Local Government Finance

Transcription

1 Local Government Finance A presentation to Metro Vancouver s Sustainability Community Breakfast: Paying for our Cities Gary MacIsaac, Executive Director Union of British Columbia

2 Presentation Outline What do cities cost and what are the trends? How is this paid for and what are the trends? What s the problem: context and perspectives What s UBCM doing? Where might the solutions lie?

3 2011 Municipal/RD Expenses and Changes in Equity $9 Billion

4 Municipal Operating Spending as a % of BC GDP

5 2011 Municipal and RD Revenues $9.3 Billion

6 Municipal Revenue Sources

7 Spending and taxes of BC local governments is way out of line they are spending and taxing much more than in other provinces FALSE

8 BC municipal expenses compared to other selected provinces

9 Canada: interprovincial comparisons in municipal spending (average per capita $ ) BC Alberta Ontario Quebec Canada General Government Fire & Police Roads & Transit Water/sewer/garbage Recreation & Culture Total 1,692 2,297 1,626 1,804 1,717 (courtesy Dr. Harry Kitchen)

10 Municipal Revenue in Selected Provinces (average per capita $-2008) BC Alberta Ontario Quebec Canada Property Tax 874 1,252 1,238 1,137 1,096 User Fees Total Own Source Revenue 1,590 2,265 1,995 1,500 1,739 Grants Total 1,696 2,830 2,745 1,742 2,214 (courtesy Dr. Harry Kitchen)

11 Municipal property taxes represent a big percentage of business s overall tax load FALSE

12 Selected taxes on businesses in BC

13 High property taxes deter business investment and affect business decisions PARTLY TRUE; PARTLY FALSE

14 Are property taxes a factor in industrial business decisions? Not a major competitive issue under typical operating conditions Not a significant factor in investments in major capital projects Affect decisions on re-investment in existing facilities, which may affect the long term viability of operations Major factor for firms in financial distress due to structural or cyclical factors

15 One Small Business: property taxes compared to total operating costs 1% % % Property tax 9% Property Tax Building lease Building Lease 92% All other operating 89% All other operating

16 Property tax is the primary source of revenue for local governments TRUE IN CANADA BUT NOT NECESSARILY INTERNATIONALLY

17 International comparison (cont.d) Property taxes: Account for more than 90% of all local tax revenue in five countries - Australia, Canada, Ireland, New Zealand, and the United Kingdom. Local governments in ten countries get less than 10% of their tax revenue from the property tax. (courtesy Dr. Harry Kitchen)

18 International comparison of municipal tax sources Income taxation (corporate and personal): Largest source of local tax rev. in 14 countries. In Denmark, Finland, Norway, Sweden, Luxembourg, and the Czech Republic, it accounts for more than 90% of local revenue. Not used in Australia, Canada, Mexico, France, Greece, Hungary, Ireland, Netherlands, New Zealand and the United Kingdom. Cities/towns/counties/special districts in 14 states in the U.S. are permitted to use a local income tax. (courtesy Dr. Harry Kitchen)

19 International comparison (cont.d) Consumption taxes (in various forms): Generate between 20% and 75% of local tax revenue in ten countries. Local sales taxes are non-existent in five countries and produce less than 10% of local revenue in another twelve countries. (courtesy Dr. Harry Kitchen)

20 International: what does it tell us? The evidence does not suggest that local governments are more efficient, effective and accountable under one tax vs. another tax. Access to one or more taxes mainly depends on: - local government s administrative capacity; - types of expenditures that must be funded; - willingness of a senior government to assign taxes to local government; - constitutional and legislative requirements. (courtesy Dr. Harry Kitchen)

21 UBCM Select Committee on Local Government Finance Select Committee on Local Government Finance Chair Al Richmond; Committee Co-Chair Mayor Greg Moore; Committee Co-Chair Mayor Frank Leonard Mayor Taylor Bachrach Mr. Paul Macklem Ms. Carol Mason

22 Timelines and Mandate Mandate: Consider whether local governments have the right revenue tools for the services they now deliver, or whether changes are indicated? Committee Meetings: November 2012 through to July 2013 Committee to report to UBCM Executive by July 2013

23 BC s Local Government Finance System Strengths Weaknesses Competitive tax levels Low levels of Provincial support Low per capita costs Significant infrastructure upgrades needed soon Property tax is stable and predictable Property tax doesn t grow with economy or distribute fairly

24 Where might the solutions lie? Build on system strengths and overcome weaknesses Recognize the importance of building the economy Lead and share innovative practices to improve system performance Find solutions that resonate with all governments and with taxpayers