Pay attention to your own budget, Mayor Nenshi

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Appeared in the Calgary Herald

It’s a pity that Calgary Mayor Naheed Nenshi is busy picking fights with the provincial government and local homebuilders. His Worship seems preoccupied with the province over his desire to have a city charter that would allow him to tax more.

The result is that instead of a mayoral focus on reformed spending at City Hall, Calgary’s homeowners have been subject to multiple years of above-inflation property tax increases. That itself has resulted from a growing and costly public sector. The trend started before Nenshi took office but he has done little to rein in such growing costs.

Using information provided by the City of Calgary and that dates back to 2007 and ends in 2012, it’s clear that Calgarians who own a condominium, townhouse or house have been subject to city-imposed, above-inflation increases in their property taxes every year except one: 2007.

That was the last time the city held property tax increases below inflation. In the other five years (2008-2012 inclusive), property taxes were hiked beyond the jumps in Calgary’s cost of living, with tax increases that ranged between 4.5 and 10.4 per cent.

Your property tax bill is made up of two components, with the city’s share at 56 per cent and the province’s at 44 per cent.

The province raised its tax rate beyond inflation in four of six years, with hikes that ranged between 2.9 and 7.2 per cent. (The province actually dropped its tax rate by 2.5 per cent in 2011, but the City elbowed in on the tax relief and jacked up its rate by 10.4 per cent that year.)

As for Calgary’s inflation rate, according to Statistics Canada,  inflation ranged between a high of 5.1 per cent (2007) with a minor deflation year in the recession year of 2009. Since the recession, Calgary’s inflation has been muted: 0.8 per cent in 2010, 2.2 per cent in 2011 and just one per cent last year.

Increases in property taxes beyond inflation don’t seem to alarm Calgarians much. Perhaps that’s because Calgary’s economy is generally healthy. Also, for those who pay their taxes through their mortgage, a tax increase may not be as noticeable as a once-a-year cheque cut to the City. And renters think that tax hikes don’t affect them—even though such increases are factored into their ever-higher rents by landlords.

But to make those above-inflation increases real, consider this example: Imagine a $2,500 residential property tax bill in 2007. Had the  City and province stuck to inflation-only increases, a $2,500 property tax bill in 2007 would have risen to $2,819 by 2012. Instead, it clocked in at $3,251, a $433 annual difference as of last year.

The cumulative six-year, above-inflation take for the City and province amounted to an extra $966, and note that I haven’t included all the above-inflation increases in city fees. One wonders if families could think of other priorities for that extra one-thousand bucks.

The City’s justification for such increases is that “The cost of City expenditures typically increases at a higher rate than goods and services considered in consumer or household inflation,” this from City budget documents. The City of Calgary even produces its own higher estimate of inflation to back up that assertion.

The City’s inflation defence is indefensible: Its self-created inflation rate is in part due to costs that Council can and should exert more control over: total public sector compensation. That City Hall allowed such costs to get out of control is their fault, but one for which taxpayers pay.

Calgary’s public sector is growing. According to the City of Calgary’s annual report, full-time equivalent (“FTE”) positions jumped to 15,449 positions in 2011 from 13,798 in 2007. (Salaries, wages, and benefits make up more than half of city operational spending.)

Some of this can be justified in a growing city. But here is the telling statistic from the city’s own books: the number of such positions grew to 14.2 per 1,000 Calgarians in 2011 from 13.5 per 1,000 in 2007. So the proportion of city employees has grown faster than the population at large.

The civil service is a useful part of any civilized society. But a bureaucracy does have its own interests and priorities, ones which can and do conflict with the more general public interest.

To restrain the growth of tax increases in Calgary requires restraining the growth in the portion of the budget the city can control--public sector compensation costs. That requires a likely unpleasant tussle between City Council and the unions that represent local government employees, along with other employees and suppliers of municipal services.

Instead, the Mayor, by demanding extra tax powers from the province, is ignoring what’s happening in his own budgetary backyard.

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