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Post-flood Political Ground Can Be Slippery

Posted August 26th, 2013 in Calgary, Calgary City Council, Calgary Herald, News, Property Tax and tagged , , by Alex Zagoumenov

There’s a general rule about public opinion and taxes.  Most voters will support increased taxation if: a) They feel it is necessary, and; b) They feel the proceeds will actually be going towards the services they want.

 

This may seem painfully self-evident, but you’d be surprised how often this simple guide is forgotten or ignored.

 

Case in point: What to do with Calgary’s $52 Million property tax windfall?  The issue is back on City Council’s agenda this week, only with a twist – five options have become six, although really only one.

 

For months now, Council has been mulling what to do with $52 Million in additional annual tax revenue retained from the Province.  The source of the revenue is property taxes paid by Calgarians, though the circumstances of its creation are a bit complicated to describe.  Suffice to say, the City is the Province’s property tax collector.  This year, the Province asked for $52 Million less than expected.  Therefore, in the spring when Council chose to keep the overall tax increase at 5.5% (as they budgeted last November), they captured an additional $52 Million in tax revenue.

 

Clear as mud right?  Here’s another wrinkle – it is annual revenue.  Tax increases are forever, so its $52 million this year and every year after that.

 

Having made the decision to keep the tax rate as previously budgeted, Council set about “engaging” citizens on what to do with the extra money.  They presented five options, but the prevailing public mood in June seemed decidedly out of step with Council’s decision to assume the tax room in the first place.

 

According to ThinkHQ survey of Calgarians, the top choice was for Council to give the money back through residential tax breaks (39%), while one-quarter (25%) opted for debt retirement. Fewer than one-third selected “spending options” (17% said a dedicated transit fund and 12% funding for neighborhood renewal infrastructure.

 

More telling than that, the consultation itself was controversial.  According to the same survey, almost 60% of those interviewed felt Council should have consulted the public BEFORE taking the tax room, not after.

 

Much of this controversy can be explained by reference to our rule about public opinion and taxes.

 

The $52 Million itself – not originally budgeted for City coffers – begged the question, “Do you really need the money?”

 

The five options presented to the public suggested the lack of a decisive plan to spend it, begging the question, “Are you actually going to spend it on the things I think are important?”

 

For a significant portion of the electorate, the seeming absence of a plan satisfying these two prerequisites drove opposition, over and above those who simply want to pay less tax.

 

Which brings us to this week.  Mayor Nenshi has tabled a Notice of Motion that would see two years of tax windfall ($104 Million) put aside to address flood recovery and remediation, with City administration to bring forward proposals on what to do with the proceeds thereafter.

 

Will the mayor’s suggestion be seen as a prudent and necessary action to an unprecedented flood or a cynical exploitation of a disaster?  Public sentiment on the matter rests not only in Council’s decision this week but in a host of “unknowns”.

 

There is no doubt that the floods of 2013 changed Alberta.  It was the most destructive natural disaster in the history of the province.  People perished; homes and were businesses were lost; peoples’ lives were disrupted in ways that seemed unimaginable just months ago.

 

There is also no doubt that today Nenshi holds the trust of most Calgarians.  His conduct during this crisis was exemplary, and his personal political stature has been significantly bolstered as a result.

 

In this current climate, Nenshi’s proposal would seem a “no-brainer”, but reference to our rule about the public’s views on taxes suggest the political ground may be more slippery than it looks.

 

Does the City need the money for flood recovery?  Maybe.

 

Provincial and federal programs typically cover these costs.  Will it cover everything?  Who knows?  At this stage, flood recovery, remediation and prevention plans are still in the early stages, and the costs are virtually unknown.  Is $104 Million too much or too little? Is it even necessary at all, given that the City currently has almost $300 Million in its “Rainy Day Fund”?

 

Will the City be spending the money on the things that citizens want?  Without even the outline of a plan at this stage, who knows?

 

One would think that for the first two years the answer is more likely to be yes than no, but according to the mayor’s proposal, the funds in year-three and there after will be going to an, as yet, unspecified purpose.

 

While the timing of the mayor’s proposal may be driven by a desire to settle the matter prior to the summer break or while the flood is still very much top-of-mind for citizens, it also carries a risk.

 

At some point in the not so distant future voters may look back and say, “why did you take the money when you didn’t need it?”  Or worse, “why did you take the money for floods then spend it on something else?”

 

– Column originally published in 2013 July 25, The Calgary Herald