Competitive Taxes Through Smart Growth
How does Kingston fund investments in neighbourhoods and infrastructure, and pay to fix roads and provide more services and more housing? By higher tax rates? Or, through Smart Growth?
In a society where there is a multitude of conflicting views on any given subject, property taxes would appear to be an exception. No one likes the idea of high property taxes or increasing property taxes.
But, the reality for the City of Kingston, and every municipal government in Ontario, is that property taxes provide the bulk of the funding to pay for critical services that we all need: public transit, fire & rescue, roads, housing, parks, etc, etc. And the cost of providing these services increases year after year with inflationary pressures (from fuel costs, labour costs, etc).
In the current budget year, about $225 million of the City of Kingston’s funding, comes from property taxes. And in a future without growth, Kingston would be confronted by the stark choice of cutting back on services…or…increasing property tax rates.
Cutting back on the scope or quality of services has obvious downsides. Similarly, increasing tax rates has obvious downsides, with negative impacts on business investment and commercial and residential construction.
Neither option should be viewed as acceptable. Particularly in the current situation in Kingston, with the record low vacancy rates pushing up the cost of housing. There is an acute need in Kingston for increased residential construction and a greater supply of housing options.
As such, SPEAKingston believes one of the basic tenets of smart growth is to have competitive taxes. Competitive property tax rates will encourage investment, grow jobs, increase the housing supply — which in turn, will facilitate growth in City tax revenues, without increasing tax rates.
How Competitive are Kingston Property Taxes?
Benchmarking Kingston property taxes against other Ontario cities is not a simple task, given different variables related to the types of homes, size of homes, the value of property, etc.
The Fraser Institute did a comprehensive study in 2015, benchmarking property taxes on a single-detached 3 bedroom home, across 33 Ontario cities. The basis for comparison in that study was a detached 3 bedroom, 1200 square foot home, with 1.5 bathrooms and 1 car garage on a lot size of 5,500 square feet.
Kingston ranked #19 in this study, in the ‘middle of the pack’ of the 33 Ontario cities. Kingston ranked ahead of cities like Barrie, Peterborough, Guelph, London, Kitchener, Windsor and Sudbury. So to the extent that study gives an accurate picture, that would seem like pretty good news.
Also of interest, that same study by the Fraser Institute benchmarked the rate of increase in residential property taxes over the 2005-2015 period. In that comparison, Kingston ranked poorly, with the 7th highest rate of increase (out of 33 cities). We were only better than Timmins, Sudbury, North Bay, Guelph, Markham and Mississauga.
However, Kingston City Council was cognizant of that negative trend and took action in 2013 to cap annual increases in property tax rates to 2.5%, with this cap including 1% dedicated funding for infrastructure investment. This policy has continued and is reflected in the current 2018 Budget for the City of Kingston. Maintaining that fiscal discipline in the future will help ensure that our tax rates remain competitive.
Growing City Revenues While Restricting Tax Rate Increases
But by capping tax rate increases to the rate of inflation, or below the rate of inflation, City Revenues cannot increase and keep up with spending pressures without growth.
As such, SPEAKingston is a strong advocate of growth—Smart Growth.
Growth that considers the advantages of intensification to provide new options for housing in our downtown core, including affordable housing, versus the continuing urban sprawl. Growth that will create an expanding array of jobs. And growth that will focus on improvements and enhancements in building design that will enhance our neighbourhoods. And of course growth that carefully balances the need to protect Kington’s unique cultural and environmental assets.