When we left off, CBRM District 8 Councilor James Edwards (who, as noted in Part I of this article on the CBRM tax cut, is a former Canada Revenue employee), was agreeing that he too, would like to pay less tax, but arguing that to be “fiscally responsible,” any reduction should be phased in gradually over a number of years.
This was also the opinion of several other councilors, including Steve Parsons of District 7, who could not attend the meeting but sent his thoughts via an email read by Mayor Amanda McDougall:
As a councilor, I am not against a 5% decrease, no, not at all, but being of a fiscal responsible mind, I think, as a council we can get there but over perhaps a three-year period instead of a one-year drop…thus protecting the integrity of our programs and services. I would propose 1.5 this year and follow it up by 1.5 and then 2% in Year Three. I really think that borrowing $8.5 million for our capital plans and commitments and then reducing taxes at 5% is contradictory to all financial logic. I would also prefer, too, if council chooses to go with the 5%, that it be targeted toward residential only and in targeted areas towards low-income earners and seniors [by] whom [it is] really needed.
Councilor Edwards took the opportunity to provide some mathematical perspective.
District 8 Councilor James Edwards.
He calculated the benefit of a 5% tax cut to a resident with a home worth $150,000, assuming they started out paying what is pretty much the average CBRM tax rate of $2.00 per $100 of assessment. Edwards didn’t say it, but that would work out to $3,000 in taxes. If you reduced that $2.00 rate by 5%, you’d get a rate of $1.90 per $100 of assessment which would mean annual taxes of $2,850. The difference is $150 or $12.50 per month.
If the house is worth $250,000, the tax cut is worth $20.83 per month; $500,000, it’s worth $41 per month; $1 million, $83 per month.
Although per-month payments are probably not the best way to think of property taxes because they’re not generally paid per month, they’re paid in two, lump-sum payments. So, in the case of the homeowner with the $150,000 home, that would mean saving $75 every six months.
As one homeowner apparently told District 5 Councilor Eldon MacDonald (who seemed completely bemused by the determination of some of his colleagues to cut municipal revenues):
Eldon, what are youse doing with the 5% discount? I was out to lunch with colleagues the other night. I paid the bill. The tip I left was higher than what I’m going to save on my taxes. We need to fix our roads and our infrastructure. We don’t need the tax break. Low-income people need the tax break and that’s where you should be targeting your money.
Low-income
Councilors in favor of the tax cut argued, variously, that it would help low-income residents, “red cupboard residents” (those using the food cupboards found around the municipality), the working poor and small businesses, but I’m not entirely convinced.
Property tax savings, as illustrated by Councilor Edwards, will not amount to very much money. Using his numbers, if you have a modest home, assessed at $45,000, your savings will amount to $27 or $2.25 per month. I get that $27 means more to someone struggling to put food on the table than to the big tipper in Councilor Eldon MacDonald’s story, but it’s still not very much money. Moreover, low-income and working poor residents are the ones most likely to benefit from municipal facilities — if you don’t have money for books or internet, you use the library. If you don’t have a summer cottage or money to travel, you use the parks.
And, of course, many low-income people are renters. As Campbell noted in her presentation, landlords are unlikely to pass along any savings on their taxes to their tenants. This applies to many businesses too — as Councilor Eldon MacDonald pointed out, the tax cut helps Sobeys but not the new grocery store on Charlotte Street.
Campbell argued it made more sense to target low-income residents directly with a tax rebate.
Big Box
Because this cut is across the board, including both residential and commercial tax rates, it will benefit big retailers like Walmart, Home Depot, Canadian Tire, Sobeys, etc.
Some councilors pointed to this as a bad thing while others, like Gordon MacDonald of District 1, brushed it off as the price of helping the “ratepayers” and small businesses.
But if you can target residential tax cuts to low-income residents, could you not target commercial tax cuts to small or medium-sized or locally owned businesses?
And if CBRM residents are struggling to afford necessities like food, isn’t it a bit much to tell them that to put a few bucks back in their own pockets they have to help Sobeys and Loblaws save money, too?
Aren’t we doing enough to help Sobeys and Loblaws by paying them more money for less food?
Also worth noting, the cut will save the federal and provincial governments $273,000 in property taxes plus, as Campbell explained, the province will receive additional savings on Nova Scotia Housing properties.
‘Equalization’
A large part of both District 10 Councilor Darren Bruckschwaiger and Deputy Mayor Earlene MacMullin’s argument for a tax cut was the $15 million top-up to the CBRM’s municipal capacity grant — often referred to as “equalization” — from the provincial government.
Council hopes this increase will be made permanent and Premier Tim Houston has promised to negotiate a new memorandum of understanding (MOU) on funding with the municipalities, but neither of these things has happened yet and Campbell noted that the recently passed provincial budget allocated no money to another top-up. Bruckschwaiger, though, is prepared for all possible outcomes:
It’s a new day, this here premier promised to double and then…negotiate an MOU. Based on his performance to date, he has been keeping his promise, and I have no reason to think the MOU won’t be complete this year in time for next year’s budget. If not, next year, we’ll do what we always do in every budget, we’ll sit down, review the numbers and decide if we need to raise taxes because of a promise not fulfilled.
Wouldn’t it make more sense to wait and see if the promise was going to be fulfilled?
Last minute
The other aspect of this situation I do not understand was why staff was not instructed to produce a budget incorporating a 5% tax decrease from what was repeatedly referred to during these discussions as “the get-go.”
The Municipal Clerk told me this could have been done.
CAO Marie Walsh told council it could have been done.
As Councilor Edwards noted, staff had pored over the budget for “months.”
And yet, the man apparently running this show, Councilor Bruckschwaiger, seemed to think it was enough for him to float the idea during pre-budget workshops. “It’s been in the media,” he said, “most of the councilors have spoken on it” and “staff should have had this notion in mind” when drafting the budget.
I think this a situation where he should have “used his words,” as we tell the toddlers, and made a motion instructing staff to produce a budget incorporating a 5% tax cut.
Best use
If I understood her correctly, Deputy Mayor MacMullin was arguing that staff should have produced a “status quo” budget and then decided, separately, what to do with the $15 million top-up to the municipal capacity grant.
But if you think about it — and I’ve been doing little else for the past two days — staff doesn’t draft a budget each year then debate, separately, how to use the municipal capacity grant. They incorporate the money into the budget and I don’t think it’s strange that they did the same with the additional $15 million.
Source: CBRM 2022-23 budget
I do think it’s perfectly reasonable for council to question how that money is spent. I think it’s fair game suggest moving funds from one project to another. But having watched council, over the years, turning down community group after community group looking for assistance, having heard councilors say repeatedly that the CBRM would love to help but has no money, I find Bruckschwaiger’s claim that there is suddenly $3.6 million worth of easily trimmed fat in this budget hard to compute.
On the other hand, while I don’t agree with the tax cut (I really don’t agree with the tax cut), I do see that the two options presented by staff to council for trimming $3.6 million should probably not have been described as the “only” ways to fund it.
I don’t have access to copies of the slides CFO Campbell presented on Thursday and was only able to screen-capture one of them so I have nothing to illustrate Option 1, which involved not cutting taxes for everyone but raising the income threshold for the low-income tax rebate to $35,000 (from just over $25,000). Campbell said this would capture an estimated additional 2,400 households. The rebate of $300, she said, would “far exceed” the benefits of a 5% tax cut for low-income residents. To illustrate she used the example of New Waterford, where the existing tax rate is $2.08 per $100 of assessment.
A person would have to have a home assessed at over $300,000 for a 5% tax cut to return $300.
Option 2 looked like this (apologies for the poor quality screenshot):
Campbell argued that the only way to avoid cutting services or laying off staff was to use $500,000 from the deed transfer tax and to re-allocate $3.31 million from the municipal capacity grant top-up from the projects noted above.
I wouldn’t go so far as to say staff was trying to “block” the tax cuts (although Bruckschwaiger did) and I would suggest that having a day to incorporate a significant tax cut into a budget that’s taken months to prepare doesn’t lend itself to carefully thought out solutions. But — and this is a big but — this tax cut is happening, council has approved it, so we’re going to need carefully thought out solutions.
In the end, council didn’t accept either option, deciding instead to take a break from what had become, in MacMullin’s words, a “very tense room” and come back to deal with the capital budget later.
So, stay tuned…
