Cities might need a new tax deal to dig themselves out of their infrastructure hole.
The hole was $564 million deep for the West’s six biggest cities last year. Property taxes don’t fill it, says a report from the Canada West Foundation.
It’s a big problem getting bigger, says Casey Vander Ploeg, a senior policy analyst who wrote the study, called No Time to be Timid. The report is part of the foundation’s multi-year Western Cities project, examining the challenges facing Western Canada’s largest cities, including Vancouver.
Part of the problem is that the cities’ only source of tax revenue is the property tax.
“I am not one who is in favour of more taxation, but I’m very much in favour of new ways of collecting taxes,” Vander Ploeg told Business Edge.
The property tax doesn’t grow with the economy or population and it hits only real estate values, so it misses other economic activity. It’s also only paid by residents, he notes.
Another problem is that Canadian cities tend to sprawl. New infrastructure costs occur at the edges, but high-value, highly taxed residences are closer to the centre, he says.
When most infrastructure was built, there was no thought of replacement. “The city is stuck with the downside of growth and none of the upside.”
One possible solution might be to reduce property tax and negotiate with the provinces for a sales tax. It should be a tax cut at first, not filling the entire revenue gap, says the report.
