Here’s why we can’t just freeze property taxes

Candidates are, naturally, talking about property taxes. In the past few years, city council (at the direction of the mayor) has held all property tax increases to 2%. This is now a fairly standard position a lot of candidates have adopted–they’ll support a 2% tax increase every year, but no more. Many would prefer to keep taxes from going up even that much. Some adopt a pledge of 1%. Some want a zero percent increase. Some think we can start cutting it.

Many candidates make such promises while also promising more spending on transit, roads, police and other assorted services.

But this is completely untenable. Put aside any new spending we might want to undertake, we can’t even maintain existing services if we’re only going to raise taxes by 2% (let alone trying to not raise them at all).

That may not seem intuitive. Inflation has tended to be around 2%, so if the property tax increase mirrors inflation, then we should be able to just keep on keeping on. (Of course, this assumes that city services increase at the same rate of inflation as everything else…hint: they don’t.)

People understand that the cost of services isn’t fixed. We all understand inflation. What so many candidates are ignoring (willfully or otherwise) is that the amount of city services is increasing along with the cost.

And I’m not saying that we’re doing more or there are an increase in the number of services being offered. No, the point is that in a growing city (which Ottawa is), in order to maintain the current level of services, we have to provide those services to an ever-growing number of people and over an ever-growing amount of land.

This second part is very important. Ottawa is growing, and it is growing inefficiently. The bulk of our growth is in suburban, exurban and rural areas. These areas are much more expensive to service than the core or the inner suburbs.

First, there’s the question of infrastructure. If we’re expanding into new developments, there’s no existing infrastructure–no roads, no street lights, no sewers, no parks, etc. All this needs to be paid for. Now, we have development charges, but a few years ago when DCs were being updated, city staff proposed new charges that would more accurately reflect the costs of new development. City council slashed those proposed DCs, so every new development is being paid for, in part, by your tax dollars and mine.

(This isn’t just about sprawl. The DCs for inner-area re-development were also slashed…it’s just not as big a problem.)

So, if we’re keeping taxes in line with inflation, and using some of the tax revenue to build new subdivisions, that means there’s less money to spend on the city services you and I receive.

But the problem doesn’t stop there! With every new development comes new obligations. New roads! More snow-clearing! More pot-holes to fill! More sewers! More water service! More maintenance! More parks! More playgrounds to fix! More…well, you get it.

So each year, these new developments have added costs. Now, you’re probably thinking that it’s no big deal, because people will be living there and paying property taxes. Assuming that these developments are 100% filled (and let’s assume they will be), you’re right; the residents will be paying property taxes.

But they won’t be paying enough.

Remember how I said we were sprawling inefficiently? Yeah, suburban and exurban homes are far more expensive to service, year in and year out. The areas aren’t as dense, and services have to travel much further. Worse, suburban homes are taxed disproportionately lower than urban homes in relation to the cost of the services they receive.

So, existing residents–mostly in the urban and inner-suburban areas–will be subsidizing the services being provided to these new developments.

So, once again, if we were to keep tax increase in line with inflation, much of the existing tax revenue would be used to provide services to these newer areas.

This means there is, again, less money to provide services to residents in existing areas. As we sprawl, we create obligations upon obligations, and we do not properly charge residents and developers to cover these new obligations.

And this isn’t all about new developments. Just think about new roads. We budget for the cost of building new roads, but we never budget for the added maintenance. Each new kilometre of road costs something like $1100 in maintenance each year, per lane. So if a road goes from two to four lanes, that’s an additional two grand in maintenance for each kilometre. So as we widen roads–as we build more and more roads–we’re just adding to our annual maintenance costs.

So you may think it’s unreasonable that your taxes are going up at a rate higher than inflation even as city service levels drop, but it actually has little to do with those services. It’s about sprawl. It’s about subsidizing certain areas of the city. It’s about poor management and poor planning.

If you’re running for city council, you need to understand this. If you want to make more and more promises about spending–without offering any significant cuts, then you better be prepared to raise taxes. Otherwise, you’re just not ready to be a city councillor.

One thought on “Here’s why we can’t just freeze property taxes

  1. Pingback: Capital Ward Debate Re-cap | Steps from the Canal

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