Death and Property Taxes

As this election enters its final days, there is a lot of talk about municipal property taxes.  As certain as death, nobody likes taxes.  Promising to freeze or limit them is, superficially, a popular position to take as people head to the polls.

The city has an annual operating budget for services and programs which by law must be balanced.  After taking into account other revenue sources (licenses, fines, grants, etc.), the vast majority of the revenue side of the City’s budget is made up of property taxes.  That amount is divided by total assessed property values from the year before to establish the tax rate.   In 2013, property taxes represented 28% of the City’s budgeted revenue, and about 56% of its spending on operations.  It is revenue the city depends on to function.

Over the past five years, Edmonton’s municipal property tax increases of between 3.3% and 5.6% have outpaced inflation.  To put a number to this, in the 2013 operating budget it is noted that a 1% increase in tax rate is equivalent to $10.524 million, on a budget that is in the billions.   Since 2009, between 1% – 2.5% of this has gone toward neighbourhood renewal, which few would dispute was badly needed and has improved the city.  As a dollar amount each year per resident, the slow increase in property taxes isn’t huge, but cumulatively over time it adds up.  Those who notice it the most are generally those with fixed incomes.

Edmonton’s municipal property taxes, though, are still amongst the lowest both in the country and among our regional neighbours.  That doesn’t mean we should be complacent.  To keep increases in check, there are three options: reduce city services, reduce the cost of services, or find other revenue.

Reducing services is honestly not an option I see a lot of support for, but it is what the idea of tying increases to inflation without finding revenue or cost reductions elsewhere implies.   As I talk to taxpayers, my sense is that they are more concerned about getting value from their tax dollars through services and programs they need and want for their quality of life.

The second option, efficiencies, seems obvious, and is an attitude with which city council and administration should act all the time.  $20 million dollars per year in efficiencies is a great starting point, and some of the ideas being put forward that would take advantage of new technologies to accomplish this without compromising services are exciting.

The third option is to find other revenue sources.  This is where, as we head into this new term, I see the most opportunity.  Property taxes are a crude way to generate revenue – slow to respond to growth, sometimes regressive, and missing altogether people who work and play in Edmonton but pay taxes elsewhere (see MGA Review and Regional Tax Sharing blogs).  There are more reliable, responsive, targeted ways of generating revenue that will not just take money from your other pocket, but distribute the tax burden more equitably among those who use city services.

I am hopeful that the new city council and the review of the Municipal Government Act which will get in full swing following this election will see these put in place.

I will ensure we are smart with our spending, maintain or increase city services and aggressively search out a better tax deal with our regional and provincial partners.