Rev­enue up­swing

Econ­o­mist talks on mu­nic­i­pal money

The Southern Gazette - - NEWS - BY AN­DREW ROBIN­SON Gan­der Bea­con

While pro­vin­cial and fed­eral gov­ern­ments ben­e­fit from a tax sys­tem fluc­tu­at­ing an­nu­ally, mu­nic­i­pal­i­ties must work with tax rev­enue that grows slowly rel­a­tive to the cost of ser­vices they must pro­vide.

That was one of the mes­sages en­veloped in a pre­sen­ta­tion by Dr. Wade Locke, an econ­o­mist and pro­fes­sor at Me­mo­rial Uni­ver­sity of New­found­land, who spoke at an in­for­ma­tion ses­sion on mu­nic­i­pal rev­enue dur­ing Mu­nic­i­pal­i­ties New­found­land and Labrador’s Mu­nic­i­pal Sym­po­sium in Gan­der Apr. 30.

Dr. Locke, who did his eco­nomic PhD on lo­cal govern­ment fi­nance, said it is im­por­tant for the pub­lic to un­der­stand mu­nic­i­pal­i­ties pro­vide the most es­sen­tial ser­vices.

“If you didn’t have snow clear­ing, garbage col­lec­tion, or fire ser­vices – those are the things that af­fect our day-to-day qual­ity of life.”

He said prop­erty tax would re­main the main source of rev­enue for years, which has its share of both good and bad points.

“What­ever prop­erty tax is do­ing, it’s not pro­vid­ing the level of fund­ing that’s re­ally needed to be able to al­low com­mu­ni­ties to ad­dress the is­sues that are im­por­tant to them, and that could be be­cause of col­lec­tion, or other is­sues.”

Ac­cord­ing to the 2007 Cen­sus of Mu­nic­i­pal­i­ties, 80 per cent of mu­nic­i­pal­i­ties in the prov­ince have had is­sues with delin­quent tax­pay­ers, with 78 per cent hav­ing to make use of col­lec­tion ser­vices.

Dr. Locke said prop­erty tax re­mains rel­a­tively sta­ble, and by con­sid­er­ing at bud­get time the ex­pected rate of delin­quency, mu­nic­i­pal­i­ties can ad­just the mil rate to a level that al­low rev­enues and ex­pen­di­tures to even out.

“This kind of tax does fa­cil­i­tate lo­cal bud­get­ing. The prob­lem is, it ex­pands very slowly.”

Prop­erty as­sess­ments are car­ried out by the Mu­nic­i­pal As­sess­ment Agency ev­ery three years in the prov­ince.

“If your as­sess­ment goes up, your prop­erty tax will go up by your mil rate. That more or less a true state­ment, but it’s not true.”

Latch­ing on to that point, Dr. Locke ex­plained that when a per­son’s in­come in­creases at a high rate, they may buy a larger house, but prop­erty tax the in­di­vid­ual pays may not rise in pro­por­tion with that per­son’s af­flu­ence. As a share of ex­penses, prop­erty tax will rep­re­sent more of bur­den for peo­ple with lower in­comes.

“The poorer you are, the big­ger this is a bur­den for you.”

With labour de­mands ex­pected to rise in the fu­ture, he said mu­nic­i­pal­i­ties will be faced with greater de­mand for ser­vices. While prop­erty taxes will rise in some places, par­tic­u­larly in St. John’s, the prop­erty tax base will not re­act quickly enough.

A study by the Canada West Foun­da­tion found lo­cal taxes grew 1.7 per cent per an­num from 1961 to 2007 in Canada, while pro­vin­cial per­sonal in­come tax grew 10.2 per cent per an­num over the same time frame.

Thus, he said pro­vin­cial and fed­eral gov­ern­ments have an eas­ier time at­tain­ing the rev­enue nec­es­sary to meet ex­pen­di­tures.

“That’s a prob­lem that calls for some kind of other ac­tion.”

Dr. Locke said the time has come for mu­nic­i­pal­i­ties to con­sider al­ter­na­tive fund­ing ini­tia­tives, which may not be easy to im­ple­ment. How­ever, he said such a move will be es­sen­tial in or­der for towns in New­found­land and Labrador to sus­tain them­selves and pros­per.

“Some share of the pro­vin­cial sales taxes should be made avail­able to (mu­nic­i­pal­i­ties). It won’t be easy to con­vince govern­ment to go along with that, and it’s not go­ing to be easy to ad­min­is­ter.”

Dr. Locke said a sim­i­lar ar­range­ment could be made for in­come taxes. He added an ex­panded grant pro­gram would also be a pos­si­bil­ity, as the pro­vin­cial govern­ment is in good fi­nan­cial stand­ing de­spite re­cent deficit-run­ning bud­gets.

“We’re go­ing to have to do some­thing to deal with the fair­ness is­sue and bal­ance is­sue as­so­ci­ated with prop­erty tax.”

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.