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Is a 5% property tax-hike cap in Vancouver realistic for 2021?

Remember back in February when Vancouver Mayor Kennedy Stewart announced that he wanted next year’s property tax increase to be no more than 5%? Seemed odd at the time, considering the mayor a few months previous supported an 8.
Kennedy Stewart-Dan Toulgoet
Mayor Kennedy Stewart announced in February that he wanted to cap a property tax increase at no more than 5% for 2021.

Remember back in February when Vancouver Mayor Kennedy Stewart announced that he wanted next year’s property tax increase to be no more than 5%?

Seemed odd at the time, considering the mayor a few months previous supported an 8.2% tax hike going into council’s 2020 budget deliberations; council ultimately agreed on 7%.

But, as regular readers will recall, Stewart had an explanation for what seemed like an about-face on his property tax stance.

“Well, when budgets come out, I like to support staff,” he said in response to a question from Coun. Sarah Kirby-Yung in February. “And so I have each year said that I support the staff’s initial recommendations, but then listen to council debates and make my final vote accordingly. So in this case, however, I think going through two years of this [debate] that an early cap is important.”

A couple weeks later, council went at it again over the mayor’s motion and eventually landed on directing staff to report back on a 5% scenario in time for a mid-year update on what the budget looks like for 2021.

Then the world turned upside down.

People continue to get sick with COVID-19 and die, people continue to lose their jobs and the City of Vancouver is still reeling from the pandemic’s effect, having for a stretch lost up to $5 million per week in revenues.

Now we’re in July and city staff has prepared that anticipated mid-year budget forecast. It goes before council next Wednesday.

The report runs 17 pages and is filled with numbers, percentages and scenarios, including what it would take to arrive at a 5% tax hike, even as the city grapples with its financial future.

Let’s take a look …

Off the top, a 5% increase would see the owner of a median single-family home assessed at $1.6 million pay another $146 in 2021. The owner of a median strata property assessed at $688,000 would be dinged another $64 in tax.

Those bills, of course, don’t include increases in utility fees, which are forecast to go up by six to 10%, according to the staff report.

For a 5% scenario to unfold, it would mean a $17 million gap would have to be filled. That $17 million, by the way, is equivalent to a 2% tax hike.

So that’s why staff has, so far, said a 7% increase is what makes more sense at this time, when considering fixed costs, collective agreements and infrastructure work for 2021.

Staff makes it clear that any budget adjustments must come from service areas that are funded by tax. And the biggest service areas are the police and fire departments.

A total of 78% of their budgets is funded by taxpayers. So it’s no surprise that cuts or delays to those departments’ budgets play a major part in arriving at the 5% tax hike scenario.

The police department would be hardest hit, with a $6 million budget decrease that would mean a delay in hiring 20 officers and 10 staff. The department would also have to hold off on replacing up to 55 positions left vacant from retirements.

The effect?

“Reductions would lead to slower response times to emergency calls, reduced service levels to citizens and businesses, limited ability to respond to non-emergency calls, greater risk of unsolved crimes and cases being lost in court and increased rate of officer burnout,” the report said.

The hit to fire and rescue services would be $3 million and mean no new hiring and a delay in hiring 25 new firefighters, which would “reduce the ability of the department to effectively respond to all incident types and lead to potential increased risk of delayed fire response.”

It would also mean a delay in hiring two new fire prevention staff, which would slow down the department’s efforts “to reduce the volume and severity of fire calls through targeted community risk reduction activities, especially in more marginalized communities in the Downtown Eastside and at single-room-occupancy hotels.”

Also on hold would be the hiring of an assistant chief and “lieutenant of diversity and outreach” positions to “build on culture and diversity, increase focus on critical social issues and expand efforts to attract and maintain a workforce that represents Vancouver.”

Other cuts or delays to people and projects would have to come in the parks department ($1.5 million), engineering and public works ($1.4 million), libraries ($1 million) and other service areas, including funding capital infrastructure.

Staff makes it clear these are just examples, but are placed against a backdrop of uncertainty, as the pandemic persists and economic forecasts remain fluid.

The mayor himself is worried that not all residents will be able to afford to pay their taxes this year or next. That includes owners of business properties, too.

So is a 5% tax-hike cap realistic in these times?

That question has become further unanswerable and complicated with movements to “defund police,” mounting evidence of a second wave of COVID-19 to come and more anticipated job loss.

The staff report also makes it clear that senior government support is needed to fully restart city operations and “is critical to the city’s recovery plans.”

Staff says the city is now looking at a $124 million revenue decline this year. More than 1,500 city workers remain laid off, pay cuts are still in effect and community centres remain closed, albeit two of them providing refuge for homeless people.

February, as all of us can agree, seems like such a long time ago.