City Council Backs Fairness Campaign
This excerpt is courtesy of the city-wide community group Your Applewood Acres (And Beyond) Neighbours
There is expected to be plenty of media coverage about the lengthy discussion at Ottawa City Council this week about the city’s serious financial challenges, including Mayor Mark Sutcliffe’s campaign to get more fundings from the federal and provincial governments — what he terms as being about ‘fairness’ — to help solve the issues (council voted in favour of supporting his campaign).
As part of that discussion, several issues were raised about what else the city needs to look at — like its own management of spending — and what could be part of future city budget discussions to find solutions — including questions about Ottawa’s spending history and future plans etc. — and the potential of getting new revenues through property tax increases.
As part of that, Barrhaven West Councillor David Hill suggested it was important to keep in mind that Ottawa’s property tax rates are already significantly higher than in some other jurisdictions (and with stresses already on the rise with property reassessments — which are outdated — expected to be done in the near future).
Hill gave some example from a recent report by Zoocasa (a real estate listing firm) about what owners of a million dollar homes are currently paying in property taxes:
Toronto: $7,153
Vancouver: $2,968
Montreal $4,977
Ottawa: $11,956
And from the report Hill was citing (see CTV story link below) the complexity of the issue is apparent:
“Ottawa homeowners pay higher property taxes on properties than residents in Canada’s largest cities, but a new report shows property taxes in the capital are the second lowest among Ontario cities.”
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Councillor Hill is setting up a story line about how the residents of the city cannot afford a significant property tax increase. Okay. Is he prepared to speak publicly about the need for significant cuts to spending?
If the city cannot increase its revenues enough to cover its spending habits then the only other alternative is to bring its spending into line with its revenues.
Taxes are relatively high because we have a sprawling city that is expensive to service and maintain. Our taxes don’t cover the full lifecycle cost of infrastructure like roads and sewers. Going forward with Tewin will only make matter worse.
We need to increase density by adding missing middle housing, stop widening roads, and invest in active and public transportation.
More cars = more roads = more sprawl = more debt
It is unfortunate when City Councillors don’t understand how property taxes are determined or worse, try to misdirect taxpayers. When comparing one city’s taxes against another it is actually critical to first know how property taxes are actually calculated. The first common mistake is to compare mill rates (the rate of taxation) across cities. The final tax is based on mill rate x assessed value so if you only look at mill rates you are not taking into account the actual property value. The second common mistake is to compare cities against each other and assume all things are equal as is being done by Councillor Hill. A million $ home in Ottawa is still a fairly expensive home while a million $ home in Toronto is below average and is well below average in Vancouver. Therefore you are comparing apples to oranges or even grapes. A much better comparison is to compare the taxes on the average price home across various cities. Using Councillor Hill’s figures, given the average price in Ottawa is about $700,000, taxes on that average house is about $8,370. With the average house in Toronto about $1.2 mln, the taxes on that property is about $8,600. Suddenly the attempt to claim that Ottawa taxes are about 67% higher than Toronto’s we end up with Ottawa taxes on the average house being a bit less than those of Toronto. Even then, you can be comparing apples to oranges if you don’t recognize various municipal funding models and responsibilities. Do the various cities include education costs the same way?, are you comparing one-tiered cities to two-tiered cities where costs are split between two different municipal governments (such as Region of Kitchener Waterloo)? Is transit funded the same way? Are social services funded the same way (mix between provincial and municipal responsibility)? Unfortunately, until Councillors understand the basics of municipal finance, how can we expect that they will ever understand the real complicated stuff.
You need to be careful when comparing property taxes between municipalities in different provinces. In each province, there is a different split in responsibilities between municipalities and the provincial government. That means that a particular government program may be in the provincial jurisdiction in Province X but a municipal responsibility in Province Y which means that it is paid for through property taxes in Province Y and by the provincial government in Province X.
You also need to know what things are paid through property taxes and what is covered through fee-for-service in each community. For example, in one community, recreation fees charged to residents may cover a higher percentage of the actual cost while in another, the resident pays a lower user fee with the balance covered by the city through property taxes.
Are things like water and sewer bills included in property taxes or does the resident pay them separately? In Ottawa, you pay your electricity bill to a municipally-owned, for-profit utility company which in turn pays a portion of your bill to the City in the form of millions of dollars of dividends each year. That amount isn’t included in what’s usually seen as ‘property taxes’.
Does the respective province cover all or part of the capital and/or operating costs for major infrastructure in the municipality such as roads, transit, etc., or are those paid out of property taxes? In Ontario, this varies even between municipalities with the province contributing different percentages to different communities.
At the end of the day, each municipality decides which services and what level of service it will provide to its residents. This was glaringly obvious back at the beginning of the century when the composite municipalities of the Region of Ottawa-Carleton were amalgamated and the different standards of service had to somehow be meshed together. For instance, in the Village of Rockcliffe Park, people left their garbage bins outside at the back of their houses. The garbage truck would arrive and the garbage collectors would go up your driveway, retrieve the bins, empty them and return them behind the house. This kept unsightly garbage bins from polluting the visual landscape on the tree-lined streets of the village and residents were happy to pay the additional cost in their property taxes. In other urban communities, residents had to haul their garbage to the street and bring the bins back in themselves and so their garbage collection costs were correspondingly lower. Other areas where service levels and costs varied drastically were in snow removal and recreational programs.
In comparing property taxes, you are more often than not looking at apples versus oranges and it would be almost impossible to find two municipalities where property taxes were being used in exactly the same way to provide similar levels of service to their residents. At the same time, the province is funding different municipalities at different levels and, in effect, subsidizing the services they can provide to their residents.
If Mark Sutcliffe wants to talk about fairness, he needs to first make sure that his city’s residents are not getting more than their ‘fair share’ of other forms of largesse from the province or the feds. Has he looked at what level of transit funding flows to smaller municipalities? In many cases, it’s zero and residents pay 100% of their own transportation costs while their provincial taxes help fund OC Transpo. That’s also the case within the City of Ottawa where rural residents in some areas get no transit services at all but contribute to the capital costs of the transit system.