Calgary’s $52 million: Where should it go and why

When the province announced that it would take in $52 million less than what the city had expected to hand over, there was an instantaneous reaction to have the money back. The amount averages to about $126 per household in a form of a tax decrease. The city has launched its own initiative that asks Calgarians how it should use the $52 million extra tax room. It has laid out 5 different options for Calgarians to choose from, one of them being a tax reduction for this year. A knee-jerk reaction to a tax room bonus though isn’t the answer. A review of these options (and possibility others) can help an every day citizen understand the implications of how we could use $52 million.

Option 1: Let the buses roll!

The city explains that it could use this extra tax room towards the following capital transit projects (copied verbatim):

  • construction of new Bus Rapid Transit (BRT)/transitway projects, potentially including:
    • Transitways along the future Green Line, including Centre Street North and the Southeast Transitway (SETWAY)
    • The Southwest transitway, connecting downtown and Mount Royal University to Southwest communities as far as Woodbine along 14th St S.W.
    • The East 17th Transitway along 17th Avenue S.E. to downtown
    • South Crosstown BRT from Foothills Industrial through Quarry Park to Mount Royal University
    • North Crosstown BRT from Northeast communities to the University of Calgary and Foothills Hospital
    • West Campus BRT, connecting University of Calgary, Foothills, the Alberta Children’s Hospital and the Northwest LRT
  • acquisition of new CTrain cars to begin four-car service at all times on the existing lines, reducing crowding, and replacing old trains that are less comfortable and more prone to breakdowns.

There’s a very interesting quote from Erol Ozan that states that “you can’t understand a city without using its public transportation system.” If that was the case, then Calgary doesn’t rank favourably for  reliable and smart transit systems. Calgary Transit statistics for 2011 pins ridership at 96.2 million. That is 96.2 million trips with only a 67% approval rating and over 15,000 complaints and concerns. As a transit user myself, the $126 tax reduction would likely go towards a monthly bus pass at $94. One can imagine that buying a bus pass only helps Calgary Transit in its operating budget (maintenance, paying its staff, etc) and not towards capital projects. An extra $52 million could go towards projects like fast-tracking real-time GPS bus times at stations, electronic passes, and even (if we can get there) driver-less C-train innovations on top of the proposed transitways. This extra investment in transit is a much more visible and practical option than a tax reduction. In a city of engineers, capital investments in transit innovation is not out of the realm of possibility.

Option 2: Give business a break!

Those who are familiar with property and business taxes in municipalities know that Calgary offers one of the lowest and most competitive property tax rates in the country, but it is not as forgiving in its business tax rates. The city’s own 2011 Residential Property Taxes and Utility Charges Survey showed that Calgary ranked third highest in total combined property and business tax levies, trailing only behind Vancouver and Victoria. A combination of business tax relief and the phasing out of a standalone business tax can make Calgary an ideal city open for business. The Calgary Chamber of Commerce states that “consolidation [of a business tax and non-residential tax] is expected to save $1.3 million in city administrative costs and result in additional grant revenues of $3.2 million that will be returned to non-residential taxpayers.” The City’s own Planning, Development & Assessment Department Report to The Priorities and Finance Committee also states that “that consolidation of business tax revenues with the non-residential property tax, occurring over a seven year implementation time frame, would yield an effective consolidation process that is in the best interests of the Calgary tax system, The City of Calgary, and taxpayers.” This process will be revenue-neutral, meaning there would be no impact to residential taxes, but it could take up to 10 years to phase out the separate business tax.

Giving businesses a break in a form of tax relief or consolidating taxes signals that the city is serious about being open for business. These are only one of many methods the city can look into in order to attract more businesses (and hopefully a diversity of businesses too).

Option 3: Revitalize our communities!

One of the items that gets overlooked is the fact that city infrastructure needs to be maintained and repaired over time. Without an appreciation for this, many jurisdictions, including Alberta, fall into an even greater infrastructure deficit. The Federation of Canadian Municipalities estimated the combined infrastructure deficit in Canada to be $123 billion and these are 2007 figures. One can imagine the impact this can have if existing infrastructure is not taken care of. By creating a fund as Council has suggested, money could go towards the following (copied verbatim from city’s website):

  • Replacement and enhancement of sidewalks, curbs and gutters, as well as street light replacement, overhead utility relocation and road, cycling, and pedestrian enhancements; and
  • Maintenance and modest upgrades to parks, pathways, playgrounds, community buildings, and community recreation facilities.

At its core, road and park maintenance is one of the primary and most visible functions of a municipality. The maintenance of roads and potholes cannot be any more local. Without the basic tools and funds to facilitate the most basic job of a city, we are depriving it the ability to maintain healthy, vibrant, and complete communities. During my lifetime, more communities (on top of the current 90 communities that the city says are older than 50 years) will require maintenance and upgrades. Where will that money come from? Will a short-term saving of $126 on a property tax bill impact what could have been a long-term vision for a revitalization fund that will help everybody’s community for now and the future?

Option 4: Drop the debt!

Live within our means, but this is one issue that Council has been largely silent on. What is more surprising is that those who have argued that the city has a spending problem have advocated a return in taxes rather than paying down the debt. How bad is the debt? The Canada West Foundation reports that while Calgary has lower taxes, the city has a higher debt load per capita compared to many other cities. Looking at the numbers provided by the Ministry of Municipal Affairs, these are numbers rarely discussed when it comes to city finances:

  • Capital debt increased 31% from $2.54 billion in 2009 to $3.34 billion in 2011. 
  • Total debt interest expenses were $129 million in 2011
  • Calgary constitutes for 43% of all capital debts owed by municipalities in the province
  • Fast Forward Weekly reported that almost $1.3 billion of this debt is water and sewer debt (and this is from 2011)

Without doing anything right now to address our debt, each Calgarian (if a population was at 1,120,225 according to the 2012 civic census) owes $2981.54 each in order to pay the debt off excluding interest. Whatever your fiscal stance in terms of more or less spending, the city’s debt needs to be addressed immediately.

Option 5: Give it back!

Each household on average will receive a $126 “discount” on their 2014 tax bill should Council choose this option. This is a one time tax relief that does not address the bigger question whether you believe Council needs to stop spending or increase spending.

There is a looming and rapidly growing capital debt that needs to be addressed (both in terms of real debt and infrastructure debt). Trying to keep up with new communities is pushing us into more and more debt each year. How do we as a city address growth while grappling with debt? Is spending a problem when we are trying to develop new communities like Keystone Hills or Belvedere? If it’s a revenue problem, then do we look pass the archaic property tax and find new sources of income? Would a city charter put an end to how limited a city is in terms of revenue?

Final Thoughts

These are long-term questions that my generation will have to face if we aren’t honest about our finances. There is no easy answer, but returning the money to citizens (as much as we would like to have it back) will not reduce our deficit nor will it solve our growing pains. If we are so hard-pressed for the cash back, then the question becomes “why did the citizens let it become this way?”

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