby group.

It is more important than ever to “Put People First”.

I would welcome any comments and ideas you have about this issue. Please email me directly. Thanks.

613.549.1900
www.billglover.org
bglover@cityofkingston.ca


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