What Are We Willing To Pay For?

At this week’s 2013 final gathering of the tribe, one of the items on city council’s agenda will be boringmeetingthe rate supported budget for next year. This is separate from the operating and capital budgets the budget committee has been publicly wrangling with since late-November, covering water, waste and parking. As ‘rate supported’, technically, these items aren’t funded from the tax base but are maintained by users of the services. Pretty much pay as you go and pretty much by everybody living and/or working in this city.

I won’t get into the details because, well, they’re so bo-o-o-o-r-r-r-r-r-r-ing, except to say that this is the model some members of council would like to see spread through more of the city budget. Taxpayers only paying for those services and programs that they use. During the staff presentations at budget committee last week, certain user fees were recommended to be hiked as high as 6% (2.25% inflationary plus 3.75% additional). devilsinthedetailsOn Friday on Twitter, The Grid’s Edward Keenan pointed out that the ratio between property taxes and user fees that make up the city’s budget jumped from 2.5:1 in 2000 to 1.2:1 in 2014.

We all know the property tax base is not the sharpest tool to use in generating revenue for governments. Property taxes rarely reflect the reality of the current economic climate nor do they always represent accurately those with the best (and worst) ability to pay. It makes sense for a municipality to try to diversify its portfolio of revenue streams.

And, in some ways, the blunt force of something like a consumption tax which, I’d argue water and waste rates based on usage are – the more you use, the more you pay and vice versa – goes toward modifying behaviour. Who doesn’t want to reduce the amount of water we use or how many landfills we fill? In the long run, such measures will prove to be economically beneficial.

But…But… And here’s the tricky part. Should the onus for such an approach fall disproportionately on those most susceptible to changes in cost? waterChances are that if you live someplace with 4 bathrooms (3 of them full) and a extensive sprinkler system in the lawn, you’re going to be less sensitive to increases in water rates than somebody living with their family in 900 square feet and one bathroom. Conservation is simply an economic decision.

We’re also very selective at this point about which users pay more fully for the services and programs they want. You want to use a city run sports field? That’s going to cost you more this year. Drive on the roads? Hell no! We won’t pay!

Next month when council debates the 2014 operating budget we’ll hear much yelling about reducing the Land Transfer Tax. This, we will be told, dampens the market for home buying and selling, although little proof will be offered to back up that claim. nickelanddimeMoreover, the LTT is a burden on those desperately struggling to put together the last few thousand dollars in order to purchase their first home and to seniors, ready to sell their family home and downsize into smaller digs.

I’m not insensitive to those arguments but I’ll just say that it is a concern we should extend to other aspects of living in this city. An individual’s ability to pay for a service or program versus the collective good of that service or program. It’s always a delicate balancing act and one that seems to be trending toward a more pay as you go kind of city. Let’s have that discussion and make sure if that’s the direction we decide to go, it’s applied evenly and fairly so that everyone is paying properly for everything the city provides for them.

monetizingly submitted by Cityslikr

2 Responses to What Are We Willing To Pay For?

  1. Jim Rootham says:

    Just to get really boring about this.

    A critical point about rates users pay as drivers of aggregate behaviour is to make sure the prices reflect the costs.

    Consider your water example. There are two cost drivers, first the volume of water used in the system and second the costs of installing and maintaining the pipes and plants.

    Volume pricing obviously matches the first costs. But does it match the second? If I live in a high density part of town I share the costs of a few miles of pipe between me and the water plant with tens of thousands of people. In a low density part of town there are more miles of pipe shared between fewer people.

    Should both people pay the same for water?

    The really boring part is that the city should do a large scale cost accounting exercise to determine the cost drivers of all of its services and decide which services should have payment regimes desgined to capture the costs.

    Using cost drivers to allocate resources only works fairly if income is equitable. That needs to be addressed somewhere.

  2. Sonny says:

    I hope the Ford supporters see that their water and garbage is going up 9% again under Ford! In Aug. 2012; the City did privatize garbage pick up in one quarter of the City but those “savings” have not been passed on to the “rate” payer…

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