Last night (February 20, 2020) the Lake Country Council deliberated further on the 2020 budget and with this article we wish to explain where we are at and what happens next.
A QUICK RECAP OF BUDGET DELIBERATIONS THUS FAR
The 5-Year Financial Plan Bylaw, which includes the 2020 budget, was sitting at First Reading with a proposed 6.03% property tax increase and a decision to be made regarding the additional approximate $170,000 needed to fund the Transportation for Tomorrow Plan. There has been much discussion about the way the $170,000 would be collected.
CHANGES IN THE LAST TWO MONTHS
Some recent changes have an impact on the budget. The assessment for new properties that have been created and built on in 2019 has gone up slightly and the average residential home assessed value has gone up. It is now $711,000. This means that Lake Country is experiencing growth. We knew that. However, what we know now is that our anticipated revenue numbers are slightly different, and the tax increase could be slightly decreased.
ROADS AND TRANSPORTATION
During the many community consultation opportunities initiated by Council– 10 face-to-face engagement events with about 100 citizens plus articles and the comments they generated – the main concern expressed by citizens was the condition of roads. We also heard that people are not opposed to an increase in taxes to see them fixed. Therefore, Council decided to fund the additional $170,000 for the Transportation for Tomorrow Plan. The debate at the meeting February 20th then became focused on how to fund this additional road maintenance and renewal need.
TWO PHILOSOPHICAL APPROACHES
Council debated the three main options:
- A general property tax increase;
- A parcel tax increase; or
- A combination of both.
When deciding about tax increases, Council must understand and appreciate the impact on the various tax classes. In Lake Country most of the burden falls on Residential — which pays $88 per $100 of collected property taxes; and Business –which pays $9 per $100 of collected property taxes. So the debate was around the impact on these two classes.
Using Class 1 Residential as the goalpost for comparison with all other classes, Class 6 Business pays 2.4 times more. This means that a $1.00 increase for a residential property owner is a $2.40 increase for a business owner.
A parcel tax is a fixed number and it applies to each parcel owned, not to a Tax Class. So, a residential property owner and a business property owner would pay the same amount of money per parcel.
These two kinds of taxes represent two different philosophical approaches.
A property tax is considered a tax on wealth in the traditional North American tax system, which is derived from the British system: the more appreciated your property value is the higher tax you pay.
The parcel tax is more about use. For instance, we have a parcel tax for sewer that is paid only by those parcels that use the sewer system. In the case of a parcel tax on roads and transportation, the philosophy or rationale behind it is that all use the road to get from point A to point B so everybody should contribute equally.
It is not up to me to suggest if one is more “fair” than the other but Council had to make a decision and in the end Council eventually decided that a combination of these two taxes would work best.
They partially applied the new growth “bonus” so that the property tax increase would be reduced to 5.88% and they approved a $25 increase on the existing road and transportation parcel tax. This combination will bring the needed $170,000 for road improvements.
A WORD ON REVENUES
When we talk about taxes, we are really talking about revenues to operate the municipality. So it is important that we all understand where the money is coming from.
Truly, both property taxes and parcel taxes only make a portion of all the District’s revenues.
Property Taxes make up only 32% of our total revenues and Parcel Taxes make up 5%. That is a total of $37 on every $100 of taxes collected by the District. The rest comes from user fees and charges that someone pays only for using a specific service such as renting the Beasley Community Hall for an event at Beasley Park, or a connection fee to connect to our water system, to only name two. User fees and charges make up 21% of District of Lake Country revenue. Developers pay direct contributions when they build new subdivisions or buildings, and these make up 16% of our revenue. Finally, there are grants and contributions from other levels of government and agencies which make up the remaining 12%.
TO RECAP…
Council approved a 5.88% overall property tax increase for 2020. For details on where the money is going to be spent, please refer to my previous blogs (published on the lakecountry.bc.ca website). This equates to an annual $16.17 increase per $100,000 of assessed value on a residential property. The average assessed value in Lake Country is $711,000 so the annual increase for the average home will be $16.17 x 7.11 = $114.97
Council also approved a $25 increase to the current Road and Transportation Parcel Tax which will go from an annual $125 to an annual $150.
The next step will be to give final adoption to the 5-Year Financial Plan which will make all of this official.
Thank you for reading the Budget series of articles. I will now endeavor to write on other topics of interest as promised.
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