Saturday, 30 May 2020

Calgary Council’s inability to cut taxes.


Calgarians have received their 2020 tax bill, and this year it is accompanied by a letter from the Mayor to explain how the tax works. Some of his claims may not be called lies, but they are certainly an opportunity for Calgarians to draw the wrong conclusions.
The economic hit caused by Covid -19 has been more severe than the last recession. The last recession was caused by a financial disaster in the banking sector, the disruption was bad but not a severe as the one we are experiencing today. With Covid-19 it has been one that has disrupted the very fabric of society. People have lost their, jobs, businesses have closed, some for ever and governments have accumulated massive debts to finance the economic collapse. These debts will have to be repaid in the future and taxes will have to go up to pay for the excesses of governments who used the crisis to implement some of their political agendas. Sacrifices will have to be made, and some governments realize that, and will adjust, but that is not the case for Calgary.
In Calgary the current Council has been made aware of their excesses long before the pandemic. Yet they never listened and continued to spend without any regard for risk management. The latest property tax increase of 7.5% comes over and above many increases in fees and utility rates. There is also the re-alignment of the tax burden between residential and business tax. This shift also increased the residential tax rate. While there has been a deferral and elimination of the penalty for late payment of taxes nevertheless that does not mean that the tax is reduced, it is just delayed. What of the businesses that have been closed for months and who may be closed forever. There is no tax rebate there.
What are questionable in the Mayor’s letter are the claims of savings amounting to $740m in cuts, and that the budget was increased by 1.5%. The reality is that the budget was increased by a lesser percentage but was increased nevertheless – this is not a saving. A real cut means that you reduce the total amount of the previous year’s budget, not increase it by a smaller amount. Furthermore, the City does not use the Consumer Price Index, they use the in-house concocted Municipal Price Index, so when they say that the tax increase is less that the rate of inflation, it is based on their index not the real inflation rate.
The other claim that the average increase per household will be $11.25 monthly or $135 yearly is another obfuscation. The fact is that most household have seen increases closer to $20/month or even higher. Council will tell you that this small increase is justified – as it is the equivalent of less than the cost of a daily cup of coffee. What citizens must realize is that the cost of this cup of coffee never decreases over the years. The only way to see a reduction in your taxes is a cut in total expenditure, but that is never the case in Calgary, in fact Council keeps adding more expenditure to the already long existing list.
While we must acknowledge that the current Market Value Assessment system is a factor in the problems experience by municipalities in Alberta, we must also recognize that when there is a clear reduction in the revenue base, a difficult decision must be made to make the appropriate reduction in expenditure to balance the deficit. Unfortunately for Calgarians, this decision has never been made. When the Mayor claims that Calgarians are charged among s the lowest taxes in Canada they forget to tell you that for 2020 Edmonton was able to have only a 2.5% residential tax increase , and freeze of property taxes for non-residential ratepayers.
To reduce the Calgary 2020 tax burden, Council had some alternatives. Councillor Farkas proposed to use the Sustainability Fund, Public Arts Fund and Corporate Welfare Fund to be used to rebate the residential tax, and a property tax freeze instead of the 7.5% tax increase. The motion was reluctantly seconded by Councillor Chu. But more importantly it was vilified by his colleagues and the vote for the tax increase was 13 for and 2 against. More importantly to justify their votes some Councillors claim that they actually voted against the budget – a real canard. A vote against a budget means nothing if ultimately you vote for a  tax increase based on that same budget.
With Covid-19, there are going to be some drastic changes to the economy. How business operate and how and where people work, as well as how services are delivered will cause disruptions that we have never seen before. While the private sector will adapt, I fear that the public sector will not, at least not in Calgary. The past is a prognosticator for the future, and given the performance of the current Council it is very difficult to see how things will change, to use the words of Councillor Sutherland, in my opinion it is quite clear that Council ‘has a limited skill set’.

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