I’d like to share with you my thoughts on the subject of taxes, as I have received volumes of calls and correspondence on a number of issues regarding this topic.
As someone who is paid by these very same tax dollars, I have put a great amount of time and care into establishing my position on our municipal tax regime and have extensively researched alternative options. After having engaged deeply with my constituents and colleagues, I have developed these very definite ideas.
Your questions and concerns have focused on:
- The $52 million dollar question that Council brought before citizens following the provincial budget, and Council’s decision to use 2013’s $52 million to help cover flood proofing and recovery.
- Your 2013 residential property tax assessment and Calgary’s market value-based assessment system.
- Taxation inequalities between the inner city and new growth areas, and between our City and the provincial and federal governments.
I believe these issues are all interconnected. I’ve laid out my analysis and responses in the following pages, along with the steps I believe Council needs to take in order to address what I see as a flawed taxation structure.
Statement of Bias – Municipal politics must remain non-partisan
I entered politics during the last election because I believed things were not as they should be in Calgary – particularly at City Hall. Almost three years into this role, I still see myself as an agent of change – on the outside – as opposed to a representative of the system and all that’s wrong with it (though it’s interesting, this time around, to be in the position of being painted as the establishment by a new crop of aspiring politicians eager to advance their own agendas).
After years of professional, academic and volunteer advocacy, it became clear to me that it was necessary to enter politics in order to create true change in how our City functions. My position on taxes has been shaped by a deep practice in the subject of city-building, and not by any predisposed ideology. In fact, I reject traditional concepts of the political right and left as completely unhelpful to the kind of discussion we need to have about the future of our city. I would not be in my current role were it not for the non-partisan nature of municipal politics, and I’m committed to keeping the governance of our City a non-partisan proposition.
The Problem – We’ve built a city we can’t afford
Everything I believe about taxes comes from the understanding that our City’s single biggest challenge is that we’ve built a city that we fundamentally can’t afford.
- We have a massive amount of infrastructure that requires billions of dollars more to maintain than our tax base generates.
- We have obligations to build even more infrastructure and, if built, most of that infrastructure will only further unbalance this equation.
- We have a taxation system that:
- Encourages us to grow our city in a way that widens the gulf between our expenses and our revenue sources.
- Presents significant barriers to the kinds of growth that would shrink that gap.
- Completely disconnects the essential relationship between revenue and expenses, so that it’s nearly impossible to have a clear-eyed conversation about the best way forward.
We have a deeply problematic relationship with other levels of government whereby we pay way, way more in taxes than we see back in services – we only get back $0.08 on the dollar! At the same time, we continually have to take up the slack and deliver more and more services that are their responsibilities.
It’s Not a Spending Problem, It’s a Structural Problem
In the face of these massive structural issues, accusations that our municipal government has a spending problem are unfair. Like any bureaucracy, or any moderately complex private corporation, our municipal government definitely does have spending issues – and they’re being addressed. The restoration of our municipal audit function, Cut Red Tape and Zero-Based Departmental Reviews are current programs that we’ve successfully deployed to begin getting our spending in hand, and a comprehensive overhaul of our procurement policies are on deck for next term. But that’s only a very small part of the crisis we’re facing. I truly believe that to focus on spending is to fail to fully appreciate the extent of the problem, and that doing so misdirects our attention away from what really matters.
So what can we do to fix our situation?
I do not believe the conventional approaches of the traditional left and right camps are the answer. On the right hand, cutting or freezing taxes will only dig us deeper into the infrastructure hole that’s already growing faster than we can fill it. On the left hand, accelerating our tax increases to something that will begin to match the growth of our infrastructure deficit will seriously impact Calgary’s competitive advantage and devastate already beleaguered portions of our population, such as seniors, those living on fixed incomes, and the working poor. Perhaps worst of all, accelerating tax increases would at this point only serve to perpetuate the “business as usual” thinking that got us into this mess in the first place. (As a side note, the extreme fringe who suggest that we can cut spending while at the same time build more centripetal infrastructure like roads are simply being unrealistic).
Great Neighbourhoods: A structural solution for Calgary
Because the challenges that face us are structural in nature, they require structural fixes. The very first thing that needs to occur is a broad conversation about which structural remedy to pursue and how best to enact it. My Great Neighbourhoods platform offers a structural remedy that addresses the transformation of our city, our Municipal Government and our democracy. Great Neighbourhoods addresses the dollar side of the equation, and also lays the foundation for Calgary to be more civically engaged, culturally vibrant, globally competitive, environmentally friendly and caring of those members of our society who need the most help.
Great Neighbourhoods is my starting point in this conversation that we all need to have. And while I reject the traditional concepts of right and left, Great Neighbourhoods is built on the traditionally conservative foundation of the following two ideas:
- The best government is that which is closest to the people who are represented by it.
- The best taxation regime is one where taxes travel the shortest distance, along the most direct course and with a maximal correspondence between the people who pay and the people who benefit.
I advocate for a municipal taxation regime where the things we all need are paid for by everyone, based on their ability to pay (more like income tax than property tax), but where we are also on the hook for covering the full costs of our individual lifestyle choices (which would entail assessing property taxes on a cost of service basis, as opposed to the current system based on market value assessment).
The Civic Charter: A new relationship with the Province
A tax mechanism based on ability to pay, coupled with a cost of service tax assessment regime, requires a complete overhaul of our legislative relationship with the Province. I’m happy to report this critical discussion has begun through a signed Memorandum of Understanding between the Premier, the Ministry of Municipal Affairs and the Cities of Calgary and Edmonton. This MoU lays out the ground rules, and agrees to begin discussions on what a Civic Charter for these Cities could and should look like following the 2013 Municipal Election. This is all being undertaken within the context of a comprehensive re-think of the Municipal Government Act—the provincial legislation that currently enables our municipal government. While the advocacy for a chartered relationship between our City and the Province has been the dream of Calgary’s municipal leaders for literally over a century, it has never meant more than it does today and it has never been more within our reach.
Given the massive structural challenges facing our City, and how our current municipal tax regime is complicit in these issues, my mission at City Hall is to ensure that the taxes we pay:
- Are spent in the most effective way possible. This means we complete two major structural overhauls that we began in 2010:
- Transforming the way our municipal bureaucracy is deployed in the service of Calgarians, through government projects such as Inspiring Strong Neighbourhoods and NextCITY.
- Shifting our capital spending towards infrastructure that maximizes the ratio between revenues and expenses. Projects such as The Route Ahead, with its increased appreciation for the relationship between transit and transit oriented development, and the Framework for Growth and Change with its focus on ensuring that all new growth on our city’s edges pays for itself are critical steps in this process.
- Better reflect our individual impacts and demands on the infrastructure and services we all share.
- Are spent in the service of Calgarians, which means changing our relationship with other levels of government.
Unfortunately, the responsible answer to the question, “when will the politicians stop constantly raising our taxes?” is “only when Council has achieved considerable success towards the above goals”. With the achievement of these structural changes, however, growth becomes a financially positive prospect.
The Great Neighbourhoods platform is based on my commitment to the achievement of a growth trajectory for our city that, in tandem with a new municipal taxation regime, makes possible a reduction in the rate of taxation growth and per capita taxation.
A Fixed Rate – Inflation plus growth
In the meantime, we must reject the unhelpful debate between raising or lowering our taxes as a point of political ideology. I have stood with our Mayor and a coalition of City Councillors for the establishment of a fixed tax rate increase pegged to inflation plus the rate of growth of our City. This certainly won’t help get ahead of the infrastructure deficit (it actually will involve continuing to fall behind for a while), but it will buy us some time and maintain momentum as we turn towards a better way of doing things. As we address spending issues, pioneer new efficiencies and establish a more effective structure for the delivery of municipal services, we’ll be able, over time, to apply increasing amounts of taxes to slowing the growth of, and eventually reversing, our infrastructure deficit.
Established/Inner City vs. New Growth Areas
As an entirely developed ward with no new growth areas (except in the industrial S.E.), Ward 9 is particularly victimized by our current tax regime’s subsidization of growth on our City’s edge.
This subsidization occurs in two ways: The first, and least transparent, is on the operating side of the equation and is directly related to the assessment of taxes. An average home on the edge of our City is less expensive than one closer in, but it costs a municipality considerably more to deliver services to the edge. Yet, because we assess taxes based on market value, the general result is that the more expensive it is to deliver the services, the fewer tax dollars we collect to pay for them. This is one of the most dangerous ways in which our municipal government has disconnected our expenses from our revenue streams. The reality is that a market value-based assessment will always create an incentive towards sprawl, and, after 60 years of growing Calgary in this fashion, it should come as no surprise that we’ve inherited a massive and growing infrastructure deficit.
The second and more easily quantifiable way we’ve subsidized growth on our City’s edge is on the capital side of the equation. This has less to do with the direct assessment of taxes and more to do with driving the need for never-ending tax rate increases. According to provincial law, Alberta municipalities are responsible for covering some of the costs of new growth within their boundaries, and the details of who pays for what between government and the development industry are worked out through negotiated agreements. For example, from 2000-2010, the agreement that the City Council of the time signed with industry amounted to a $14,700 subsidy per new home on the city’s edge from the general tax base.
I am happy to report that this City Council cut that subsidy in half until 2015, and has delivered to industry the firm expectation that from 2015 onwards there should be no future subsidization of growth on our City’s edge. One of my fundamental missions in seeking re-election is to ensure that City Council holds firm on the commitment that after 2015, all new growth will cover both its capital and operating costs. It should be noted that self professed “fiscal conservatives” who support further subsidization of unsustainable growth either don’t understand these realities or are banking on the hope that the Ward 9 voter doesn’t.
The reason why the City assesses property tax based on market value is because we are legally required to do so by the Province. This is one of the many critical issues up for discussion during the development of a Civic Charter for Calgary. However, issues with market value-based assessment aside, Calgary is frequently recognized as having one of the best and most sophisticated assessment systems in North America. While it’s clear that this is strictly according to the echo chamber of the municipal assessment industry (and market value assessment is their universal standard), at least, and for the time being, we can take some solace from the fact we have made the best of a bad situation.
The City of Calgary’s assessment system is a complicated algorithm that determines individual property value assessments based on a variety of factors, including sales of similar properties in a local and citywide context, and proximity to mitigating factors, from good things like transit and parks to bad things like freeways and industry. While it’s considered a top-notch system on a continental basis, there are obvious issues and it’s definitely capable of making weird mistakes. With hundreds of thousands of assessable properties perhaps it’s remarkable that there aren’t more mistakes – perhaps we do have as good a system as there is currently to be had.
Some observations and comments:
- Most people notice that the assessed market value of their property is consistently lower than the actual market value as determined by the sale of that property. The City Assessors seem remarkably oblivious to this fact, and I suspect it actually has to do with a concerted effort on their part to keep appeals to a manageable level.
- The appeals process is a source of significant problems for the City’s Assessors, as it’s a quasi-judicial function and decisions by the Assessment Review Board have precedent-setting implications across the entire system. My impression of the Assessment Appeal system is that there’s a mini-industry of assessment lawyers who are the chief beneficiaries of the unending struggle.
- In order to avoid the costs and potentially negative outcomes of the appeals process, and developed in conjunction with the establishment of our top-notch current assessment system over the last several years, the City Assessor is committed to working collaboratively with people who have problems with their assessment. So if you have an assessment that is radically higher from one year to the next, it’s very possible that there’s an easily negotiated fix to what could be a glitch; the best thing you can do if you’ve got an issue is call.
While I’m a City Councillor who is unafraid to get involved in City business, I believe Assessment is an area where we have as functional a system as is currently legal. It’s also an area where political influence is especially problematic. So while I am happy to help my constituents access the pre-appeals process, I cannot and will not interfere with the current assessment process. Instead, I believe the best course of action is to overhaul the nature of the system to help set Calgary on a better path forward.
The $52 Million Question
As discussed before, Calgarians see only eight cents in direct benefits from every tax dollar we pay to the three levels of government (corporate tax, income tax, gas tax, GST, property tax, etc.). Part of this unsustainable equation is the Provincial take on our property taxes. For every dollar of residential property taxes that we pay to the City, the Province takes roughly 40 cents up to Edmonton. This money originally funded our school systems, but over the years the Province decoupled that revenue stream from the expenses it was earmarked to cover. It was diverted into general revenues, and now, like the overwhelming majority of the taxes we pay, it never makes its way back to us in the form of services we expect our taxes to fund. Our Mayor and City Council have been extremely clear with our Provincial counterparts that we can’t run Calgary, one of Alberta’s and Canada’s most powerful economic engines, with 60 cents on the dollar. If we’re to be the piggy-bank that floats the prosperity of our fellow Albertans and Canadians, then so be it, but adequately reinvesting in Calgary is essential if we’re expected to continue to be an ongoing source of our country’s collective wealth.
To this end, we have aggressively lobbied to keep as many of our tax dollars as we can in Calgary, to address the massive unfunded needs of our citizens. Since 2010, our Mayor and Council have voted twice already to keep two small fractions of the Province’s 40 per cent take—amounts of $40 million and $5 million per year—in order to establish dedicated funds. In other words, we’re trying to re-couple our revenue stream to our expenses. These funds have created sustainable pools of capital for the development and upkeep of essential and previously unfunded City services such as fire halls, libraries (including the new Central Library), recreation centres (including the four new rec centres under construction now), our civic partners (Heritage Park, the Calgary Zoo, etc.), and intelligent transportation system upgrades to our clogged road system (lane reversals, intelligent signal lights, etc.).
While the $52 million came from exactly the same source as the previous two funds (a fractional portion of the Province’s 40 per cent take from our residential property tax), this time it was not a deliberate grant back to the City of Calgary. But neither was it the tax cut to the citizens of Calgary that the Province ended up claiming they had intended to grant. This time, as part of the extremely austere 2013 Provincial Budget, the government simply screwed up the math and accidentally left $52 million of the taxes we’d already paid on the table. After trying to get them to realize what they’d done, and then trying to get them to consider whether they actually wanted to do that, and if so, how we could work together to address the financial challenges confronting Calgary, the $52 million went public. While the Province decided to claim it was a deliberate tax cut to Calgarians, Council decided the right thing to do was to engage our citizens in the question of how we should spend our money.
Because I am committed to correcting the deep financial imbalances challenging our City’s future, my predisposition was to keep our tax dollars in Calgary to serve Calgarians. Of the five choices Council floated for discussion, my inclination was toward a transit fund that would help us build a future Calgary where the infrastructure to tax-base ratio will be more balanced than our current deficit situation. But as a representative of Ward 9 electors, I was also committed to as much engagement on the issue as I could undertake. I spent almost two weeks door-knocking in some parts of the ward where I felt my support from voters was the least secure. I chose SE Acadia because it didn’t support me in 2010, it has had high voter turnout in every election, and it votes consistently deep blue conservative. I fully expected 60 to 70 per cent of the doorstep responses to be in favor of giving the money back to the taxpayer. And I was shocked and gratified, after knocking hundreds of doors, when “give it back” represented fewer than 10 per cent of the responses at the doors.
Over the couple of months I had to connect with my voters on the issue of the $52 million, in Acadia and throughout Ward 9, I have come to believe that the “give it back’ crowd is not a crowd at all. In fact, there are three distinct groups. The first are those citizens who, due to the complexity of the issue, the busyness of our lives, and the framing of the issue by some media, haven’t been able to fully appreciate the issue and have responded viscerally; I’ve found that when fully engaged this group are quickly able to appreciate the nuances of the issue and frequently change their vote. The second are those members of the population that universally dislike government and view taxes as oppressive, as opposed to the collective funds we all contribute to make the society we share function; this group have a legitimate point of view that I don’t share. The third group are the ones who give me serious pause – the working poor, seniors and people with disabilities living on a fixed income—for whom $100 off their yearly property tax would make a meaningful difference; in their regard, my belief is that they too need a Calgary that works, that offers a broader range of choices and that is financially solvent into the future.
I want to clarify a few things with regard to how a few members of the media described me. First, certain journalists have completely mischaracterized the comments above as an assertion on my part that the voters are “stupid” and that “I don’t care about seniors”. This is ridiculous, deeply unhelpful and thankfully, marginal. Second, the same members of the media have framed the engagement Council undertook with citizens as a pseudo-referendum, and have further mischaracterized the facts to make it seem that the majority of citizens voted to give the money back but Council took the money anyway. This is deeply wrong.
With regard to the notion that the engagement was a referendum, there was actually a discussion amongst Council as to whether to put the $52 million dollar question on the 2013 ballot. I wanted to pursue this line of thought from the perspective that it would increase voter turnout—something I support. However, the majority of Council asserted that the Canadian form of democracy is representative democracy, and not direct democracy – we elect City Councillors to make these decisions informed by the perspective of their offices, and to put the question to a referendum would ultimately be a dereliction of our duty.
With regard to the media claim that Calgarians voted, this pertained to the results of one internet poll that the City offered as one means of engagement. Suggesting that the results of one internet poll is an appropriate measure of the will of the people is a dangerous abandonment of the principles behind our democratic institution of voting.
Most importantly, however, the assertion that the majority of Calgarians voted to give the money back, and Council took it anyway, is blatantly false. The majority respondents to that one poll actually supported options that entailed using the money to establish dedicated funds to accomplish the things that Calgary needs to do. In other words, the majority of respondents who participated in that poll suggested that Council should not give it back.
This summer’s floods changed everything. As my team and I helped Ward 9 and the rest of Calgary dig out, surrounded by the most humbling outpouring of volunteerism I’ve ever witnessed, a frequent sentiment amongst the muddy throngs of citizen-volunteers regarding the $52 million was that “nature voted.” Some Calgarians have challenged the need for earmarking additional funds to flood relief given the pledges from Provincial and Federal governments and the healthy reserves that Calgary has set aside for contingencies such as this. I believe these additional funds are essential to the recovery for the following reasons:
- It offers immediate liquidity for issues that require immediate action. We have no idea how long it will take to receive disaster relief from the Province and the federal government.
- It allows us to implement improvements to what we’re rebuilding—disaster relief funds are only intended to restore what was already existing, but it’s imperative that we improve upon what was there to mitigate against future events.
- It will prevent us from emptying the reserves we’ve set aside, or more likely, help us rebuild those reserves. Our reserves are filled by tax dollars, so if these funds are not replenished by the $52 million, then they will come out of taxes that we haven’t yet paid.
- It remains to be seen whether the provincial and federal governments will actually cover everything they’re required to cover. ”Not a chance” is a pretty good guess.
While the flood was a significant setback for a City already on thin financial ice, we’re lucky on a number of fronts. Our economy is one of the strongest in North America, we are an incredibly industrious and resilient people and we’re going to take this opportunity to rebuild better than we were before, with a civil service that’s emerged from the flood stronger and more efficient than it’s ever been.