Hamilton

There is a notion that the only question worth asking at the municipal level is: “Are my property taxes going up? And, how are you going to make them come down?” 
The real question should be, “Am I paying the right amount of taxes to fund the services, infrastructure and reserves that my community actually needs?” When your taxes are low, that is not necessarily being fiscally conservative; it is quite likely that they are fiscally irresponsible. They are artificially low, as they are not correctly reflecting the value of usage we are deriving from your community’s assets and services, and our community is accumulating a liability that will arrive later, larger, and with interest. Conversely, if our taxes are too high, then perhaps this is a signal of some failure in efficiency and prioritization. The goal is not about low taxes; the goal is about the right taxes and the discipline to hold that line across successive Councils.
Communities across the country face the same challenge: An infrastructure funding gap that no level of tax increase today is likely to rectify in any of our lifetimes. This is not the result of some Act of God or Force Majeure. It is the accumulation of more than a generation of decisions that focused on keeping the municipal tax rate as low as possible and choosing to defer the building of reserves for replacement onto future councils. The political incentive to keep taxes low is real and understandable. No one wants to be the elected official who comes in and raises taxes. But that doesn’t make the bill disappear. Deferral only means that when the decision becomes inevitable, there will be an interest charge on top.

Charles L Marohn articulates this very clearly in his book “Strong Towns”. Communities that prioritize low taxes over full cost recovery are essentially borrowing from their future selves, or their future children. They are spending down their infrastructure accounts without building a reserve to eventually replace it. In Fernie, this factor is compounded by the limited commercial and industrial tax base within our municipal boundaries, as well as a significant tourism industry that accelerates the wear on infrastructure without contributing proportionally to the tax base. Building a more robust and diversified local economy will help spread out these pressures.
The “growth” we’ve seen over the last 40 years has primarily been focused on single-family home developments. Unfortunately for many municipalities, many recent studies, including one by the City of Ottawa, show that when accounting for full lifecycle costs, the property taxes a single-family residential home pays do not cover the services to it. In Ottawa’s case, it costs the City $465 per person per year. That is, the cost of the roads, sewer, water, etc. exceeds the additional revenue a city gains from such developments. This same study also shows that per unit type, mid-density and mixed-use development generates significantly higher net fiscal value per acre. High-density infill development provided the City with $606 per capita of revenue per year. Joe Minicozzi of Urban3 performed an analysis of Asheville, North Carolina, and found that a typical acre of mixed-use development yields $360,000 more in tax revenue to city government than an acre of strip malls or big-box stores. Now, Fernie is not nearly as large an urban center as either of these two examples. But it speaks directly to the need to consider our zoning and how we build out, or build up, our community to ensure that the tax revenues we generate are beneficial to the long-term sustainability of our community.
Responsible taxation begins with ensuring we are building our community responsibly, and carries through to ensuring that the utility rates we set and the property taxes we collect are sufficient to build reserves to cover the full lifecycle cost of these services. We need capital reserve funding to be a core part of our budgeting process, and not a decision made at the end in determining what the headline number for tax increase will be. We must continue to build our process whereby our tax rates and reserve strategies are tied directly to our asset management plan so that the numbers are transparent, and citizens can see the direct connection between what they pay and what gets maintained or replaced. Our DCC rates need to be reviewed on a regular basis, not a 20-year cycle, and must cover the full lifecycle costs, not just upfront capital. We need to continue the progress in updating our budget process to demonstrate to residents the cost and value of the services their tax dollars fund, and the next step is to start demonstrating what the cost of not paying would be. Lastly, we need local elected leaders to have the Political Will to maintain and consistently apply this strategy across council terms, because responsible taxation will only work if it is sustained.

It would be easier to focus on “Let’s lower taxes!” as we approach the election, but that’s a slogan, not a leadership strategy. This paper is not a tax policy document. It is an honest account of where we are and what it will take to get us out of it. My commitment isn’t to raising taxes. My commitment is to ensuring that the tax rates we set are fair to current residents, as well as future residents. Our tax rates should be based on the actual needs of our community now and the true cost of those services. I am not afraid to stand up and tell you, the residents, the truth about the financial situation our community is in. A responsible tax strategy is going to require Political Will, and without it, we are just avoiding a challenging conversation.