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Righting budget processes |
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Written by editor
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Sunday, November 09 2008, 9:59 PM |
Municipal governments across Canada have an “upside down budgeting process,” says a Canadian Taxpayers Federation director, because they determine how much they’ll spend first and then set the tax rates to collect the revenue later.
While other levels of government consider existing tax rates and projected revenues before determining their spending, municipalities execute the taxation equivalent of shooting first and asking questions later.
At this point, particularly at this time of year when the budgeting process is in high gear, readers who pay property taxes will surely be nodding their heads. The process does seem backward. It creates a scenario where spending can steadily rise and the impact on local taxpayers becomes an afterthought, taking a backseat to all the services and infrastructure taxes can pay for.
Maureen Bader, federation director, in a report released last week, says there’s a better way. Property taxes should be capped to make both municipal government revenues and the tax bills to residents defined and predictable.
“It would force local governments to prioritize spending and focus on core activities, fundamental to the operation of a community,” she writes.
The federation’s proposal suggests a property’s assessed value would be fixed to the provincial rate of inflation as long as it wasn’t sold. Once a property changed hands, its new assessed value would be the sale price, a concept based on the simple principle that the price paid for a property is its true value.
For people living in their houses with no plan to sell, such a system would moderate property taxes from year to year even if the local housing market catches fire.
In addition to calling on provinces to cap property taxes, the provinces would have to reverse the downloading of services onto municipalities, allowing communities to focus on services that are purely within their scope of responsibility.
A municipal government could hike property taxes beyond the rate of inflation, but only by referendum.
Sound good so far? In the face of rising property taxes, it sure does.
But under the proposal, taxpayers might see their annual taxes moderate, but fees for services would likely rise. The federation recommends shifting to fees to pay for services, except for core services that can’t be paid by individual users: emergency services, police, roads and the like.
That means utilities, water, garbage and recreation facility fees would charge fees that would cover the service, leaving the user a choice of paying more or using less.
The federation urges more privatization of services and use of alternatives such as public-private partnerships — fine, so long as the arrangement gets the best value for money and is not driven solely by an ideology.
The real strength of the proposal is it would force municipalities to examine how money is spent, not just how palatable a particular tax hike may be. Such a system would draw a clearer line between revenue and the service provided. That would make it clearer for both decision-makers and taxpayers to discern what their taxes and fees pay for, and then judge for themselves the value received.
It’s that search for value that we expect from our municipal leaders, particularly in times of economic turbulence. Whether they’re qualified or willing to take on the difficult task of finding savings, rather than the easier solution of going back to taxpayers for more, remains to be seen.
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