Your Council is not the Reason Your Taxes Are High

At least not entirely.


Since social media got to be so darn popular, I see a lot more people weighing in online about all kinds of things to do with their communities, particularly about the taxes they pay, and where they think the tax dollars should go.

I would like to try to explain the position between the financial rock and the hard place where you will find most Councils. My hope is to provide some information and create an understanding so that we can put to bed some of the myths around community taxation.

Up until relatively recently, communities were required to deal with four things: water and sewer, taxation, garbage collection and roads within the municipality. In the past several years, communities are now considered responsible for their own emergency planning and health care, tourism, economic development, recreation, parks, asset management, community initiatives and art and culture. There is no way they can meet these obligations with the same staff roster they had even ten years ago. Yet, these are all considered essential should a community be deemed as a potential site for economic development.

Infrastructure, water, and sewer lines were placed within these communities in the mid-fifties and early sixties, heavily subsidized by the government of the day. Councils come and councils go, and it is the rare community that had the foresight to put money away to replace these infrastructures.

People are amazed at how much it cost to replace these unseen necessities; most have gone up 3000% or more. There are provincial bodies that regulate our water and sewer. They can revoke municipal licenses to operate our infrastructure once the pipes degrade to where they pose a risk to ground water, or if there is the slightest chance of our potable water sources becoming tainted. Councils then, eventually hit a wall where they cannot keep putting off these repairs to keep the peace.

Municipalities with critical issues, due to years of keeping taxes as low as possible at the expense of these repairs, are forced to borrow, just to continue to provide the existing level of service. Taxes cover the loan payments, and as soon as one loan is paid, there is a need to borrow more; assuming of course the infrastructure fails in sequential order. When it does not, some communities are forced to cut services or raise taxes.

There is a limit too, on how much money municipalities are allowed to borrow, so it takes careful stewardship to ensure there are sufficient reserves to constitute the ten to fifty percent portion of a project the community is expected to provide. This is not the fault of the existing Council; this is the end result of years of waiting until next year, next year, next year. Eventually, the infrastructure fails in a game that leaves the Council in the chairs at the time the scapegoats for the community.

Even those communities who keep healthy reserves are hard-pressed to come up with funds to fix and replace all that is necessary within their existing tax base. Most communities are subsidized just to provide the level of service they provide today. For large projects, they must compete with many other communities in hopes of getting a grant to fix necessary infrastructure; a large percentage of applicants are not successfully funded. That leaves some communities with the unfortunate position of reducing level of service or increasing taxes.

The smaller the community, the more taxes you pay because there are fewer people to share the basic expenses. One should never compare their taxes with the neighboring communities because there are variables that could explain the difference, that may not be public knowledge. A rule of thumb though, large communities pay less per capita in taxes, towns pay more than cities, villages pay more than towns, commercial pays more than residential.

Asset management legislation requires municipalities to have plans in place to replace or repair all the town owned buildings, equipment, and infrastructure as they fail. With an emphasis on infrastructure, communities that fail to do this risk losing some of the funding the government sends to them, and greatly inhibits a community’s ability to compete with other communities for grants.

Almost all projects, to be funded, must be engineered at a cost of tens of thousands of dollars per year. Failure to do so, means you will not qualify for those all-important grants, and could result in a plan that doesn't work at all. I say this because it costs millions of dollars to replace infrastructure, far outstripping the entire tax base for many of these communities.

Some Councils are being held with their feet to the fire because there is a significant difference between commercial tax rates, and residential tax rates. Consider this though, if they reduce the commercial tax rates, which are a tax deduction to the business, those community expenses get spread out amongst the residential folk or there needs to be a reduction in the level of services. If the property taxes were even, that means the person who works for minimum wage for the business, pays as much tax as the person who owns the business, depending on assessment and cannot deduct the tax from his or her own income.

“I PAY TAXES” is the battle cry of all who feel that their taxes are unreasonably high considering what we get. I agree, our taxes everywhere seem exceedingly high, but the Council is not the enemy here. The costs are going to keep going up, the businesses are going to struggle to pay the commercial rates and the citizens are going to struggle to pay their property taxes. This is an unsustainable loop. We need to look at our options, and seriously consider some changes. Before you post something mean about your Council and taxes on social media, please consider that their tax policies impact them the same way it impacts you.




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