“Roughly half of all municipal revenue in the Province of British Columbia (Province) is collected through property taxation” (B.C. Ministry of Community, Sport & Cultural Development, 2012, p. 1). Valemount compares favourably in this analysis.
Grant revenue is dependent on successful grant applications – projects can be significantly delayed if applications are unsuccessful. Grants are also increasingly dependent on supporting documentation such as Feasibility Studies, Needs and Demand Studies, Cost of Services Studies, and so on; the process and cost of getting those in place can take years. And finally, grants typically require varying degrees of funding from the municipality to contribute to the project.
The Village maintains three budgets inside of the overall budget: general, water, and sewer.
Expenses in the general budget are in nine main categories, shown in Figure 3. The categories can be confusing and it can be unclear what types of expenses are in each. Appendix A contains a list of samples of expenses for each. It is not a comprehensive list of all of the expenses, and is intended simply to provide an understanding of what is involved in each category.
Valemount has a tax ratio of 2.02:1 which is lower than the provincial average. What does that mean? Commercial properties pay (relative to property values) 2.02 times as much in property taxes as residential properties do. The reasons for this are as follows:
“Generally, business enterprises and commercial property owners are thought to have a greater ability to pay than individuals [i.e., Class 1 owners] for three reasons:
1. they use the property to generate income;
2. they can, in general, pass on costs to customers; and,
3. they can deduct expenses from taxable income” (Union of BC Municipalities [UBCM] 2011, p. 5).
“Non-residential taxes in BC are higher than residential taxes and are not dissimilar with non-residential taxes in other provinces” (Expert Panel on B.C.’s Business Tax Competitiveness, 2012, p. 52).
The low tax ratio in Valemount helps to create a business friendly environment which is fair to both existing businesses and new businesses, unlike some business attraction strategies. In addition, keeping the tax ratio low makes Valemount less vulnerable to initiatives such as The Case for a Cap on the Property Tax Gap, proposed by the Canadian Federation of Independent Businesses (CFIB).
“In The Case for a Cap on the Property Tax Gap, CFIB calls on municipalities to voluntarily cap the ratio of Class 6 property tax rates to Class 1 property tax rates at 2:1. CFIB suggests that if municipalities are unwilling to take this action, the provincial government should prepare the necessary legislation and impose the 2:1 cap. Such a cap, whether introduced voluntarily or imposed through legislation, would lead to revenue shortfalls in almost every city, town and village” (UBCM 2011, p. 6).
Many communities have higher ratios (Coquitlam has a ratio of 4.0, for example), and would suffer significant hardship if proposals such as the CFIB’s were adopted.
“Since 1984, when they were no longer required to base their tax rates on ratios set by the province, B.C. municipalities have gradually increased the rate on business, industry and utility classes relative to residential tax rate” (Bish & Clemens , 2008, p. 195).
“For most if not all municipal governments, finding sufficient “cost savings in their budgets” to accommodate a cap on the Class 6/Class 1 ratio would lead to the reduction or elimination of important local services, the presence of which contributes directly to the well-being and prosperity of local communities, their residents and their businesses. In most communities, the reduction or elimination of local services would not be considered acceptable” (UBCM, 2011, p. 6).
In the end, it is always a difficult balance as commercial properties in Valemount may feel it unfair that they pay twice the rate (relative to property values) that residential properties do, while residents may feel it is unfair that Valemount has a low business tax ratio which shifts more of the tax responsibility onto them. On the other hand, commercial properties in Valemount benefit through the low tax ratio while residents benefit through paying half the amount of taxes (relative to property values) that businesses do.