Bank of Canada, Inflation and Valerie Plante: Three reasons why we can't avoid a tax increase
December 12, 2023
Next Monday night, December 18, Côte Saint-Luc City Council will adopt our 2024 budget. You can join us at City Hall at 6 pm or watch the live stream here.
In my 18 years on city council, this was the most difficult budget process I ever experienced and I know the mayor, the other seven elected officials and our senior staff feel the same way. Municipalities across the country are in the same boat, principally because of the Bank of Canada significantly increasing benchmark interest rates.
For demerged suburban municipalities, we are faced with the triple threat: The Bank of Canada rate hikes, runaway inflation and the absolutely unfair Agglomeration Council controlled by Mayor Valerie Plante and the City of Montreal.
What does this all mean for Côte Saint-Luc property owners? Regrettably, a higher average tax increase than we'd like to see. However, thanks to a lot of hard work, we were able to bring down the original forecast.
For months our Finance Department has crunched numbers and instructed each department to propose serious cuts. This entire exercise has been done with city council. Let me commend Councillor Steven Erdelyi, who has the finance portfolio, for leading the discussions.
Here is what we are facing. In a normal year we net anywhere from $4.3 to $7.9 million in welcome taxes, funds directed our way every time there is a new property purchase. The Bank of Canada has increased lending rates to lower inflation. While I understand the objective, there is a reason why our next Prime Minister Pierre Poilievre has been calling for the governor of the Bank of Canada Tiff Macklem to be fired. The interest hikes are holding people back from buying new homes. Some can’t even keep up with their mortgage payments. Municipalities have been forced into deficits. Besides cutting what we can, our only other option is to pass on the costs to taxpayers for Quebec law does not allow us to adopt deficit budgets. Experts do say Macklem's strategy is showing signs of working. But will the rates ever go down enough to help the housing market? If not his moves will in fact contribute to inflation. Property owners will pay higher taxes. This includes apartment building owners passing on the cost to tenants; businesses having to raise prices to keep up. So is this just one vicious circle?
This year, at best, thanks to Tiff, we budgeted for $4 million in welcome taxes. As the year draws to a close we expect to reach $2.5 million. So that represents a $1.5 million shortfall.
To clarify regarding the Welcome Tax, between 2019-2022, these transfer duties ranged from $4.3M to $7.9M. See actuals below:
- 2019 $4,317,237.23
- 2020 $4,403,458.06
- 2021 $5,671,587.34
- 2022 $7,878,059.19
"Based on these numbers we had budgeted $4 Million for 2022 and 2023, which we had thought was conservative based on the actuals," said Councillor Erdelyi. "In 2020, when the pandemic hit, we were worried that people would stop buying homes as open houses and in-person visits weren’t allowed. We still had over $4 million in revenue from the welcome tax that year. For 2023, we didn’t realize that the interest rates would stay this high for so long nor have such a detrimental effect on property sales."
The effects of inflation have hit all of society very hard. And yes that is what the Bank of Canada is trying to address. We have to pay more for everything. Snow removal costs alone will go up by $350,000.
As for how the interest rates affect us, we have to pay off our debt. So the "Tiff effect" there adds up to another $230,000.
When the former Liberal government, then headed by Jean Charest, permitted municipalities to demerge from megacities nearly 20 years ago this was a double-edged sword. Yes, we got our city and town halls back, but in our case Montreal headed an Agglomeration Council whereby the taxes from demerged cities contribute about 21 per cent of the Agglomeration budget, but demerged mayors only represent about 17 per cent of the votes, a fraction lower than quorum. It is an unfair system that the Liberals were never willing to adjust. Fat chance the CAQ will help us out. Guess what our increase in payments to the Agglomeration are this year? An ugly $1.8 million.
We are not Montreal. Our staff do not travel around the world and order oysters for dinner. When we hold public consultations, we listen to citizens. Why should we have to contribute to Plante's obsession with adding bike paths and waging war against moving vehicles? Is it our fault that her administration has ruined downtown and made it unattractive to visit?
Add in some more inflationary expenses and we were looking at an unprecedented $5 million deficit.
We spent countless hours being briefed by staff on every penny we could cut. At one point the proposed tax increase was not acceptable. So we entered an exercise. How could we arrive at the lowest possible average property tax rate with the least impact on residents in terms of services? We cut $500,000; no easy task. This included staff cuts, also a challenge given union and contractual agreements. Frontline services like the library and the Aquatic and Community Centre remain in place. Streets will be repaved, potholes filled and parks maintained. So will most activities, with some slight adjustments in terms of user fees. We all had to make difficult decisions. In my case, the all-volunteer Côte Saint-Luc Cats Committee (my true "pet' project) had its budget cut in half. We will try and fundraise to make up the difference. Local winter skating rinks are affected as well. For years I worked hard to bring a rink to Rembrandt Park. That is one the ice surfaces that will not be back for 2024.
Like our mayor said at the last council meeting, this is like managing a household. If your personal revenue goes down for any reason, you have to tighten your belts. Maybe a vacation is cancelled or downsized or you go to less restaurants. Something always has to give. We are no different.
What I can assure residents is that Côte Saint-Luc will remain one of the best municipalities to live. And looking into the crystal ball, if major development projects for the Quartier Cavendish, Decarie Square and Côte St. Luc Shopping Centre occur in the next few years we will have a much needed new revenue stream which will benefit all taxpayers.
Go to the 33:40 mark of our last meeting to see my remarks: https://www.youtube.com/watch?v=hGhvdHXDkMo
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