Friday, 31 May 2013

Dragon's Den produces More Taxes

For a number of years Calgary’s Mayors have been complaining about the lack of funding from the Province. This issue has been the constant mantra of both Mayor Bronconnier and Mayor Nenshi. Their argument stems from the fact that approximately 40% of the property tax collected in the city goes to the provincial education portion.
Their argument, on the face of it, seems to be fairly simple; if the province vacated the education tax, Calgary would be entitled to 100% of the property tax collected in the City. Hence Calgary would be able to provide more services or infrastructure for the benefit of its citizens. Creditable argument, one would agree.

However there is more to this argument than meets the eye. Over the years both the current Mayor and his predecessor have made no attempt at cutting or even controlling rising costs. Instead they have continued to obfuscate the financial issues by implementing bogus budget systems which have no transparency.

First it was the three year budget. This process was nothing more than a business plan with tax increases for three years. The budget, unlike previous years was subject to public participation only in the first year. The following two years’ budgets were summarily discussed by only members of Council. To that effect Calgarians have seen no change in the proposed taxes, despite changes in the economy.

Enter Mayor Nenshi, a former ‘non-profit finance’ lecturer, who promised change. He puts into place another City designed budget system called ‘zero-based-reviews’, which promises to give Calgarians what they ‘want’. Problem is that this system coupled with the ‘Municipal Price Index’ is once again not transparent, and results in no real savings that can be vetted by Calgarians. Instead any ‘savings’ are quickly spent somewhere else.

In addition when the Province decides to return the education portion of the tax collected, the amounts are quickly appropriated and spent. This appropriation causes the true rate of property tax for 2013, to be 13%, another double digit tax just like the previous year.

In the midst of an outcry by both the media and the public, Mayor Nenshi, instead of returning the money to Calgarians in the form of a tax reduction, decides to have a bogus public consultation in the form of a popular TV show’. He invites one of the show’s hosts to chair a discussion among himself and other Aldermen to decide how the $52 million given back by the province should be spent.

Among the proposals are:
Money for transit, reduction of the business tax, revitalization of communities, reduction of the debt, and lastly give it back to Calgarians. Therein lays the management problem. Do we need a gimmick to make an important decision? One would have thought that the great business plan or ‘zero-base- review’ process would have a priority list which Council could use without any organized publicity stunt masquerading as a public consultation.
The Mayor agrees that $52 million while not a large percentage of the City’s budget, ‘it is a lot of money’. Money I might add came from the taxpayers’ pocket and in all fairness should be returned in the form of a tax reduction and not further spending. By the way this money must be used for capital and not operating expenses. What we must consider is that any capital expenditure will generate future operating expenses;  resulting into future tax increases because  Council refuses to look at alternative ways of delivering services.

This so called windfall sheds a new light on the discussions for a new City Charter. When mayors ask for more power, it will result in only one thing – the ability to tax. While Calgarians have been let to believe that more money from the province will reduce their taxes, they must think very carefully before they agree to more powers of taxation. In addition the new four year term for Council may generate a four year budget, which may result in no public consultation for three years.
Since, in recent past, Council has not adjusted proposed tax rates to reflect economic realities, Calgarians will only face tax increases instead of good financial management.
 With more powers there will be no reasons for any cost cutting, but further excuses for ‘investing’ citizens’ money. Calgarians should beware what they wish for.

Marcel Latouche

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