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Flat fee for rental suites could lower Township property taxes
How much of a burden do secondary suites place on the Township?
And what would the impact be on annual budgets if homeowners paid a flat fee to have those suites?
The topic arose on Feb. 1 as council continued discussions on the 2012-2016 financial plan which includes the budget for this year.
The five-year financial plan had originally contemplated a property tax increase of 3.95 per cent. Then, as council continued the budget process it became clear that a 2.7 per cent increase was feasible.
The tax increase consisted of 1.5 per cent for general operations, and 0.70 for improvements to fire and police services.
In addition, another .50 per cent was contemplated for road maintenance, but would not include new road construction.
In late January, Councillor Steve Ferguson suggested that council consider yet another 0.50 per cent to allow the Township to return to a system in which money is set aside for capital projects, such as new recreation facilities, playing fields and bridges.
This would bring the budget up to 3.20 per cent.
At the beginning of the budget session on Feb. 1, Mayor Jack Froese quoted Churchill: “Gentlemen, we have run out of money. Now we must think.”
It was Councillor Kim Richter who thought: Why not institute a flat fee for every house that contains a secondary suite?
She noted that the proposed property tax increase is higher than the cost of living in B.C. (1.7 per cent), Vancouver (1.9 per cent), and Canada (2.3 per cent).
Taxpayers must be given a break, she said. “We can raise more money, but we can stop spending so much.”
Richter said the Township is borrowing money from its own reserves and borrowing externally.
“Maybe it’s time to stop spending,” she said.
Councillor David Davis echoed her concern, and said he worried about the Township getting further into debt.
Debt, he said, “is cheap money.”
Finance director Hilary Tsikayi warned that delaying property tax increases will ultimately mean larger increases in the future, which does not offer stability to ratepayers.
“We are going to catch up some time,” Tsikayi said. “Cost drivers don’t go away.”
Charging fees for secondary suites is one of several options which Tsikayi’s department offered to reduce taxes. Others include raising development cost charges, admission to recreation programs, and rentals on municipal properties. Savings could also be found by cutting services, or dipping into reserves.
Richter said rental fees are something the Township should investigate. But, she stressed during the meeting and in an interview afterwards, there must be public input.
“We have to have public dialogue because it will be an extremely controversial issue,” she said.
Asked by Richter how many homeowners declare their secondary suites, head planner Ramin Seifi replied that there are 200 to 250 owners every year “that we know of” — and none pays a fee.
The argument behind a fee is that single family homes pay taxes based on the assumption that only one family uses general services such recreation and transportation, and utilities services such as water, sewer, recycling and garbage collection.
Furthermore, tenants’ vehicles put pressure on street parking.
Even if council has the appetite to follow this avenue, there is insufficient time to incorporate a fee into this year’s budget, but judging by the Township’s figures, the impact would be considerable.
Seifi said that Township research indicates that neighbouring municipalities charge a homeowner between $400 and $500 a year for a secondary suite.
If a fee of $400 was applied to 2,000 rental suites and the revenue not placed entirely for utilities funding, the reduction in property taxes would be $800,000, the equivalent of about one per cent.
Richter wondered whether the Township could track the real number of secondary rental suites through the census.
Meanwhile, Councillor Bob Long said that he plans to canvass representatives of municipalities across the country about the issue when he travels to Ottawa for a sustainability conference of the Federation of Canadian Municipalities.