Vancouver city council heard Tuesday that property taxes could be set at an average of nine per cent each year over the next five years if the status quo of spending and generating revenue is not addressed this year.
Colin Knight and Patrice Impey of the city’s financial team outlined pressures facing the city over the next five years that include unknown increases for union staff, many of whom are under collective agreements that expired in January.
“The city is significantly impacted by collective agreements,” Knight said. “And with the high-inflation environment comes higher-than-typical salary increases through collective agreement negotiations. So the city's budget will be impacted by that.”
Other drivers of spending over the next five years include full-year costs of council-directed investments for new police officers, firefighters and mental health workers. Initiatives related to the revitalization of Chinatown is another driver.
Water and sewer infrastructure upgrades, and the $9-billion replacement of the Iona sewage treatment facility are also expected to have substantial multi-year impacts on property taxes and utility rates.
Utility fees increase 10%
Utility fees alone are estimated to increase by approximately 10 per cent annually on average for the next five years. That’s based on Metro Vancouver regional utility charge forecasts and the increased pace to replace and maintain the city’s infrastructure and assets.
“If we don't take further action to address our revenues and expenses, in the coming years what we project is a tax increase on average of nine per cent each year for the next five years,” said Knight noting the increase would mean an additional $116-per-year cost for the owner of a median strata property.
Knight pointed to construction costs, supply chain shortages and finding skilled workers in the development industry to get city projects built as other challenges, with staff focused on reducing delays to avoid further spending.
“We're looking at optimizing our processes internally on how things can move more quickly through the system to make sure that we're looking at any factors that are causing projects to be delayed, and to make sure that we're taking action to address those,” he said, noting council will get an update in July on the progress of the city’s capital projects.
CPI eased from 6.8% to 3.8%
A report accompanying staff’s presentation said products used heavily by the city such as ductile iron, copper pipes and fittings, electrical supplies, wire and cabling, waterworks brass fittings, mechanical couplings and steel street lighting poles are anticipated to continue to increase in price.
While the Consumer Price Index (CPI) for Metro Vancouver has eased from the peak of 6.8 per cent in 2022 to 3.8 per cent in May 2023, the current inflation rate still remains higher than the Bank of Canada’s target range of one to three per cent.
The most recent Conference Board of Canada CPI forecast for the period of 2024-2028 is currently estimated at two per cent. However, the Canadian economy grew faster than expected in the first three months of 2023, with an expectation to continue expanding in April 2023.
The five-year budget outlook from staff comes after the ABC Vancouver-dominated council approved a 10.7 per cent tax increase in February for 2023. At the time, Mayor Ken Sim told reporters that “tax increases of this magnitude cannot and will not become the norm” and that “tax increases like this” will not become a thing of the future.
Sim was on city business Tuesday and absent from the council meeting.
'Desired property tax percentage'
But his colleague, Coun. Sarah Kirby-Yung, told reporters after the meeting that a property tax hike of nine per cent over the next five years “is not direction from council as to what our target or desired property tax percentage is, and that's really important to note.”
Kirby-Yung wouldn’t say what that “desired property tax percentage” is, pointing out staff’s update Tuesday was a starting point for addressing the city’s 2024 operating and capital budgets, which are anticipated to go before council for approval in December.
“When we get some facts that we can put out there, then we'll share them,” she said. “But we're not going to put out a number that we can't stand behind yet.”
Added Kirby-Yung: “We know that this isn't sustainable. So we're like everybody else balancing the same cost pressures. But we don't want to put undue burden on the residents and the small businesses, so we're looking to try to make that more reasonable for people.”
Back in April, the mayor announced that he created a task force with a mandate to review the city’s operating and capital budgets “with a fine-tooth comb” and recommend ways tax dollars can be spent “more efficiently and responsibly.”
Recommendations from the task force are expected in October.
'Not a lot of fat to be trimmed'
OneCity Coun. Christine Boyle said staff’s five-year budget outlook was a reflection of the significant pressure that local governments are facing financially in terms of inflation and downloaded costs from senior governments.
“What staff outlined is clearly there's not a lot of fat to be trimmed in the budget,” Boyle said. “Vancouver has been finding efficiencies for a number of years all through last term. We were pressuring each department to find efficiencies and we were holding vacancies, particularly through the pandemic.”
Boyle, who was opposed to boosting the Vancouver Police Department’s budget and hiring 100 officers, said she was worried that budget deliberations later this year could end up in cuts to services to pay for ABC Vancouver’s campaign promises.
She mentioned library closures, reduced community centre hours and cutting grants to arts, culture and child care as concerns, although ABC Vancouver has not made suggestions any of that would occur.
“It's all trade-offs,” Boyle said. “And to be honest, I don't know what trade-offs this ABC majority will make — and it makes me very nervous.”
Some of the short-term strategies the city is looking at to increase revenues are fees from ride-hailing services, a commercial vehicle decal program, business licence fees and a “park board parking strategy.”
