Did you just raise our taxes? Clarifying misconceptions from this week’s indicative tax talk at Council

Originally posted April 27, 2018

Please let me do my best to explain what happened at Council this week.

No one (including myself) likes to see an increase in taxation. But, I must make it clear - City Council did not raise taxes on Wednesday. Period.

What Council did was set an “indicative” rate – the rate is an indication from City Council of what it expects the City’s budget to be. Indicative tax rates are a direction and a forecast.

With this direction, managers will spend the next few months preparing and determining how to provide the best service possible to Calgarians over the next four years. City Council’s budget (and subsequent tax increases or freezes) are finalized every November.

Council listened carefully to eight hours of presentation by Administration as to what their best estimate was on what those services would cost given the new communities we are bringing on and what Calgarians expect. They will continue to work on maximizing efficiencies to get the number as low as possible.

This leads me to address a few questions.

On Wednesday, Councillor Farkas proposed that we set a 0% indicative rate over the next four years. I understand why he raised this point – Calgarians continue to feel the effects of the economic downturn. However, this isn’t realistic. And here’s why:

First, indicative rates are not gospel. Between 2014-2018, City Council set indicative rates of 4.5% in 2015, and 4.7% in the years 2016-2018. But, the actual increase per year was less. We saw an increase of 3.5% in 2016, 2.9% in 2017 and 0.9% in 2018. In the same period, the City found $523 Million in cost reductions.

As stated above, indicative tax rates are used to forecast and plan the City’s budget in the next cycle. However, the City must factor two important areas: inflation and growth.

With an inflation rate of 1% to 2%, this leads to a change in the City’s coffers. With consistent inflation increases, $1 today is worth more than $1 in the future. Therefore, the City must consider the effects on increased inflation on its revenue streams.

Our City continues to grow, and most of this growth occurs in new communities. Growth is a challenge because we pay more money up front when building new communities until new units begin to generate tax revenue.

There is an argument to be made about cutting spending. The City has done that: in the 2015-2018 budget cycle, the City made $523 million in cost reductions.

The big takeaways: 

1. No, we did not increase taxes yesterday. I voted to set the indicative rates at around 3% year over year between 2019 to 2022 to give administration some room to work in. These rates aren’t final until each November.

2. Indicative taxes are a forecast for the future and not a set rate.

3. A 0% indicative rate fails to address inflation and growth

4. Times continue to be tough for Calgarians, however, we must focus on smart spending, and smart leadership. If increases in property taxes are in order, then I will advocate to make them as small as possible without risking serious reductions in service.