Assessments 2021

Assessments are here. For those who own homes, this means a letter arrived in the mail telling you what the assessed value of your property was on July 1, 2019. It also tells you what the assessed value was over the previous three years. Some people are very upset to find their property has gone up in value, which means their property taxes are going up. Others are very upset that their assessed value has gone down, and their investment is losing value. At least, that is what I glean from Social Media, but maybe I need to get out more.

I have written before about the relationship between property assessment and property taxes, and about how the assessment process works, so this will be a bit of an update/summary of those posts. A bit of redundancy, but with new numbers.

First off, your assessment does impact your property taxes, but not as directly as you may think. The City has not passed a 2021 budget, so I do not yet know what the 2021 Property Tax rates will be, but in our last discussions, we seemed to be settling towards something like a 4.9% increase over 2020. I will round that up to 5.0% for the purposes of this discussion as long as we can all agree that is speculative and the numbers may change between now and when you get the bill.

That 5% means the amount of revenue the City will receive in property taxes from existing taxpayers will go up 5%, but it does not mean the cheque you write in July will necessarily be 5% higher than the one you wrote in 2020. First off, it only impacts the portion of property taxes that the City gets to keep. Last year, your residential Property Tax Bill looked like this:

So 58% of your property tax goes to the City, 35% to the provincial government through the School Tax, and about 7% to other agencies regulated by the provincial government. Everything else I talk about below here relates only to that to-the-City portion of the tax bill. To find out how the School Tax is set or how the BC Assessment Authority spends it’s 1%, you need to go to someone else’s blog. All this to say if the City put your municipal property taxes up by 5%, the amount of money you pay only goes up about 2.9% (that is, 5% of 58%).

If you look at your Property Assessment letter, you will note that the average change in property values in the City of New Westminster was a 3% increase. Because the City calculates its property tax rate based on this average value, a 5% increase will be based on this value. If your house went up in value by the average, then a 5% tax increase means the municipal portion of your property tax bill will go up 5%. The relationship between these two numbers is linear, so to calculate your potential increase, subtract the average value increase from your own value increase, and add the 5% increase the City is proposing:

My assessment (1940 SFD on a 5,300sqft lot in the Brow) actually went down by 11% since last year. So my Municipal taxes would go down by (-11)-(3)+5=  –9%.

My friend in Sapperton (1920 SFD on a 4,000sqft lot) saw her assessment go up by 20% over last year, so her Municipal taxes would go up by (20)-(3)+5= 22%.  Yikes.

Assessment is a dark science, and every year there are weird local effects of property values in one neighbourhood going up or down relative to others, and it is not always clear what the causes of these changes are. A recent example is the Heritage Conservation Area in Queens Park which was either going to cause housing prices to go through the roof and make the neighbourhood forever inaccessible to young families, or was going to crater the value of the houses dooming young families to inescapable debt, again depending on which Social Media account you followed. The reality is, it had little perceptible effect when compared to similar properties in Glenbrook North or the West End over the last 5 years. The market is bigger than one neighbourhood.

Properties actually sell “above assessed value” or “below assessed value”, a metric that is often used as an indicator of a market trend, since assessments are always at least 6 months old. However, it is important to remember that, in aggregate, things just don’t shift as much as they do in one-off conditions. If the person up your street who spent $50,000 on a new kitchen sells their house, they are likely to get more than the neighbour who has a black mold farm in the basement, even though both houses may look the same from the outside. Assessments are approximations of how the “typical” or median house of the size, age, and lot dimensions in your neighbourhood should be valued, not an evaluation of your wainscoting. Individual results may vary.

If you think your increase or decrease this year is unfair, there is a process to appeal your assessment, but you can’t dawdle. Local governments have to know the official assessed values by April so we can set our tax rates and get those cheery bills into the mail, so the Assessment Authority has to provide official numbers by the end of March. Therefore you only have until February 1st to file an appeal, but if you think you might want to do so, you should contact BC Assessment immediately and get the details about what you need in order to make that appeal. The important part is that the onus is on you to provide evidence that the appeal is wrong, not vice versa.

Budget 2021 – part 2

I wrote a bit about last week’s Council Workshop on the Capital Budget a few days ago, complete with some ugly pies. This post I am going to write about the second half of that presentation – the draft utility budgets for 2021.

As I have mentioned before, the City has more than one budget. The General Fund is all of the stuff we do to provide general City services, from parks and recreation to police and fire services to fixing potholes and supporting arts. The General Fund has a few funding sources including senior government contributions and fees related to permits or parking or fitness classes, but the bulk of it comes from property taxes. In that sense, it is the big fund that Council has close-to-unlimited authority to spend on providing a suite of services.

The Utility Funds are different, and are accounted differently. Outside of occasional senior government grant programs, all of what you pay for water, sewer, or solid waste, goes directly to paying to provide those services. No property tax is used to pay for providing those services, and paying for those services does not offset property taxes. (I am purposely putting our Electrical Utility aside, because it is unique in New West, as I’ve talked about before).

Utility rates are going up faster than property taxes. This is not because of Council largesse or pet projects, but because the cost of delivering these services is going up. To be more accurate, the cost for delivering these services *sustainably* is going up. More on that below.

I did some posts a couple of years ago that used a type of flow diagram to show what happens to the money you spend on your water, sewer, and solid waste bills. The numbers have gotten a little larger, but the proportions have stayed about the same, so the diagrams are still useful even if I don’t have the time or energy to update them right now.

Keep in mind that like all of our budgeting, the law tells us to create a 5-year budget plan. We update this plan every year, so even though we are currently looking to approve 2021-2025 budgets, we are really only approving the 2021 rate increases. The future rate increases are projected in order to inform our planning, but the rate increases in 2022 and beyond are really up to the discretion of future Councils. With that in mind, here is where we see the budgets going.

We foresee collecting just under $15 Million in water fees this year, compared to $13.7M in last year’s budget. That is about a 10% increase. Part of that will come from selling more water (the City is growing), and the rest from a 7% increase in water rates. Here’s where the money is projected to go:

Water is the money we pay Metro Vancouver for the water in the pipes. Operations is the cost of running the utility day to day (staff, materials, power, water quality testing, etc.). Capital is the cost of replacing or building new pipes, valves, meters, hydrants, and all the hard parts that keep water flowing. Transfers are the exchange of money between the Water Utility and the General budget of the City. The “City” buys water from the Utility to run city hall, arenas, the pools, watering flowers, etc. At the same time, the Water Utility uses City equipment and personnel to do some of their work – from billing to road crews, and because the Utility by law must be separate from the General fund, these transfers must be accounted for. Every year, the Utility uses a little more City services than it collects from us in water charges. Finally, Reserves are the money the Utility puts aside in a reserve fund for a variety of purposes, which I will talk about below.

We foresee collecting just over $24 Million in sewer fees this year, compared to about $22.5 Million in 2020. That is about a 7% increase. We are also projecting to collect another $3.6 Million in DCC money and capital grants (I talk about how that works here). That will predominantly come from a 7% increase in sewer rates. Here is where we expect that money to go:

With the same categories as water above (instead of paying for water, we are charged by volume by Metro Vancouver for the treatment of our waste water), you can see it is a little different. We are budgeting for a much bigger capital expenditure in 2021 for sewers, and we are actually going to dip a bit into our reserves to pay for that – which is why I put the blue box with the arrow above the line there to show the offset of costs from dipping into reserves.

Solid Waste
We foresee collecting $3.74M in users fees this year, compared to $3.35 Million last year (we also collect other revenue of a little under a million dollars in this utility) the utility rate increase works out to about 12%. Here’s where the money is projected to go:

You can see the solid waste utility works different that water and sewer. Though the per-tonne “tipping cost” of depositing waste at Metro Vancouver and private facilities is significant and going up, there is much more operational and transfer costs than other utilities. This is because of the nature of the work – we have collection trucks running 5 days a week that need crews and fuel. Also unique here is the fact we are running with a deficit in our reserves for solid waste, which will hopefully turn around by 2022, and this is not unrelated to why the rates are increasing so much.

I want to wrap this up by talking about our reserves. This is the money that each of these utilities have “in the bank” (well, Solid Waste has a deficit in the bank, but follow me here). We often talk about the main reason our utility rates are going up is because the cost of operating them is going up, but that is only partly true. We are also raising rates to build up our reserves.

The reason we have reserves is because they work like a buffer on the system. If we have an unexpected cost like extensive emergency repairs, a catastrophic loss, or have an opportunity to get a big matching fund grant from senior government that requires we are able to pay our half, a healthy reserve gives us that flexibility. Healthy reserves make our utilities *sustainable*. Currently, our reserves are in the order of 2-3% of the value of our assets. With increased awareness of the infrastructure gap so many communities are suffering, the current best practice is to keep reserves between 5% and 10% of the asset value. For this reason, we are continuing to build reserves in each of our Utility funds with an aim to get to that level.

This was a conversation we had in the workshop, and part of our finance staff’s work plan is to do a thorough analysis of our reserves situation as the City’s Asset Management plan is updated.

Overall, a typical household in New West can expect to see their annual utility rates for water, sewer, and solid waste go up by $132 next year, or about $11 more dollars a month.

Budget Survey

The City’s Budget is something everyone has an opinion on, even those who don’t think of it in that way. When people say “the City should fix the sidewalks”, “do more about homelessness”, “get back to the basics” or “extend the Hume Pool season”, they are making comments about the budget. However, few discussions around services put budget at the centre of the item, except at the time of the year when the Council is asked to set a tax rate for the year ahead.

We have always asked people to comment on the budget, and every year there is a public report and Opportunity to be Heard on the final budget decisions (always framed around “next year’s tax increase”), but this is commonly after all of the heavy lifting of putting the budget together has happened, and the details of how we got there are not transparent enough for meaningful input.

The result of this, as I have previously joked, is that the community spends 11 months asking the City (and Council) to do more things, then spends a month telling us to not raise taxes to fund those things. Local governments really aren’t able to operate at deficits, so this form of feedback is not particularly useful for guiding policy. Part of that is because much of how the City’s budget works is arcane, and we need to change this.

One effort the City has undertaken in the last couple of years has been to try to make our budgeting process less arcane. Followers of this Blog (hi Mom!) know this is an interest of mine – I spend probably more time than is useful talking about taxes and busting some of the myths about how New Westminster taxes compare to our cohort. Past of that effort was my own research to better understand how our budget works so I can make more informed decisions about it. Thing is, Municipal finance is a complicated thing.

This was identified a few years ago as an area where the City should improve its Public Engagement efforts, and over the last couple of budget cycles we have been changing how we ask for input to the budget. Doing it sooner, adding an education component to guide more useful feedback, and trying to get a more diverse group of residents and stakeholders involved in the conversation.

We are at the beginning phases of the 2021 budget process. It starts around now and works towards a final budget being prepared in early May. This is obviously a different year than most, as both our revenues and our expenses were very different than we projected prior to the pandemic. Rectifying that in our 2021 budget, and understanding how to project forward with an uncertain pandemic recovery is going to be a challenge. However, we are still ramping up our public engagement on this topic. If you are the kind of person who read this far into this blog, you probably are the kind of person who has feedback to the City on the budget process.

Here is what you can do:

Go to the city’s Budget Engagement website. There you will see links to background information you may want. You will also find links to:

Watch the webinar and/or read the power point deck, again to provide a bit more background, and to hear a Q&A session with residents asking questions you may have had.

Most importantly, fill out the survey! There is a relatively quick survey to get your initial feedback about how the City should prioritize spending in the year ahead, and to see how the public feels about that services/costs balance that the City is always trying to manage.

As I mentioned above, the City is really trying to get a wider variety of feedback on this stuff. I know there are a few people out there who fill out every public engagement opportunity the City has (sit down, Brad!), but I am hoping those of you who are reluctant to spend 5 minutes on an online survey will take the time, or that you vocal types will, after filling it out yourself, pass this on to some other people in your household or social circle to add diversity to the voices we hear from. The survey is open until October 18th, so this is a great family Thanksgiving activity!

Taxes 2020 part 2

The conversation about property taxes is always loudest not at tax time, but when the annual tax rates are announced. Early in the new year, every City Council in BC gets to the part of the annual budgeting process where tax increases enter the conversation.

Most of the rest of the year, Council talks about things they want to do. People come to Council and ask the City to do things. Any reduction in the base level of service is treated as an affront to all that is good. Reluctance to take on new tasks is seen as not supporting the incredible community benefits those tasks will support. Ten months of the year Council is asked to do more; two months of the year, we are told to spend less. That is not a complaint, it is an observation of how democratic government works. It’s the job I applied for.

As a result, discussion of taxes is rarely separated from discussion of ever increasing taxes. It does little to tell people that federal and provincial taxes have been steadily going down in Canada and BC for several decades as more tasks are downloaded to local governments. Property taxes are going up faster than inflation, and some people don’t like it.

Following on my last post, and in my continued quest to compare us to our cohort, I got to digging into the data again. We can again compare the New Westminster experience to the rest of Greater Vancouver through the BC Government stats on property taxes that are available as far back as 2005 here in “Schedule 707”. I will continue to argue (until someone gives me a good reason to think otherwise) that taxes collected per capita is the best comparator of taxes paid across the region. So how does New West compare to the other 20 Greater Vancouver Municipalities in tax per capita of the last 15 years? It’s a bit messy, but here we are:

There are two outliers: West Van has always been highest, Surrey has been lowest. New West is somewhere in the middle, increasing slightly less (by my eye) than average over the decade and a half. The big tends if I try to parse them: Delta and Port Moody rising faster than most (likely related to higher industrial land use and resultant industrial tax “windfalls”); the small communities (Anmore, Bowen, Lions Bay, Belcarra) all seeing recent significant rises since ~2013 (I would suggest they are coming to grips with infrastructure renewal costs they cannot offset with growth); Vancouver bucking the trend a bit, and the rest of us pretty tightly clustered together. If there are reasons for municipal tax increases, they don’t seem to track with politically left or right councils, rich or poor cities, or any imagined east-west or north-south divide.

Using the same BC Government Schedule 707 tables, you can look at how each city has changed in the 15 years between 2005 and 2019. There are three related growth numbers I think are fun to compare: population, value of residential land per capita, and the residential taxes collected per capita:

For the fun of it, I sorted this data by the rate of population growth. Despite what I said just two paragraphs ago, you can see Anmore was the surprisingly-fastest growing municipality over that 15 years increasing by 57%, even faster than Surrey. New West population rose 29% over that time (from just under 60,000 to just under 77,000), which makes us one of the faster growing communities. Lions Bay and Belcarra both lost population over this time. This chart, however, doesn’t show any clear trend relating the rate of growth to the rate of property value increases or tax increases.

This second view is the same data, but sorted by the increase in residential property taxes per capita. New Westminster is slightly below average in increase, as the per capita tax rate has gone up 76% over 15 years, compared to 78% for the average municipality (a tie between Langley Township and Port Coquitlam). New West residential land values have gone up quite a bit more than the average, though. In 2005, there was $84,000 worth of residential property per person, in 2019 that number is $276,000 – more than a tripling in value.

Just for the fun of it, I did the math to create a totally meaningless idea. If there was a (statistically-unlikely) person in New Westminster who owned a proportionate value of land for those 15 years, they would have paid about $7,700 in property taxes over that time, and earned about $192,000 in increased land value. Of course this is only property taxes to the municipality, not to the province (School taxes) to regional government (GVRD taxes), and doesn’t include the fee-for service money the City collects for utilities. Still, I think it argues against the sometimes-proffered idea that municipal taxes have been a significant driver of housing affordability challenges in the region over the last decade and a half.

Taxes 2020

I am returning to a common theme here in the blog, because I like to look at data, and have recently had a resurgence of folks suggesting to me that New Westminster is the highest taxed city in Christendom. Well, maybe only in British Columbia. Recently, I noticed a Councilor in another municipality puffing his own tires about how prudent the tax regime in his City was by calling out New Westminster as specifically worse tax- & spend-thrifts. Which allotted me the excuse for the following subtweet:

That the City that Councillor represented was well to the left of New West in the graph above was left unsaid, as were his name and that of his community, because I really don’t think it is a competition. Moreover, the problem with graphs like above is that they are one simplified analysis, and as I have tried to demonstrate in many blog posts like this over the years (Here with 2019 numbers, Here from 2015, Here where I compared taxes and utility rates, etc, etc. ) there are various ways to compare property taxes between Cities, and any comparison is useless without context. Some more useless than others.

Cities primarily provide services to people. This is why we generally rank the “size” of a City by population, not by square kilometers. The cost of providing services also most closely tracks with population. So when we talk about tax burden, certainly in the sense that our nameless Councillor was talking about it, we are talking about how much you pay for taxes as a resident of the City, which is easily measured by the taxes collected per capita:

The BC Government collects these stats every year, and report out on “tax burden” on a spreadsheet they call Schedule 707. You can read it here. The table above was generated by dividing the 2019 “Total Municipal Taxes” from each City by the population (2018 estimate, because that is what is on the Schedule). New West collected just under $84M in taxes a population of just over 76,000 people, for a per capita tax of $1093. This puts us right in the middle of Lower Mainland municipalities. The average of these per capita numbers is $1123 (New West is a little lower), but the average tax burden is actually $1042 (New West is a little higher).  This makes sense based on the different ways you can calculate the average, but fair to say New West is pretty firmly in the middle of the region.

This first chart compares all municipal taxes, though, and residential property tax – that collected from homeowners and landlords of rental properties – is only a portion of this. We also collect taxes from businesses and industries and utilities and such. Fortunately, Schedule 707 also break taxes down by property class. New Westminster collected just under $52M in residential taxes from those 76,000 residents, which works out to $675 per capita:

As you can see, that puts New Westminster just below average across the region. You will also note the municipalities that leap to the left side of the graph tend to be residential communities with limited commercial and industrial properties. Without those businesses to prop up the expense of the running the City, residential property owners have to pay more. Here is the commercial and industrial taxes collected per capita in 2019:

In this red is “Major Industry” like the Kruger paper plant or big industrial areas like Annacis and Mitchell Islands. Purple is “light industry” like the type of warehouses you drive by on the Mary Hill Bypass or in Port Kells. Green is “commercial”, which means retail, restaurants, malls and office buildings.

As you can see the distribution of this type of development is unequal across the region. Vancouver is the commercial centre of the region, and has oodles of office and retail space downtown and along the Broadway corridor. Delta has Annacis Island and the River Road corridor, that huge industrial reservoir allows them to keep their residential taxes low. As a proportion of property tax collected, New Westminster gets about 38% of its tax revenue from commercial and industrial properties and 62% from residential, which again puts it somewhere in the middle:

Unfortunately, commercial and industrial taxes are much harder to compare across the region. “Per Capita”, as I have used here, feels wrong. Raw numbers or rates are hard to compare because the value of commercial real estate in Downtown Vancouver is very different then the same office space in Langley, with New West somewhere in the middle. The pressures, costs, and relative utility of industrial land varies even more widely across the region. I will try to dig more into that in a follow-up post, because there are a few ways to look at business taxes in New West that make it look like we may be a little out of the ordinary.

But when ti comes to residential taxes, it is clear that New West is neither high or low taxed relative to the rest of the region. And there is a good case to be made that the Lower Mainland of BC has among the lowest residential property taxes in North America. But I’ll let someone else make that case.

Budget 2020!

This week in Council we are going to be talking about the Budget, and are asking people to once again provide us some feedback on budget issues. Providing this feedback is difficult for many people, or it is hard to understand how your feedback will be incorporated, because municipal finance is a little bit arcane. So I thought before the meeting, with the reports and tables on line here, I would give you a bit of a run-down of how the budget process works.

We have already had some lengthy discussions about the capital budget. This is the budget we use to pay for things like buildings and vehicles and computers. These are (mostly) one-time items, though most need periodic replacement, and (mostly) tangible objects, though we can use capital funds to fund planning for tangible objects, like hiring a consultant to develop an Urban Forest Strategy that will result in capital expenses to buy and maintain trees.

The City is required to balance its budget over a five-year financial plan, so when we talk about “Budget2020”, we are talking about an excerpt of the overall 2020-2024 Financial Plan. Following from this, our 2020 Capital Budget is part of a 5-year Capital Plan, which makes sense because most large infrastructure works cannot be planned, financed, completed and paid for in a single year.

Our draft budget has a 5-year capital plan to spend ~$468 Million on new buildings, infrastructure and equipment, with a some of that representing a few major projects: The ~$100M Canada Games Pool, $54M for a district energy utility, a ~$40M electrical substation in Queensborough, ~$17M to fix up the Massey Theatre, $20M in road paving, etc. This includes the Utility capital investments ($123M for Electrical, $50M for Sewer, $25M for water, and $1.6M for solid waste). In 2020, we are budgeting to spend ~$140 Million of that total.

The City has three options to pay for any capital expenditure: reserves, debt or revenue. Reserves are the monies we have in the bank, some to assure financial solvency, some earmarked specifically for projects, like the money we have put aside for the Canada Games Pool replacement. If there is a reserve fund appropriate for the spending we plan, then drawing from those reserves make sense, though we have to be cautious about drawing those accounts too low because they provide us some financial resiliency, and improve the rates we get from banks when we borrow. Borrowing to pay for infrastructure makes sense for a recreation centre much the way it makes sense to get a mortgage for your house: the people using it pay for its use while it is being used. We have a *lot* of debt room in the City as far as regulations and good financial planning are concerned, but we have to address the public tolerance to take on debt (through a public process when we take out loans), and of course manage the cost of borrowing. The third option is to draw from revenues in the year we have the expense, be those revenues in the form of a grant from senior government or through raising taxes. These both, of course, have limits.

The part of the annual budget that directly impacts your tax rates is the Operational Budget. It is from this budget that we pay staff and buy paper and diesel. Sometimes a pundit in town will chagrin “most of the City’s spending goes directly to salaries!”, to which my only retort is “Yeah, and?” The City provides services more than we build widgets. Widget ore is not as big and expense as delivery of those services, which are delivered by people, from lifeguards to librarians to police officers. Sure, we buy asphalt and pipes, and firefighters need firetrucks, but most of our budget is service delivered by people.

We spend most of the year operating the City based on the operating budget set in the previous spring. As the year goes along, staff, Council and the public identify places where the City can do things differently, where our service is not meeting demands, or where new services are being pondered. Some small things may get done as staff find space in their existing budget to make them happen (or stop doing other things to make the room). But some things are more costly or need more staff time to manage, so managers put forward an “enhancement request” – they ask for more money.

Part of the task of our senior management team is to review all of these enhancement requests, and decide what is reasonable and what isn’t, then set some priorities. Council is not directly involved in that process, but the priority-setting is based on a framework of Strategic Planning created by Council. One of the questions staff need to ask themselves and each other at this stage is – does this enhancement meet a strategic goal of the Council? Then ask if we can afford it. Which is where Council comes in.

Before these enhancement requests, the draft 2020 budget sees costs equaling a 3.9% tax increase already baked into our 5-year financial plan. These are things like increased debt servicing, annual salary increases, inflationary pressures and financing of earlier enhancement commitments already made by Council in previous budgets. Staff have brought forward new enhancement requests equaling just under another 2% of taxes. They then recommended that about half of these enhancements be included in the 2020 budget, and the other half deferred to a future year. This equals out to a draft 4.9% tax increase.

There is an interaction between the Capital and Operational budget. The interest we earn on our reserves is a revenue that is included in our operational budget, so draw those reserves down and we have less revenue. Similarly, the interest we pay on our loans is an operational expense. There is also an operational impact to many capital projects: the NWACC will cost money to heat and light, and will need to be staffed. It will also bring in revenues. Those numbers will be different for the NWACC as they are for the current CGP. These changes have to be budgeted towards.

Since we have a regulatory requirement to balance the budget at the end of the year, if we pull in more revenue (through taxes, charges for services like parking and permits, grants from senior governments, investment income, etc.) in a year than we spend (on salaries, supplies, grants, etc.) that extra money (“profit!”) goes into our reserves and helps offset future capital budget costs. The corollary to this, of course, is that a large capital budget requires us to raise taxes a bit to keep these reserves at a stable level and to pay debt servicing costs.

(I have almost completely skipped utilities in this discussion, I talked a bit about them, with fancy coloured diagrams to show how those work in this blog post from a couple of years ago)

So, this week Council will be asked in two meetings (Monday AND Tuesday nights) to review the budget, review the results of the public consultations that occurred around the budget, and provide one more public meeting where people can come and address council with their concerns regarding the budget. We will review the capital budget commitments for 2020, and will review the recommended and non-recommended enhancements. Council will then make recommendations on any changes, and staff will take those away and work on putting together the necessary Bylaws to make the budget a reality. By the end of the Tuesday special meeting, we should have a pretty good idea what our budget increase will look like for 2020, but looking at the reports, it will likely be something around 5%.

Taxes 2019

If you own a home in New West, you should have received your annual tax bill in the mail in recent weeks. If your assessment went up by the city-wide average of 9.03%, then your tax bill went up over last year by 5.28%. If your assessment went up by more than 9.03%, then your tax bill went up more. Conversely, if your assessment went up by less than 3.7%, or if it went down, then your tax bill this year is lower than it was last year. I tried to show how this works in this blog post from a couple of years ago (with the numbers from a couple of years ago, mind you).

It seems an appropriate time for me to update some of my older posts comparing New West tax rates to others around the region. I’ve done this a few times in a few different ways for several years on this blog (here, here, and here, for example), and no matter what type of analysis you do, it is clear that some local pundits continue to perpetuate terminological inexactitudes when they claim that New Westminster has the highest taxes in BC, or Canada.

Recognizing my own suspicion of bias, all of the data below comes from the BC Government reports that annually compare tax rates and burdens across all local governments, and have been doing so for a while. Of course, this data is from 2018 (Cities are only now submitting 2019 budget numbers to them), but this is the best source to compare numbers across the province. You can read them all here and make your own comparisons if you don’t like my ham-fisted Excel skills.

I am going to reiterate a point I have made before: there are many ways to compare taxes between jurisdictions. Vancouver and Surrey collect more tax overall than New West, because they are much larger. West Vancouver has lower mil rates because their average house price is much higher, Creston has a much higher mil rate because its average house value is much lower. Even the use of “typical house value” to compare taxes is biased, because some cities like New West have more people living in rental and condo buildings than some others, so a “typical house” is much larger and more expensive than the median or average household occupies. So to answer the primary question: do New Westminsterites pay more municipal taxes than residents of other municipalities, I think the fairest comparison is taxes collected per capita:

Source: BC Government statistics, Schedule 703_2018

Of the 161 Municipalities in BC, ranked from highest taxes to lowest, New Westminster (orange bar above) is ranked #71, between Parksville (#70) and Saanich (#72). In 2018 we collected $77.7 Million in taxes from just under 74,000 people, making our per capita tax rate $1,051. Province-wide, $4.76 Billion in municipal taxes was collected from 4.3 Million people, making the province-wide average about $1,150 (red dashed line above). So New Westminster residents paid $100 less per year, almost 10% less, than the average resident of BC. Our tax increase in 2019 will eat into this gap, pushing us up by about $50, but at the same time, almost every other Municipality in the province increased their taxes at a rate between 2 and 7%, so our position will not shift substantially.

Naturally, there are massive differences across the province on the proportion of taxes paid by industry and businesses, and the level of services provided by the Municipality. The Lower Mainland is a bit different than the rest of the province in the level of services we supply and the cost of delivering those services, so it may be fairer to only compare New West to our Metro Vancouver cohort:

Source: BC Government statistics, Schedule 703_2018

New Westminster ranks 13th out of 21 GVRD municipalities in taxes collected per capita. The GVRD Municipalities collect about $2.6 Billion in Municipal taxes from 2.56 Million people, for an average of $1019 per person (the red dashed line). New Westminster collects slightly more (3% more) than this average. This has changed over the last couple of years for two main reasons: New Westminster’s Capital Levy we are using to fund our aggressive capital renewal plan (lead by the replacement of the Canada Games Pool) and the regional trend where there is a much higher rate of population growth in the relatively low-tax municipalities of Surrey and Maple Ridge compared to slower growth in Vancouver and (especially) the North Shore. We can talk about correlation/causation here, because it might not be what you think…

Ask Pat: Private School taxes

Duke asked—

The two large private schools on opposite ends of the city are nearing completion. My question is will the City be receiving any property taxes from these schools? It’s my understanding the BC Libs exempted them from certain taxes.

Short version: no, they likely won’t pay property tax. But as always, there is a longer answer. And this needs a bit of a “this is how I understand things, and I think I am correct here, but am willing to hear any corrections if people have them and I will fix the record” warning.

There are two types of exemptions from paying property taxes: statutory and permissive. As you may have figured from the name, the first is set in provincial regulation, Section 220 of the Community Charter outlines uses that may be exempt from property tax: Provincial property, places of worship, cemeteries, fruit trees(!), private schools and other things. The general interpretation of this act is that the statutory exemption only applies to the building or ground used for the prescribed purpose, not necessarily the entire property.  So a church that has a large parking lot and/or adjacent housing on the same property may not get statutory exemption for those auxiliary lands, but just for the place of worship.

The permissive exemption is also what it sounds like: something cities are permitted to grant, but are not required to grant. There are limits to how we can hand these out, and they are listed in Section 224 of the Community Charter. This permission is generally limited to government-owned lands not caught up in Section 220, parts of lands exempted under S.220 that are not strictly exempted by S.220 (like the parking lot around a church), or lands used by a charity or public service that are used for a community service or charitable work, including sports clubs. The City may grant partial or complete exemptions on these lands, but it is generally limited by Section 25 of the Charter which prohibits the City from providing direct assistance to a business. Whew.

In practice, the City does a review of permissive exemptions (and reviews applications for new permissive exemptions) in September or October, and updates its Bylaw in time that those exemptions can be factored into our financial planning for the next year. The last time we reviewed them in New West was on September 17, 2018, and you can see in that report the list of to whom the City provides exemptions. Both John Knox and Urban Academy are listed as exempt under S.224.

Now back to the other part of your question, Back in 2015, the BC Liberal Government was led by a Premier who proudly boasted that her child attended the most exclusive private school in Vancouver (one that had a large swath of “Permissive Exemption” real estate) while also taking public school teachers to the Supreme Court to defend an illegal contract that kept her from having to staff public schools enough to meet reasonable classroom size standards. That government signed in to law Bill 29, which extended a Statutory Exemption to all of these ancillary lands around private schools are part of the school operation. Student housing, parking lots, skating arenas, the woods out back where the kids smoke pot; as long as they belong to the school, they are now exempt by statute.

Frankly, this change probably does not apply to either the new John Knox school on 12th street or the new Urban Academy school at Braid and Rousseau, because both are modern “urban school” designs, with very little footprint outside of the building site. The parking is underground and the play area on the roof, so there aren’t open fields of “accessory lands”. The shift from Permissive to Statutory exemption is probably irrelevant in this case, though I am not clear why the City gives them an S.224 exemption when a S.220 exemption probably applies.

That said, both schools are being built on lands that had significant commercial value, and paid commercial property taxes before the schools took over the sites. If we ballpark the two properties at (land value only) $3 Million each, then at 2018 taxation rates for commercial properties, the property tax they would pay to the City would be a little over $30,000 each per year if there was a non-exempt commercial property on that spot. Plus about $12,000 each in School Tax. Take from that what you will.

(draft) Budget 2019

I guess we knew this was going to be a tight budget year for New Westminster, as it is for most Cities in the lower mainland. The shift in MSP / employer health tax has impacted many municipalities hard, which I will talk more about below. Combine that with our aggressive capital plan, regular inflationary increases in costs, and constant demand for new services, and the tax increase is higher than some would have liked this year. That said, I actually would vote to make it a little bit higher, and indicated so to Council. Here is my rationale.

The current proposal is for a 5.28% increase in property taxes. That is about a $117/year increase for the “average” household. For perspective, the “average” household in New West is a $1.2M house that went up in value over the last year by 9%, or about $100,000. Condos went up a little more than houses overall, so the tax increase for condo owners will be proportionally higher than for detached house owners. The City has no control over that, it is just how the market works.

For the purpose of explanation, it is helpful to break that 5.28% into component parts. The numbers below are my back-of-the envelope estimates drawn from the kinda complex budget documents (you can see a staff report here), and of course the budget has not been passed yet, so the numbers may change. All that to say nothing below represents official numbers or communications, but this is close enough to an accurate breakdown to foster conversation:

1.8% is directly attributable to the shift in the MSP and employer health tax. This could be viewed as downloading: increased local government costs that will be funding something that should be paid from provincial and federal coffers. However, I generally reserve that for when we shift the burden for a service to local governments, not just the cost – an oft-mentioned (by me!) example is underfunding the provincially-funded ambulance service so that our locally-funded Fire and Rescue staff need to cover the load. regardless of what you call it ,the effect is the same. We and other cities have challenged the province to not apply this to local governments, and we lost that fight. So here we are, and need to budget for it.

If you want to take a more positive look at (spin of?) this tax increase, remember that it is a result of phasing out of the MSP system. That means the $40 or so that this 1.8% costs the “average” household is easily offset by the $1,500 the “average” New West household saves in reduced MSP fees. If that is no help, then at least recognize this is a one-time event, and that there will actually be a slight reduction in City costs next year as the final MSP phase-out occurs. That means we will be starting the 2020 budget year ahead of the game by about $300,000.

4.23% is direct growth and inflationary pressure – increased wage and supply costs related to just doing what we do every day. This goes up both because of because of inflation, and because the population City is growing at a rate of about 1.6% per year, so we need to do about 1.6% more stuff. Add to this inflation a little above the 2.0% projected CPI increase (don’t get me on a rant about how the CPI “basket of goods” does not fairly reflect the inflation of running a municipal government) and the projected 2.5 % wage growth across the region. Much of this increase is locked up in contracts with our staff, which have annual increases built into them. Of course budget time usually results in some on-line trolling of City workers. For the record, I no not think our staff is underworked or overpaid. Wages in New West are a little below the regional average for municipal governments for people in comparative roles, and our ratio of exempt staff to union staff is about 13%, which is slightly below the average of comparable sized municipalities (a fact that is directly counter to the rhetoric used by some during the recent election).

-2.46% That’s right, this is a negative. The growth part of above means that there are more properties / people to pay taxes and more services bought from the City. The taxes from new construction and increased other revenues allow us to actually reduce the overall tax rate by about 2.5%.

1.2% is related to new spending. This is all new staff positions and operational and capital costs related to things we do now that we didn’t do in the past. This is “discretionary spending”, the money we get to haggle over at this point in the budget cycle. And haggle we did.

The reality for us on Council is that people rarely ask us to do less. Every week, people come to Council asking the City to do something more, be it paint more crosswalks or plant more trees or give more to a local group to help run a festival or provide homelessness outreach. Nine times out of ten, we want to do it, and often I see the strained look in staff’s eyes as they are the first to recognize that we don’t have the capacity in our budgets or room in staff work plans to do this, and they are going to have to come back to Council with hat in hand, asking for the resources to fund what Council has already said we want them to do, or to ask us which of the existing programs or services we should cut. It is only the week of budget that everyone asks us to spend less, but aside from “finding efficiencies”, I never hear specific programs that people want us to cut.

The “nice to haves” in the budget reporting this year added up to more than $2 Million, and would have put us well over a 7% tax increase. This means we did not fund some of the things I would have loved see happen this year in the City.

To give you an idea of what kind of new spending we did approve, here are a few line items from the report:
• $122,000 (equal to 0.15% tax increase) to hire two new staff to ramp up the tree maintenance and planting program as we move forward with Urban Forest Management Program;
• $80,000 (0.10%) to bring in some expertise to guide us through our Truth and Reconciliation process;
• $225,000 (0.28%) to run the QtoQ ferry service year-round;
• $54,000 (0.07%)for a part-time Facilities Project Manager to help us make budget and timing on a couple of our bigger capital projects;
• $100,000 (0.13%) for a full time program coordinator to carry the Intelligent City program forward for one more year;
• $65,000 (0.08%) for a Special Events program coordinator to help for community partners to run events like Fridays on Front.

0.5% The final piece of the budget increase this year is the Capital Levy. We introduced this special line item last year as a buffer for our increasingly extensive capital plan. The big item is, of course, the replacement of the Canada Games Pool and the Centennial Community Centre, which will blow a $100 Million hole in our budget. This is a big enough story, and this is already a long enough blog, that I am going to hold off commenting more on the Capital Plan until a follow-up blog. Short version: I think we should be putting more into this Capital Levy and keep it at 1% this year, but the majority of Council did not agree.

What we have now is a proposed budget framework, subject to some last-minute number crunching and adjustments by finance staff. There will be a budget bylaw (and new 5-year financial plan) prepared, which will come to Council for deliberation, though the real debate happened in workshop last week (see the video here). Of course, we always invite public comment and delegations to come speak to the budget and let us know how much they appreciate the hard work staff and Council do to manage the City’s finances responsibly. Alternate opinions are also welcomed.

Bad Data

I never want to react to the Fraser Institute. The easy ad hominem attack is that they are the Canadian propaganda wing of Koch Brothers enterprises, and their attempts to shift public policy in Canada should raise concern, but the more substantive attack is that they produce terrible reports that would not earn a passing grade if they were handed in as an Economics 101 term paper. They are bad at data, so it is best if we ignore them.

Alas, I was asked by an intrepid local reporter to comment because the City of New Westminster is made to look fiscally irresponsible in their latest fresh-off-the-presses piece of decontextualized tripe, so I did a bit of a dive into the numbers. This turned into several hours of trying to reverse-math their numbers, because like the failing university economics students they resemble, they don’t actually provide raw data or point clearly to what their data sources are, instead providing derived numbers without the benefit of showing their calculations. They are bad at reporting data, and we should probably ignore them.

I dug around in the BC Government website they link to as a data source (this one), and after figuring out how they got all of the population for 2016 wrong (using projected estimates instead of readily-available Census data), I started to dig through the various tables and repeated calculations until I got results mimicking theirs. They primarily used “spending data” from this table, and “revenue data” from this table. But they clearly didn’t know (or didn’t care) that New Westminster’s data includes the financial reporting by our Electrical Utility. They are bad at interpreting the data they have, so it is best we just ignore them.

For context, New Westminster operates its own Electrical Utility. It has since before BC Hydro existed. We hold on to it because it is a great deal for the residents of New Westminster. Using 2016 numbers to be consistent with the Fraser Institute report (See Page 90 of this report for the utility’s 2017 numbers), our Electrical Utility sells about $45,000,000 worth of electricity to residents and businesses in the City, at the same rate (more or less) as those customers would pay BC Hydro if they were in another Municipality. It costs the utility about $33,000,000 to purchase that electricity from BC Hydro at bulk wholesale rates. About half of that difference goes into operating the utility (paying staff, buying wires and building substations) and the other half is paid to the City as a dividend. We are the only Municipality in the lower mainland that does this, so we are the only municipality that includes these numbers in their expenses and revenue tables. This is important context. The Fraser Institute is bad at context, which is why we would all be better off by ignoring them.

Because of this bug in the data, their report suggests that New Westminster has “the second highest municipal spending” per capita, along with “the second highest municipal revenue” per capita. They even have bar charts to prove it:

The problem being, New Westminster’s electrical utility “spends” about $38 Million a year, and it generates about $45 Million in revenue. If you take this into account, those bar charts look very different:

The shorter and more accurate story here is that New Westminster (outside of the electrical utility) spends slightly above the regional average on a per capita basis, and collects slightly less than the regional average in taxation and fee revenue. Think about that for a minute.

“Spending” in the local government context means putting police officers on the street, mowing lawns in our parks, and providing swimming lessons to your kids. The money we spend is providing services to our residents, and we do that at a slightly higher rate than the regional average. At the same time, the revenue we collect from our residents in the form of taxes and fees is lower than the regional average. An alternate Fraser Institute headline may be: New Westminster delivers more for less!

Ironically, part of the reason we deliver more for less is the electrical utility that can buy electricity for wholesale, sell it for retail, and provide a dividend to the City which we can use to provide services that would otherwise need to be paid for through taxes. Arguably, having an electrical utility is the most entrepreneurial thing we do, and is something that the entire “run government more like a business” Fraser Institute crowd would normally celebrate.

There is more in this report, including tables showing the City’s residential taxes are below average for the region (12th highest of 17 municipalities), and our debt servicing costs are average, but that kind of story – “City is about average” – doesn’t make for a very exciting headline.

Alas, New Westminster is just kind of average. And when it comes to managing finances, this is not a bad thing. Every financial decision is about balancing the cost with the priorities our residents and businesses expect us to address. I am proud of the level of service we provide in New Westminster, and our ability to do that while keeping taxes below the regional average.