Wade Locke — File photo
Municipal fiscal framework are words that prompt a Pavlovian yawn from many of us. Yet, according to Municipalities Newfoundland and Labrador (MNL) president Harry Hallett, we need to wake up and pay attention to the subject, as the framework is not enough to maintain our municipalities.
It says change is in the hands of the incoming provincial government.
“Since 1992, Newfoundland and Labrador municipalities have seen drastic reductions to their municipal operating grants and, without new sources of revenue, the current tax system cannot provide adequate revenue for basic services like clean drinking water, waste management and safe roads,” Hallett stated in a news release Tuesday.
Along with the statement, MNL released an economic report from Memorial University of Newfoundland economist, Wade Locke, looking at options for increasing revenues in the long term. Locke’s research was floated in brief at the 2011 MNL conference in May, but the final report was not available until this week.
Citing the document, MNL is calling for a one percentage point increase on the provincial personal income tax rate. It says the increase can generate an additional $116.5 million that could be downloaded to municipalities.
It all adds to an ongoing public policy debate on municipal sustainability. How do we keep what we have, afford what we need, if current taxes are not enough, as many municipalities have claimed?
A simplistic solution would be to increase property taxes which are considered visible, transparent, predictable and easy to administer, Locke’s report states.
Municipalities rely on property for the bulk of their revenue.
However, in Newfoundland and Labrador there appears to be a problem with people paying property taxes.
A 2007 MNL census suggests as much as 80 per cent of communities ran into problems with tax delinquents in 2006, “resulting in 78 per cent of (them) resorting to a collection service.”
Report offers revenue generating recommendations … Continued from page A1
As well, as the report states, the property tax does not take into account the ability for a property owner to pay. A go-to example is the elderly resident who feels forced into selling their home and moving, due to the financial pressure of rising property tax paired with a fixed income.
Also, the public does not like property tax increases, tending to vote out whoever votes them in, Locke states, even in cases where there is a proven need for the additional revenue.
Enter the alternatives.
The report outlines how municipalities in this province might be given access to an income tax or a sales tax, or both. The point is to diversify where towns and cities get revenue.
He notes countries such as Sweden, Norway and Germany get 75 per cent or more of their local revenues from taxes from income, profits and capital gains.
While diversification is perhaps a simple idea, it is not so simple in execution. Locke warns against potentially increasing inequities between regions, even individual communities through varying taxation. Pairing the additional taxes with some form of equalization system is considered.
Administrative costs, Locke’s report states, can be avoided by piggy-backing the municipal tax on the existing provincial tax.
The report takes a briefer look at other revenue-generating options, including the implementation of or increase in: a general sales tax, grants-in-lieu of taxes, corporate income taxes, development charges, entertainment taxes, hotel and accommodation taxes, property or deed transfer taxes, business occupancy tax, gas tax and user fees.
Ultimately, the challenge is in determining what will work as well for one community as another.
According to numbers provided in the report, over a quarter (26.4 per cent) of the provincial population resides in one of 199 communities with populations of 2,500 people or less. A grand total of about 20 per cent of the population resides in the capital.
As part of his 128-page report (more than 500 pages with appendices), Locke quickly looks at MNL’s push to increase regional governance.
Meanwhile, on the campaign trail, party leaders had little to say on the newly released report.
There was no statement from the Dunderdale campaign.
“Dr. Locke has a number of recommendations, but at this point we haven’t made any decision on that,” Liberal Leader Kevin Aylward said.