THE BLOG

Breaking Down Calgary's Property Tax Increases

12/10/2014 06:24 EST | Updated 02/09/2015 05:59 EST
Christian Hoehn via Getty Images

Once again, Calgary city council has raised property taxes beyond the rate of inflation. No surprise. Over the past seven years, only once, in 2007, has council approved a tax increase below Calgary's inflation rate.

For example, in 2010 and 2012, the tax hike was five times the rate of inflation, and almost eight times the rate of inflation in 2013 (when the city raised property taxes by 13.1 per cent with inflation at just 1.7 per cent).

The latest hike, 4.5 per cent in residential property taxes for 2015, is triple the average annual Statistics Canada inflation rate for the 2010-2014 period in Calgary. Looking ahead over the next four years, even the city doesn't forecast the consumer price index to rise more than 2.1 per cent each year or a cumulative rise of 8.7 per cent.

Meanwhile, city utility rates for water, wastewater and drainage will go up next year and in the subsequent three years by double-digit percentages each year, ranging from 15.4 per cent to 27.8 per cent annually depending on the year and the particular charge.

Whenever city council hikes property taxes or fees by multiple times the inflation rate, some apologists point to another index--the city's self-created Municipal Price Index. That's the one that measures the cost of goods and services delivered by the City of Calgary--but with costs that often result from City Hall's own choices.

For example, in the spring, the city cut a generous deal with its largest union: 12.5 per cent over four years. So in the future, that wage deal will inflate the city-created Municipal Price Index, which, again, will be used to justify higher settlements with city workers and the tax increases that accompany them. And round and round with higher-than-inflation property tax increases we will go.

Some might assert Calgarians are happy to pay higher-than-inflation tax increases. After all, the city's Citizen Satisfaction Survey seems to say so.

But answers to surveys often reflect the design of the question. The devil is in the polling questions.

For example, consider this query. "Due to the increased cost of maintaining current service levels and infrastructure, the City must balance taxation and service levels." Respondents had a choice of four options, two that involve increasing taxes and two that offer to "cut services."

Given the restricted choice of responses--increase our taxes or cut services--it's surprising anyone would answer "cut services." After all, people might well expect some increase in property taxes at least to keep up with inflation.

But imagine a different question prefaced this way: "In Calgary, 45 per cent of tax-supported expenditures go to salaries, wages, overtime and benefits. Would you A) Prefer tax increases above the rate of inflation; B) limited to inflation; C) reform of city employee compensation packages including pension costs; or D) more competition in service delivery?"

That preface--45 per cent of tax-supported expenditures go to salaries, wages, overtime and benefits--is derived from the city's own "action plan."

Space does not allow for a deep discussion of all compensation issues so consider one as an example: pension plans. And look at one in particular that the City contributes to for enrolled employees (the city has multiple plans) --the Local Authorities Pension Plan.

Contribution rates in that plan doubled between 2000 and 2012, for both the city and employees.

Pension reform, which would help moderate property tax increases, could have been an option. But at least one council member, Mayor Naheed Nenshi, has shown little appetite for such a tussle with government employee unions.

In May, the mayor wrote the provincial government to oppose then-planned pension reforms. (Incidentally, those reforms were put on ice shortly thereafter and then shelved completely in September by Premier Jim Prentice.)

In his letter, while the mayor claimed he "wasn't opposed to public sector pension reforms," he opposed even mild reforms such as ending early retirement with full pensions at age 55 for city employees.

The upshot is that this is what we know for sure on city spending. City government employee compensation costs are 45 per cent of tax-supported expenditures. The city has struck wage deals above historic inflation levels. Contribution rates have doubled in one major pension plan, driving up pension costs. And the mayor opposes even modest reforms to city government employee pensions. All of that helps explains why above-inflation property tax increases have become the norm in Calgary.