Equalization formula up for debate again

She argued it’s based on the assumption B.C. municipalities could raise tax rates on properties, which have seen their values soar in recent years.

B.C. isn’t the only province with concerns about the proposal.

“When it comes to the potential of generating more revenue from the high prices of real estate, which is what British Columbia is arguing, we don’t have the capacity to squeeze out more money from the system,” Ontario Finance Minister Charles Sousa said in an interview.

Sousa said his province has lowered its revenue expectations for the real estate sector after the introduction of measures to cool red-hot markets, such as the Toronto region.

Ontario has been receiving equalization payments since 2009 as a have-not province.

But after improvements to its economy in recent years, it’s expected to return to “have” status some time in the next couple of years.

A senior Ontario government official, who spoke on condition of anonymity, said the proposed change could be the difference between whether it collects equalization funds or not.

“Our concern is that if the last years taught us anything, it’s that property values are volatile in both British Columbia and in Ontario,” said the official, who would prefer a phased-in approach.

The future of the equalization formula will also be a priority for Newfoundland and Labrador at the meetings.

The province’s economy, hit hard in recent years by the commodity slump, still failed to qualify for equalization payments this year and Finance Minister Tom Osborne doesn’t expect it to next year, either.

Osborne said in an interview that the current formula only addresses revenue and doesn’t account for the different costs of services between provinces.

He says his province, with its small, well-dispersed population, faces the highest costs of services in Canada — and they’re growing at an “unsustainable” clip.

Osborne plans to push his counterparts on the issue in hope of changing the formula so that it reflects both revenue and expenditures.