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Options for Municipal Revenue Growth in British Columbia

James Fletcher and Doug McArthur

November 2010

� LOCaL PROsPeRity

table of Contents

2 executive summary

4 Chapter 1 • Local Government Financing

6 TrendsinLocalGovernmentFinancing

10 ImpactofBC’sMunicipalRevenueChanges:HousingCosts

12 ImpactofBC’sMunicipalRevenueChanges:IndustrialPropertyTax

14 ImpactofBC’sMunicipalRevenueChanges:CompetitiveEdge

15 TheFutureofMunicipalFinancinginBC

�6 Chapter 2 • Challenges Facing Local Government

16 EconomicImpactsofEnvironmentalandEnergyPolicy

18 PopulationStructure

20 ChangingRoleofMunicipalGovernment

23 BC’sEconomicTransition

26 CreatingTwoBritishColumbias

28 Chapter 3 • Revenue sources for Local Government

28 Taxes

37 SaleofServices

50 OtherRevenues

56 Chapter 4 • economic Development

56 HousingAffordability

58 LocalProcurementPolicies

60 WorkingwithFirstNations

62 ColumbiaBasinTrust

63 CommunityBonds

65 CaissededépôtetplacementduQuébec

67 EncouragingClusters

70 ImportSubstitution

73 sources

8� appendix a • think City survey

85 appendix B • survey Respondents

2 LOCaL PROsPeRity

Thenextfewyearswillbechallengingtimes

forBC’slocalgovernments.Socialand

economicchangeswillrequireadaptationand

innovationinourinstitutionsandgovernance

structures.Inparticular,theBCeconomyisin

themidstofamajortransition.

Theneedforbroad-basedmunicipalfinance

reformhaslongbeenrecognizedinnumerous

studiesandreports,suchasthosepublished

bytheConferenceBoardofCanada,the

CanadaWestFoundation,TDBankFinancial

Group,andtheCanadianChamberof

Commerce.However,littlehasbeendonein

thepastthreedecadestoadvancespecific

proposalsforhowcitiesinthisprovince–or

acrossCanada–payfortheservicesand

infrastructurethatresidentsandbusinesses

relyonnow,andwillneedinthefuture.

Thisdiscussionpaperisintendedtospark

debateamongBC’slocalgovernments,

residentsandbusinessesaboutthestateof

finances.Theaimistobeginaprocessof

buildingconsensusaroundasetofsolutions

toaddressthefiscalchallengesfacingour

province’s189municipalitiesandregional

districts.

executive summary

Thefirstchapterofthispaperlooksathow

localgovernmentsarecurrentlyfinancedin

BritishColumbia,andhowthosefinancing

arrangementshavechangedovertime.It

alsoexaminessomeofthechallengesand

issuesassociatedwiththecurrentmodelof

municipalfinancinginBritishColumbia.

The ongoing economic transition

requires that we develop new ways

to finance local governments.

3 LOCaL PROsPeRity

Thesecondchapterexploresquestions

relatedtosocial,environmentaland

economicchangesthatarereshapingBritish

Columbia.Thesechangesarehappening

simultaneouslyatboththeglobalandlocal

levels.ThischapterarguesthatBCisinthe

midstofamajoreconomictransitionthathas

importantpredicableconsequencesforlocal

communities;consequenceswemustprepare

forasbestwecan.

Theongoingeconomictransitionrequires

thatwedevelopnewwaystofinancelocal

governments.Itisarguedthatthemost

importantaspectsoftheeconomictransition

willbedrivenbydemographicchanges

towardanaging,moreurbanizedpopulation;

industrialchangesawayfromrenewable

resourceextractionandprocessing;and

changesingovernmentfinancingarisingfrom

risinggovernmentdebtanddecliningrevenue

buoyancy.

Thethirdchapterlooksatpossible

solutionstodiversifyrevenuesourcesfor

localgovernments.Usingexamplesandcase

studiesfromBritishColumbiaandother

jurisdictions,weexploresolutionsthatwould

allowgovernmentstodiversifytheirsources

ofrevenue.

Inthefourthandfinalchapter,weexaminea

numberofpromisingeconomicdevelopment

policiestohelpBCcommunitiesgrowtheir

localeconomies.Theseideasaimtodiversify

oureconomy;improvelocalmultipliereffects

withhigh-valueindustries;keepmoney

circulatinglongerinourcommunities;

andattractandretainbusinessinvestment

andhumanresourcetalent.Together,they

provideablueprintforamoreself-sufficient,

moreentrepreneurialandmoresustainable

economy.

� LOCaL PROsPeRity

Mostlocalgovernments

inBritishColumbiaare

governedundertheCommunity

CharterandtheLocalGovernmentAct.

Therearesomeexceptions,suchastheCity

ofVancouver,theIslandsTrust,andvarious

resortmunicipalitiesgovernedunderseparate

legislation.However,whetherit’sBC’slargest

municipality,thenewSunPeaksMountain

ResortortheVillageofHazelton,municipal

legislationregulatingthefinancialscopeofa

localgovernmentisvirtuallythesameacross

BC–andthatscopeisquitelimited.

Localgovernmentsarenotallowedtorun

deficits,evenduringperiodsofrecession,

makingthemparticularlyvulnerabletothe

boom-and-bustcycleofaresource-based

economy.Theirprimarysourceofrevenue

istheabilitytotaxrealpropertywithintheir

jurisdiction,andlevychargesformunicipal

services.Takentogether,propertytaxesand

salesofservicesaccountfor88.5percentof

own-sourcerevenuesforlocalgovernments

inBritishColumbiain2008.

BC’smunicipalitiesarenotallowedto

collectsalestaxes,incometaxes,royalties,

orvariousothertaxescollectedbythe

provincialandfederalgovernments.Theyare

alsonotallowedtoborrowmoneywithout

theapprovalofelectorsbyreferendum,a

democraticsafeguardtoprotectagainst

recklessdecisionmaking.

Local Government FinancingLocalgovernmentsinBritishColumbia

havelongstruggledtoestablishanequitable

financingmodelthatrecognizesthegrowing

responsibilitiesoflocalgovernment.Tensions

betweentheprovincialgovernmentandthe

UnionofBCMunicipalities(UBCM)andits

membergovernmentsarenotnew.Indeed,

thehistoryoffinancialrelationsbetween

thesetwolevelsofgovernmenthasoften

beenchallenging.Fromthe1940sonward,

theissueoflocalgovernmentfinancingarose

regularlywithreportsandstudiesontheissue

publishedineverydecade.

Thehighpointformunicipal–provincial

financingrelationsoccurredin1978.Inthat

year,accordingtoa2008UBCMpolicypaper,

theprovinceintroducedarevenue-sharing

programthat“…providedaguaranteedshare

ofmajorprovincialrevenuesourcesincluding

personalandcorporateincometaxes,sales

andfueltaxesandnaturalresourcerevenues.

Thisshareofprovincialrevenuewasusedto

financeunconditionaloperatingtransfers

andconditionaloperatingandinfrastructure

supporttolocalBCgovernments.”

ChaPteR

1

Local governments in British

Columbia have long struggled to

establish an equitable financing

model that recognizes the

growing responsibilities of local

government.

5 LOCaL PROsPeRity

Overthelast32years,muchofthat

fundinghasdwindledandtheproportion

allocatedtounconditionalgrantshas

shrunk,withmuchmoreofthefunding

becomingconditionalandtiedtospecific

capitalprojects.By1993,lessthan

halfofthefundingwasunconditional.

Thistrendcontinuedthroughoutthe

1990s.AccordingtotheUBCM,“general

unconditionalsupportwaseliminated

in1997,althoughsomegrantstosmall

communitiescontinued.”Thisprompted

theUBCMtopublishthestudy“Financing

LocalGovernment”in1998.The1998

UBCMstudyrecommendedgivingmore

flexibilitytomunicipalities;improved

reportingstandards;removingrestrictions

onexistingrevenueinstruments;accessto

newsourcesofrevenue;anewpolicecost-

fundingformulaforsmallcommunities,

andcontinuedprovincialsupportforsmall

communities.

AsaresultofUBCM’sadvocacywork,

traffic-finessharingwasintroducedin

1999andraisedto100percentin2004,

whilesupportforsmallcommunities

hasbeenmaintainedandexpanded.The

federalgovernmentbegan,in2005,toshare

gas-taxrevenueswithlocalgovernments

underanagreementwiththeUBCMand

theprovincialgovernment.Inaddition

totheserevenue-sharingprograms,the

federalandprovincialgovernmentshave

continuedtofundcapitalprojectsthrough

theCanada–BCinfrastructureProgram,the

MunicipalRuralInfrastructureFundand

theBuildingCanadaprogram.

Otherspecificallytargeted,provincially-

mandatedprogramsinareassuchaswildfire

prevention,seniorshousingandcommunity

tourismhavebeenintroducedtomeet

certainnarrowly-focusedneeds.However,

likemostprovincialandfederaltransfer

programs,theyaremostlyrestrictedtocapital

infrastructureorareone-timegrantsthatdo

notprovideforongoingoperatingexpenses

anddonotprovidefinancialstabilityforlocal

governments.

In2006,theFederationofCanadian

Municipalities(FCM)presentedapapertitled,

“RestoringMunicipalFiscalBalance.”The

FCMpapercalledforbroad-basedreformthat

wouldclarifyrolesandresponsibilitiesofthe

differentlevelsofgovernment,developaplan

totackletheinfrastructuredeficit,diversify

municipalrevenuetools,investinpublic

transit,andreformvariousadministrativeand

governancepractices.

AccordingtoVancouverMayorGregor

Robertson,theneedformunicipalfinance

reformisjustasgreattoday.AtanFCM-

sponsoredeventinMay2010,themayorof

BC’slargestmunicipalityreaffirmedthat,

“Canadaiswaybehindothercountriesin

restructuringsothatcitiesareempoweredto

takecareoftheirownneeds.”

Thebalanceofthischapterreviewsthe

recentmunicipalfinancingtrendsforBC’s

localgovernmentsanddiscussestheir

implicationsforfutureeconomicviability,as

wellastheirprimaryimpactsonresidentsand

businesses.

6 LOCaL PROsPeRity

Trends in Local Government FinancingBC’slocalgovernmentsreceivethelargestpart

oftheirrevenuesfromthreechiefsources:

propertytaxes,salesofgoodsandservices,

andtransfersfromothergovernments.

Propertytaxesareanown-sourcerevenue

(i.e.,arevenuethatissolelyderivedand

managedbythecity).Theyarebasedona

chargeontheassessedvalueoflandand

improvements.

Salesofgoodsandservicesareanother

own-sourcerevenueandthevastmajorityare

calculatedonthebasisofvolumesofservices

delivered.However,becausethereisverylittle

individualpropertymetering,thevolumes

aregenerallyproportionatelyallocatedto

properties.Theyareessentiallyataxon

propertycalculatedonadifferentbasisthan

thestandardpropertytax.

Thefinalmajorsourceofrevenuesfor

localgovernmentsaretransfersfromsenior

levelsofgovernment,soarenotown-source

revenues.Transfersmaybeforspecific

purposes,inwhichcasethelocalgovernment

isessentiallyactingastheadministrative

agentofthetransferringgovernment.

Alternatively,transfersmaybeforgeneral

purposes,inwhichcasetheysupplementthe

revenuessupportinggeneralservices.

Tables1and2providedataonlocal

governmentandprovincialgovernment

revenuesfrom2000to2008.Whencomparing

thesefigures,rememberthatTable1is

expressedinthousandsofdollars,whileTable

2isexpressedinmillionsofdollars.

Table 1: briTish Columbia loCal governmenT revenue and expendiTures ($Thousands,

CurrenT), 2000-2008

Revenue and 2000 2001 2002 2003 2004 2005 2006 2007 2008 Expenditure

Total revenue $8,521,050 $8,800,212 $8,981,522 $9,318,707 $9,791,072 $10,577,459 $11,252,598 $11,923,586 $12,554,106

Own source 4,780,217 5,006,580 5,010,656 5,219,752 5,568,622 5,925,006 6,455,542 6,837,437 7,229,017 revenue

Property and 2,599,612 2,715,661 2,794,121 2,886,090 3,000,249 3,165,982 3,437,791 3,655,669 3,830,456 related taxes

Sales of goods 1,557,197 1,601,682 1,650,949 1,764,185 1,965,230 2,084,072 2,270,115 2,426,578 2,566,378 and services

Other revenues $623, 408 $689,237 $565,586 $569,477 $603,143 $674,952 $747,636 $755,190 $832,183

General purpose transfers 64,335 68,711 62,911 67,483 113,733 121,366 157,332 113,849 151,616 from other government subsectors

Specific purpose 3,676,498 3,724,921 3,907,955 4,031,472 4,108,717 4,531,087 4,639,724 4,972,300 5,173,473 transfers from other government subsectors

Total expenditures 8,603,744 8,847,486 9,286,348 9,790,511 10,115,862 11,069,407 11,764,540 12,492,781 13,700,419

table �: British Columbia local government revenue and expenditures ($thousands, current), 2000-2008

7 LOCaL PROsPeRity

ChartsAandBtracethetrendlinesforown-

sourcerevenuesoflocalgovernmentsandthe

provincialgovernmentsince2000.Thedots

aretheactualamountsandthelinerepresents

thetrend.

Whilelocalgovernmentown-sourcerevenue

growthwasmorestableovermostofthe

pastdecade,theserevenuesgrewatafaster

ratethanprovincialown-sourcerevenues

andtheprovincialeconomyasawhole.

Theseresultsshowthatinordertomeetthe

expendituredemandsplaceduponthem,

localgovernmentswerecompelledtoimpose

amorerapidly-growingburdenoftaxesand

goodsandservicechargesontheirtaxpayers

thantheprovincialgovernmentplacedon

provincialtaxpayers.Localgovernment

own-sourcerevenuesincreasedby51.2per

centfrom2000to2008,whileprovincial

governmentown-sourcerevenuesincreased

byonly33.7percentfrom2000to2009.

Revenue & 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Expenditure

Own source $22,850 $24,951 $23,788 $22,493 $24,439 $26,747 $28,780 $29,887 $31,166 $30,458 revenue

General purpose 2,495 2,632 2,737 3,417 2,918 2,575 1,804 2,008 1,574 1,663 transfers from other government subsectors

Specific purpose 459 484 482 472 829 3,030 3,665 4,142 4,417 4,488 transfers from other government subsectors

Total expenditures 27,121 27,914 29,256 28,586 28,728 28,885 30,661 32,707 35,065 38,335

table 2: British Columbia provincial government revenue and expenditures ($millions, current), 2000-2009

Chart a: British Columbia local government own-source revenues, 2000-2008

$7500 -

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other government subsectors

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E

Dollars (millions)

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E

Chart B: British Columbia provincial government own-source revenues, 2000-2009

Dollars (millions)

8 LOCaL PROsPeRity

Furthermore,asnotedearlier,thesetwo

majorrevenuestreamsaccountfor88.5

percentofown-sourcerevenuesforBC’s

localgovernmentsin2008.Incomparison,

propertytaxesandsalesofgoodsandservices

accountforonly16.7%ofalllocalgovernment

andprovincialgovernmentown-source

revenuescollectedinBCin2008.Oneofthe

explanationsforthisisthatlocalgovernments

arerestrictedtoamuchnarrowerrangeof

revenuesourcesthanistheprovince.

Theburdenoflocalgovernmentrevenue-

raisingbeingconcentratedononlytwo

sourcessuggeststhatresultingeconomic

distortionsmaybequitelarge.Furthermore,

thevulnerabilityoflocalgovernmentsto

weaknessineithersourceisquitehigh.

ChartsCandDshowthedistributionof

localrevenuesbetweensalesofservicesand

propertytaxsince2000,aswellasthetrends

between2000and2008.Therateofgrowth

ofsalesofgoodsandserviceshasbeen

somewhathigherthanthatofpropertytax

revenues,withsalesincreasingfrom59.9per

centofpropertytaxrevenuein2000to67.0

percentin2008.

Chart C: British Columbia local government sales of good and services revenues, 2000-2008Dollars (millions)

Chart D: British Columbia local government property tax revenues, 2000-2008

Dollars (millions)

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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9 LOCaL PROsPeRity

Itappearsthatlocalgovernmentsare

showingsomeinclinationtoshifttheburden

touserchargesovertime.Thereasonisnot

entirelyclear,althoughitmaybeinpart

becauseuser-chargeincreasesreceiveless

publicattentionandthusaresubjectto

lesstaxpayerresistance.Forexample,in

Vancouverthepropertytaxfor2010was

increasedbyoverfourpercentforresidential

propertyowners,whiletheincreasesin

chargesforserviceswasabout12percent.

Thelatterincreasereceivedlittleatttention

inthemedia,eventhoughitwillresultinan

increaseinpaymentsbypropertyownersof

about$50million,comparedtoanincreaseof

about$20millioninpropertytaxpayments.

Therehasalsobeenachangeintransfers

fromseniorlevelsofgovernmentinthepast

decade.ChartEshowstheamountsand

trendsinaggregatetransfersoverthelast

decade.Ascanbeseen,transfersarenow

almostentirelyforspecificpurposes.

Transfersincreasedbyabout42.4percent

overtheperiod,whichisalmostexactly

thesamerateasthegrowthinprovincial

own-sourcerevenues,butconsiderablyless

thanthe51.2percentrateofgrowthinlocal

governmentown-sourcerevenue.When

transfersfailtokeeppacewiththegrowth

inown-sourcerevenue,localgovernments

necessarilybecomemoredependentontheir

own-sourcerevenues.

Overtime,thistrendtowardsgreaterself-

financingwillcontributetothegrowing

infrastructuredeficitasneededinvestments

aredelayedforlackoffunds.Inadditiontothe

upfrontcapitalcosts,theongoingoperating

expensesofnewinfrastructuremustalsobe

takenintoaccount.

ThinkCitysurveyedmayors,councillorsand

seniorstaffinlocalgovernmentthroughout

BritishColumbiafromNovember2009to

February2010(forfulldetailsseeAppendix

A).Fromthissurvey,theinfrastructuredeficit

emergedasaprimarysourceofconcernfor

localgovernments.

Chart e: British Columbia local government transfer revenues, 2000-2008Dollars (millions)

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6500 -

5500 -

4500 -2000 2001 2002 2003 2004 2005 2006 2007 2008

$35,000 -

30,000 -

25,000 -

20,000 -

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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2000 2001 2002 2003 2004 2005 2006 2007 2008

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E

�0 LOCaL PROsPeRity

Impact of BC’s Municipal Revenue Changes: Housing CostsForresidents,municipalrevenuechanges

overthepastdecadehaveprimarilytranslated

intohigherhousingcosts.InsomeBC

municipalities,shiftingtheproperty-tax

burdenofcommercialandindustrialproperty

ownerstoresidentsfurtherincreasesthese

costs.Theseincreasedhousingcostscome

atthesametimeBCisdealingwithanover-

heatedrealestateandrentalmarket,where

housingcostshaveincreasedfasterthan

wages,inflationorgrossdomesticproduct

(GDP).

Residentialpropertytaxesandtherelated

goodsandservicefees(e.g.,water,sewer,and

solidwaste)arebasedontheassessedvalue

oftheproperty,multipliedbythemillrate.For

example,thecurrentmillrateforresidential

propertiesinVancouveris$3.25per$1,000

ofassessedvalue.Thus,thecombined

annualpropertytaxanduserfeecostsforthe

averageresidentialpropertyworth$781,000

isapproximately$2,543peryear.Whena

localgovernmentincreasesitsown-source

revenuesfrompropertytaxesorfeesfor

servicesthatarelinkedtopropertyownership,

bothresidentialpropertyownersandtenants

areforcedtopayhigherhousingcosts.

Unfortunately,propertyvaluesmay

havearelativelyweakrelationshiptothe

homeowner’sabilitytopay.Furthermore,

whileassessedpropertyvaluesarecertainly

acontributortoanindividual’swealthand

networth,therelationshipbetweenproperty

valueandincomeislessdirect.Asaresult,

thisformoftaxationdisproportionately

impactslower-incomepeople.

Retiredhomeowners,forexample,often

ownpropertybutliveonrelativelymodest

incomes.Theprovincialtax-deferment

programexiststohelpintheseandother

hardshipsituations.Unlikelow-income

homeowners,low-incometenantsdonot

benefitfromanyofthepoliciesthatsubsidize

homeownership,suchastheannualhome

ownergrant.Low-incometenantsdopay

higherhousingcosts,however,because

landlordspasstheirincreasedproperty-

relatedcostsalongtotenantsintheformof

increasedrents.

�� LOCaL PROsPeRity

Moreover,becausehousingisabasic

necessityratherthanadiscretionaryspending

choice,theincreasedcostofpropertytaxes

andrelatedfeesfallsmostheavilyonthose

whoarealreadymostexposedtothecosts

ofBC’sinflatedhousingmarket.Inthis

sense,higherown-sourcerevenueslinked

topropertyassessmentscanworktoerode

thebenefitofotherpublicpolicyinitiatives

inareassuchaspovertyreduction,childtax

credits,incomeassistanceandaffordable

housingmeasures.

ManyofBC’slocalgovernmentsalso

recognizetheinequityoftheproperty

taxesanduserfeesthatcontributeto

municipalcoffers.InThinkCity’ssurveyof

localgovernmentleaders,52.8percentof

respondentsagreedorstronglyagreedthat

localgovernmentsshouldlookattheirtax

policiesthroughthelensoftaxfairnessfor

lower-incomepeople.

Inadditiontoannualincreasesinproperty-

relatedtaxesandfees,residentshavealso

beenimpactedbyincreasestotheproportion

oftheoverallpropertytaxburdentheybear.

Severallocalgovernmentshaveadjusted

theirpropertytaxregimes–mostlytoreduce

theproportionpaidbybusinessproperty

ownersandtoincreasetheproportionpaid

byresidentialpropertyowners.TheCityof

Vancouver’staxshifthasattractedthemost

attention,butotherlocalgovernmentshave

pursuedsimilarpoliciesinrecentyears.

Amoreextremeversionofthistypeof

shiftingistherecenttaxrevoltinitiatedin

severalresource-basedmunicipalitiesin

2009bylargeindustrialpropertyowners.

Taxeswereinitiallywithheldandinturnlocal

governmentsclosedtheresultingrevenue

gapbyhikingresidentialpropertytaxesand

relatedfees,orcuttingpublicservices,or

both.

InPortAlberni,forexample,residentswere

assesseda23.6percentincreaseontheir

propertytaxbill,industrialpropertyowners

receiveda6.9percentcutintaxes,and

commercialbusinessessawnoincreasein

2010.


Impact of BC’s Municipal Revenue Changes: Industrial Property TaxInMarchof2010,theBCgovernment

establishedaprocesscalledtheindustrial

propertytaxationreview,apolicyreviewthat

coulddramaticallyrestricttheabilityoflocal

governmenttotaxindustrialpropertyowners.

Overthelasttwoyears,theBCBusiness

Councilandagroupoflargeindustrial

taxpayershavemountedacampaignto

reduceindustrialproperty-taxratesinBritish

Columbia.

Theindustrialpropertytaxationreview

comesontheheelsofthe$24-millionintax

reliefforheavyindustryinthe2008budget.

Also,PremierCampbellannouncedan

industrialpropertytaxcreditonOctober22,

2008,whichprovidesarebateof50percent

ofschoolpropertytaxestolightandheavy

industry.Bigbusinesswillalsobenefitfrom

theHST,whichwillshiftapproximately

$2-billioninprovincialsalestaxfrombusiness

toconsumers.

Theindustrialpropertytaxissuereallycame

toaheadwhenCatalystPaper,thelargest

pulpandpapercompanyinBC,refused

topayitstaxesinthefourmunicipalities

whereitspulpmillsoperate:Campbell

River,PowellRiver,NorthCowichan,and

PortAlberni.Insteadofpayingthe$23

millionintaxesassessed,CatalystPaper

CEORichardGarneausaidthecompany

couldonlyaffordtopay$1.5milliontoeach

municipality–aboutonequarterofthe

amounttheywereowed.

Astheeconomyworsened,otherindustrial

companiessuchasTimberWest,WestFraser,

andZellstoffCelgaralsobegantowithhold

theirpropertytaxes.Theirmaincomplaintis

thatindustrialpropertytaxesinBCarehigher

thaninothercompetingjurisdictions.

Themunicipalitiesrespondedbytaking

CatalystPapertocourt,and,inDecember

of2009,theBCSupremeCourtruledthat

municipalitieshavetherighttosettaxrates

astheyseefit.JusticePeterVoithwrotethat

thecourtshavetraditionallybeenunwilling

toencroachontheauthorityoflocal

governmentinthisregard,andthatessentially

thiswasapoliticalissue,notalegalone.

CatalystPaperrespondedtothecourt

decisionbycontinuingtorefusetopayits

taxes,launchinganappeal,andsteppingup

itslobbyingandpublicrelationsefforts.

Pressureonthegovernmentsteadily

increasedasbigbusiness,localpoliticians,

andlabourleaderssteppedforwardto

demandtaxconcessionsfortheindustrial

sector.InthethronespeechinearlyFebruary

2010,thegovernmentpromisedareviewof

theindustrialproperty-taxissue.


OnMarch10,thegovernmentannounced

thatthereviewwouldlookintotheissueand

reportbackbythefallof2010.Thesteering

committeeforthereviewiscomposedof

seniorbureaucrats,industryrepresentatives,

andmunicipalpoliticians.Therewas

nomentionofanypublicprocessor

opportunitiesforpublicinvolvement.

InBritishColumbia,municipalitiesmostly

havefreereigntosettheirownpropertytax

policies.Provincialregulationhascreptinto

certainareas,suchasrailwaysandports,but

itnowappearstheprovinceiscontemplating

furtherrestrictionsonthetaxationauthority

oflocalgovernments.AccordingtoThink

City’ssurveyoflocalgovernmentleaders,

morethanoneinsevenmunicipalitiessaid

theyhaddifficultycollectingtaxesfromlarge,

industrialtaxpayersasaresultoftherecent

industrialtaxrevolt.

Localgovernments,bigbusiness,andmost

economistsagreethatmunicipalitiesarefar

toodependentonpropertytaxesasasingle

revenuesourceandtheyneedalternate

sourcesoffinancing.Butsimplyshifting

thepropertytaxburdenfrombusinessto

homeowners,asVancouverandseveralother

communitiesaredoing,isnotanequitable

solution.

Iftheprovincialgovernmentintendsto

furtherregulatemunicipalpropertytaxes,the

wholeissueofmunicipalfinancingmustbe

takenintoconsideration.Subsequently,local

governmentsneedtobecompensatedwith

alternaterevenuesources.

TheCityofTrailhasrecentlyjoinedthe

DistrictofKitimatincallingforarigorous

independentanalysistobeconductedto

determinethestatisticalcausalitybetween

municipalpropertytaxationandindustrial

activity.Manylocalgovernmentsthroughout

BCareconcernedthatimportantpolicy

decisionsaboutindustrialpropertytaxation

couldsoonbemadewithoutdetailed

economicanalysis.

InanopenlettercopiedtoallBClocal

governments,TrailMayorDieterBogswrote:

“In the absence of proceeding in this way,

we are very fearful of the eventual outcome,

which may provide major industry with

marginal short-term profit gains but

do nothing to address potential macro-

economic problems and the long-term

sustainability of industry that most likely

extends far beyond the annual municipal

property tax levy.”


Impact of BC’s Municipal Revenue Changes: Competitive EdgeWhenitcomestotheprimaryimpactof

BC’srecentmunicipalfinancechangeson

businesses,FCMstudiesassertthatthe

commercialcomponentofincreasedproperty

taxandgoodsandservicefeeshasanimpact

onthecompetitivenessofbusiness,making

itmoredifficultforcitiestoattractbusiness

investmentandhumanresourcetalent.

Simplyput,peopleandmoneyaremobileand

willseekoutmorefavourableenvironments

inwhichtooperate.

TaxcompetitionamongadjacentCanadian

municipalitiescanhaveadestructiveeffect

onrevenuesasresidentsandbusinesses

seekoutlowertaxjurisdictions.Wherelow-

taxjurisdictionsorunincorporatedareas

existadjacenttomunicipalboundaries,

thediscrepanciesinpropertytaxratescan

sometimesbeverysignificant.Residentsand

businessintheseareasoftenbenefitfromthe

municipalinfrastructureandservicesbutdo

notcontributetheirfairshareofthecosts.

Anotherconsiderationistheimpactoftax

competitionbetweencountriesonvarious

industries.Forexample,exportingfirmsare

veryimportanttothehealthoftheoverall

BCeconomy.Exportingfirmssellingto

internationalmarketsarecompetingagainst

otherfirmsthatbenefitfrommorefavourable

propertytaxregimes.Thesebusinessesare

ofteninthemanufacturing,processing,and

distributionsectorsoftheeconomy.Thisisa

veryvaluablesectoroftheeconomybecause

itgenerateshighereconomicmultipliersand

higherpayingjobsthantheserviceorretail

sectors.

Finally,besideslowertaxes,thereareother

incentivesthatcompetingcountriesoffer

businessestoattracthuman-resourcetalent

withthatCanadianmunicipalitiescurrently

cannotmatch.Ina2006reporttitled,“Our

Cities,OurFuture”,themayorsofCanada’s

largestcitiesmakethecasethatCanadian

citiesarecompetingwithcitiesaroundthe

globethatareabletodrawuponamuch

widerandmorediverserangeofrevenue

sourcestofinancetheinfrastructureand

publicservicesrequiredtosupportatwenty-

firstcenturyeconomy.

Accordingtothemayors’report:

“Cities in the United States and Europe have

access to other revenue sources such as

income, sales and selective sales taxes. In the

US, 16 states permit municipal governments

to collect local income taxes. Couple the

access to these revenue sources with federal

programs ... that provide US cities with

access to over $100 billion for transportation

infrastructure, and Canadian municipalities

quickly lose any competitive advantage.”


The Future of Municipal Financing in British ColumbiaThehistorictrendsofthethreemajorfunding

mechanismsofBC’slocalgovernments

suggestthatcontinuedrelianceonthese

sourcesmayprovetroublinginthefuture.

Overthedecadejustended,local

governmentshaverelieduponhigherrates

ofincreasesinpropertytaxesandgoodsand

serviceuserfees,comparedtothegrowthof

provincialgovernmentown-sourcerevenues.

Thisraisesquestionsabouttheviabilityofthe

currentrevenuemodelformunicipalitiesin

thefaceofthetroublingeconomicpressures

feltbymanyresidentsandbusinesses.

Furthermore,seniorgovernmenttransfers

arenotkeepingpacewiththegrowthof

municipalown-sourcerevenues,whichin

turncreatesadditionalupwardpressureon

thegrowth-rateofthetwootherrevenue

sources.Giventhestateofthefinancesof

seniorgovernments,itisalsoveryunlikely

thattransferswillgrowasrapidlyinthe

comingdecade.

Inadditiontotheseweaknesses

underminingthecapacityoflocaleconomies

togrowastheyhaveinthepast,itisalso

verydoubtfulwhethertherecoveryfromthe

recessionwillbeasrapidandascompleteas

iscommonlythought.Thesefactorstogether

couldseriouslyimpedetheabilityoflocal

governmentstoenjoytherevenuebuoyancy

ofthepastdecade.

Lookingintothefuture,theeconomyofthe

newdecadewilllikelybemuchdifferentthan

thepastoneforlocalgovernments.Forward-

thinkingpolicydevelopment,atboththelocal

andprovinciallevel,isrequiredtorespond

toglobalenvironmentalchanges;population

changes;newandexpandeddemandson

localgovernments,andatransitioningBC

economy.

Itisclearthatamorecomprehensive

andreliablerevenue-sharingsystemis

neededtoprovidecertaintyandstability

formunicipalitiesintheyearsahead.As

well,alternativerevenuesourcesshouldbe

developedforfinancingtheexpandingneeds

ofBC’smunicipalities.


Challenges Facing Local GovernmentChaPteR

2Localgovernmentsin

BritishColumbiaarefacing

severalkeyeconomicchallenges

thatwillhaveseriousimplicationsfor

revenuesandexpenditures.Concernsabout

theenvironmentarefundamentallyaltering

theglobaleconomy,significantpopulation

structurechangesarecoming,theroleof

municipalgovernmentischangingasittakes

ongreaterresponsibility,andtheBCeconomy

isinthemidstofamajortransition.

Thesemacro-levelchangesarecreating

twoBritishColumbiasbywideningthe

dividebetween–ontheonehand–the

rapidlygrowingpopulationcentresinMetro

Vancouver,theCapitalRegionalDistrict,and

theOkanaganand–ontheotherhand–the

resource-basedcommunitiesintherestofthe

province.Verydifferentchallengesarefacing

localgovernmentsinbothsituations.

Economic Impacts of Environmental and Energy Policy

Sustainabilityisafundamentalgoal

forBritishColumbia’sfutureeconomic

development.Thisnecessitateslooking

atvalue-creatingactivitiesintermsof

theirenvironmentalimpacts.Thegoalof

sustainabilityposesachallengeforpolicy

makers,asoureconomycontinuestodepend

onindustriessuchasconstruction,mining,

oilandgas,transportationandforestry.

Atpresent,industrializedsocietiesfacea

monumentalchallengetoreducegreenhouse

gasemissions.Mostexpertsagreeonthe

needfordramaticmeasurestoaddressthis

problem.ThechallengeinBCisverysimilar

tothatofotherindustrialeconomies,with

transportation,buildingsoperationsand

temperaturecontrol,andlargeindustry

eachcontributingclosetoone-thirdoftotal

greenhousegases.

Simultaneously,weshouldanticipatethat

energypriceswillclimboverthenexttwoto

threedecades,asthecostofextractingscarcer

fossil-fuelenergysourcesincreases,andas

climatechangepoliciesbegintoshiftmoreof

theenvironmentalcostsofenergyproduction

ontotheenduser.Forenergyintensive

industriesinBC,thelong-termtrendtoward

higherenergypricessignalsthatinvestments

inenergyefficiencyandenergy-saving

technologiesareastrategicpriority.


Mostanalystsagreethatpartofthesolution

mustbetoshifttheBCeconomytoamuch

“greener”base.Thisshiftisneedednotonlyto

reducegreenhousegases,butalsotocompete

witheconomiesinEuropeandAsiawho,as

earlyadopters,threatentomovewellahead

inthetransitiontoamoreenergy-efficient

economy.Wemustmakenotonlygreater

efficienciesintheconsumptionofenergy,

butalsomajorinvestmentsintheproduction

ofnewtechnologiesthatwillmakedramatic

gainspossible.

Thefirstmajoreconomicshiftrequired

istherapiddevelopmentandproduction

ofnewtechnologies.Thesecondisthe

rapidadoptionofnewtechnologiesin

goodsandservicesproduction.Interms

ofthefirst,manynationsandjurisdictions

arepursuingindustrialstrategiesthatwill

generaterapidgrowthintheproductionof

greentechnologies.Todate,therehasbeen

onlylimitedprogressinBC.However,we

expectthepaceofadaptationtoaccelerate

aspoliciesfavourreducedgreenhousegas

emissions.

Implicationsofthesechangesforlocal

governmentsarenotentirelyclear.Many

localgovernmentsareunderpressureto

makeshiftsintheirownpractices.Asglobal

energycostsincrease,thecostofoperating

municipalutilities,buildingsandvehicle

fleetswillinevitablyalsoincrease.Senior

levelsofgovernmentwilllikelypursue

policiesthatwillinevitablyshiftsomeof

theresponsibilitiesandcostsforreducing

greenhousegasesontolocalgovernments.

Thetaxbaseoflocalgovernmentsmay

alsobeaffectedbyadaptationstoclimate

change.Oneexampleofhowclimatechange

isaffectingtheeconomyofBCcommunities

isthepinebeetleepidemic.Withoutsustained

coldweatherinthewinters,thepinebeetle

hasbeenabletothriveanddestroylarge

tractsofBCforest.Otherindustriessuchas

agriculture,fisheries,andtourismmayalso

beimpactedbyclimatechange.Assomeof

themoreintensivegreenhousegasemitting

industriescomeunderincreasingdemands

toreduceemissions,theremaybefurther

industrialdislocation.

Localeconomieswillbefacedwith

additionalandunpredictabledemands

andpressuresgoingforwardtowardagoal

ofsustainability.Theimpactsonlocal

governments’costsandrevenuescannotbe

ignored.


Population StructureInmanyways,populationchangesaremore

predictablethantheotherthreechallenges

thatwillaffectBC’scollectiveeconomic

future.Overthenexttwodecades,British

Columbia’spopulationwillcontinuetogrow,

age,becomemoreconcentratedinlarge

urbanareas,andbecomemorediverseand

multi-cultural.Thesefourdemographic

developmentswillhavefinancialimplications

forBC’smunicipalities.

i. Growth

BC’spopulationwillgrowbyapproximately

onemillionpeopleoverthenext20years,

andabout500,000overthenexttenyears.

Suchpopulationgrowthwillexertsignificant

pressureonlocalgovernmentsfornew

infrastructureandadditionalservices.

Agrowingpopulationwillcreatesome

economiesofscaleandabroaderbaseto

absorbsomeofthesecosts,buttherewillalso

besignificantadditionalcosts.Ofparticular

concernistheneedforlocalgovernments

toprovidenewinfrastructuresufficientto

handlelargerpopulations.

ii. AgingThegeneralcontoursoftheagingofthe

populationarequitewellknown.Thepost-

warbabyboomhaddramaticimpactson

theagedistributionofpopulations,which

continuetobefelt.Dependencyratios

measuretherelationshipbetweenthosein

theirworkingyears(aged18to65)andthose

whoareunder18andover65anddependent,

toonedegreeoranother,ontheadultworking

population.Thefollowingtablesetsoutthe

changingdependencyratiosovertheyears.

Chart F: total population of British Columbia, �97�-203�

6 -

5 -

4 -

3 -

2 -

1 -

0 -

1971 1981 1991 2001 2011 2021 2031

F

G

H

I

J

historical projected

1971 1981 1991 2001 2011 2021 2031

Children and seniors as percent of those aged 18 to 64


child

elderly

$58000 -

53000 -

48000 -

43000 -

38000 -

33000 -

28000-

23000 - 1999 2001 2003 2005 2007

CAN

BC

AB

ON

1999 2001 2003 2005 2007

CAN

BC

AB

ON

1998 2000 2002 2004 2006

CAN

BC

AB

ON

2.7% -

2.5 -

2.3 -

2.1 -

1.9 -

1.7 -

1.5 -

1.3 -

1.1 -

0.9 -

0.7-

0.5 -

1999 2001 2003 2005 2007

CAN

BC

AB

ON

$35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000-

5000 -

K

$40,000 -

35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

0 -

20,4

26

20,6

88

21,2

98

22,

337

2

8,35

9

3

3,83

1

34,1

63BC average $34,978

1 Central Vancouver Island

2 Kootenay/Boundary

3 Okanagan

4 Thompson/Cariboo/Shuswap

1 2 3 4 5 6 7

5 Northern Interior

6 Northern Sunshine Coast/Garibaldi

7 Northeast

Dollars

80% -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

40% -

35 -

30 -

25 -

20 -

15-

10 -

6 -

5 -

4 -

3 -

2 -

1 -

0 -

1971 1981 1991 2001 2011 2021 2031

F

G

H

I

J


1971 1981 1991 2001 2011 2021 2031



child

elderly

$58000 -

53000 -

48000 -

43000 -

38000 -

33000 -

28000-

23000 - 1999 2001 2003 2005 2007

CAN

BC

AB

ON

1999 2001 2003 2005 2007

CAN

BC

AB

ON

1998 2000 2002 2004 2006

CAN

BC

AB

ON

2.7% -

2.5 -

2.3 -

2.1 -

1.9 -

1.7 -

1.5 -

1.3 -

1.1 -

0.9 -

0.7-

0.5 -

1999 2001 2003 2005 2007

CAN

BC

AB

ON

$35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000-

5000 -

K

$40,000 -

35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

0 -

20,4

26

20,6

88

21,2

98

22,

337

2

8,35

9

3

3,83

1

34,1



2 Kootenay/Boundary

3 Okanagan


1 2 3 4 5 6 7

5 Northern Interior


7 Northeast

Dollars

80% -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

40% -

35 -

30 -

25 -

20 -

15-

10 -

Millions

Chart G: British Columbia children and seniors as percent of those aged �8 to 6�, �97�-203�


Implicationsofanagingpopulationfor

municipalitiesareconsiderable,astheshiftin

dependencyratiosfromyouthtotheelderly

hasdramaticimplicationsforserviceneeds.

Inresponsetothisshiftinthepopulation,

allgovernmentswillhavetoaddress

newconfigurationsofneedsforhousing,

transportation,infrastructure,community

facilities,healthcareservices,education,and

securityservices.

Furthermore,publicservicesandpublic

serviceemploymentareanticipatedtochange

inresponsetothesepopulationchanges.

Forexample,needfornursesandhomecare

workersmayincrease,whilethatforteachers

maydecrease.

iii. Regional DistributionThelargestratesofgrowthinpopulationwill

continuetobeintheLowerIsland,Greater

VancouverandtheOkanagan.Inseveral

regions,localcommunitieswillexperience

stagnationordeclinesinpopulation.Asthese

populationchangestakeplace,theimpact

ontherevenuesoflocalgovernmentswill

becomplex.Formanyruralmunicipalities,

seriousquestionsariseabouttheviabilityof

theexistingsystemsoffinancingandservice

deliveryundertheseconditions.

table 3: British Columbia population projections by region, 20�0 and 2020

Region 2010 2020 Per cent population population change

BC total 4,510,500 5,148,500 14.1%

Vancouver Island/Coast 752,000 870,600 15.8%

Mainland/Southwest 2,710,400 3,175,500 17.2%

Thompson/Okanagan 541,400 605,900 11.9%

Kootenay 150,400 156,400 4.0%

Cariboo 160,000 163,700 2.3%

North Coast 58,000 57,900 -0.2%

Nechako 40,000 41,600 4.0%

North East 68,600 76,900 12.1%

20 LOCaL PROsPeRity

iv. ImmigrationBritishColumbiahas–andwillcontinue

tohave–relativelyhighin-migrationover

thenext20years.Netmovementsfromother

provinceswillaverageabout10,000peryear

andimmigrationfromothercountrieswillbe

about40,000peryear

Newimmigrants,particularlyfromother

countries,createbothopportunitiesand

challengesforlocalgovernments.Afull

realizationofthepotentialcontribution

ofimmigrantsoftenrequirescomplex

services.Rolesoftheprovincialgovernment,

localgovernments,andcontractednon-

governmentalorganizationsinproviding

settlementservicesvarywidelythroughout

theprovince.Whereservicegapsexist,local

governmentmustoftenbearthecostsof

assistingindividualsincrisis.

Changing Role of Municipal GovernmentOverthepasttwodecades,localgovernments

haveincreasinglybeenexpectedtotake

onmanymorerolesthanwasthecase

inthepast.However,whiletherolesand

responsibilitiesofmunicipalgovernments

havegrown,therevenuetoolsandfiscal

environmenthaveactuallybecomemore

constrained.

Justover30yearsago,theBCgovernment

distributedsubstantialamountsofrevenueto

localgovernmentsonthebasisofequalization

principles.However,duetofiscalchoices

madeattheprovinciallevel,themunicipal

financingsystemhasactuallyrevertedbackto

earlier,lesssupportiveprinciples.Inaddition,

manylessaffluentBCcommunitiesoften

haverelativelymorepressingdemandsfor

supportiveservices,whileatthesametime

havingalessercapacitytomeetthecosts.

Greaterpressureisputonmunicipal

revenuesbyincreasedcompetitionfor

investmentandhumancapital.Other

challengesforlocalgovernmentinclude

morecomplexsocialconditions,emergency

preparednessandpublicsafety,growing

environmentalproblems,andothersocietal

challenges.Forexample,infrastructure

andhousingaretwoareaswhereBC’slocal

governmentshavebeenaskedtodomore

withlessformanyyears.

2� LOCaL PROsPeRity

i. InfrastructureLocalgovernmentshavealwaysplayed

amajorroleininfrastructure,butsenior

governmentoff-loadinghasadded

considerablytothatburden.WhenThink

CityaskedBC’slocalgovernmentleaders

whattheirprioritieswouldbeiftheycould

increasetheirrevenuesbyfivepercent,

surveyrespondentsindicatedthatrepairing

andupgradinglocalinfrastructurewasatthe

topofthelist,faraheadofanyotherspending

priority.

OverhalfoftheentireinfrastructureinBC

istheresponsibilityoflocalgovernments.In

thefaceofcontinuingpopulationgrowth,

thecostsofdevelopingandmaintaining

thatinfrastructurehavebecomeimpossible

forlocalgovernmentstomeetwithinthe

existingfiscalmodel.Urbantransportation

isoneaspectoftheinfrastructuregap,with

MetroVancouverasanespeciallyserious

case.Alargefinancinggapmustbeaddressed

inordertomeettheneedsforamodern,

efficientpublictransitsystem.

Manylocalgovernmentshavedeferred

orputoffexpensiveinfrastructureprojects

duetolackoffunding.Collectively,these

decisionshaveresultedinthemuchdiscussed

infrastructuredeficit;abillthatcanbe

delayed,butcannotbeavoided.Meanwhile,

thecostofmaintainingandrepairinganaging

infrastructureisincreasing.Modern,efficient

infrastructureisabsolutelycriticalifBCisto

overcomethemajoreconomicchallenges

outlinedinthischapter.Thecurrentlocal

governmentinfrastructuregapinBC–thegap

betweenneededandavailablerevenues–isin

excessof$10billion.

transit photo (skytrain)

22 LOCaL PROsPeRity

ii. HousingHousingisanotherareawherelocal

governmentshavefoundthemselves

squeezedbymorecomplexsocial

problemsontheonehandandlesssenior

governmentsupportontheother.Housing

wastraditionallythejurisdictionofsenior

governments,butthefederalgovernment

walkedawayinthe1990sandtheprovincial

governmentfollowedintheearly2000s.

HousingcostsinBritishColumbia,and

particularlyintheMetroVancouverregion,

areveryexpensive.RecentdatafromCanada

MortgageandHousingCorporation(CMHC)

showsthatMetroVancouverhastheleast

affordablehousingmarketinCanada.A

January2010reportfromDemographia

Internationalsurveyed272metropolitan

housingmarketsworldwideandfound

Vancouverhadtheleastaffordablehousing

intheworldwhenmedianhousingsale

valueswerecomparedtomedianhousehold

incomes.Accordingtothisstudy,themedian

houseinMetroVancouversellsfor9.3times

themedianannualsalary.

Theaveragetwo-bedroomapartmentin

theVancouverregionrentsfor$1169per

month.ToachievetheCMHC’saffordability

threshold,whichstatesthathousingcosts

notexceed30percentofincome,thistwo-

bedroomapartmentrequiresoccupants

toearnaminimumhouseholdincomeof

$46,750.The2006censusrevealedthat21per

centofVancouver’srenters,comprising57,000

households,paymorethan30percentof

theirincomeinrent.Andthosenumbersare

certainlyhighernow.Lastyear,averagerents

inMetroVancouverincreasedtentimesfaster

thantherateofinflation.

MetroVancouverhasconductedhomeless

countsin2002,2005,and2008.In2002,1,121

homelesspeoplewerecounted.In2005there

were2,174,and2008sawanincreaseto2,592

homelessindividuals.Approximately60per

centofthesehomelesspeoplewerecounted

inVancouver,whiletheremaining40per

centwerecountedinothermunicipalities

throughouttheregion.Areasonableestimate

ofMetroVancouver’shomelesspopulationin

2010isapproximately3,000,afigurethathas

almosttripledsince2002.

23 LOCaL PROsPeRity

Intheabsenceofadequatehousing,

localgovernmentsexperiencethefrontline

affectsofhousinginadequacy.Poverty,

mentalillness,drugdependence,violence

andabuse,anddiscriminationallfind

immediateexpressiononthestreetsandin

publicspaces.Localgovernmentscannot

helpbuttakeresponsibilityinthefaceof

seniorgovernmentneglect,butthecostsare

veryhigh.Localgovernmentsmust,anddo,

addresshousingandothercausalfactors

associatedwiththeseissues.Yet,withsenior

governmentsoff-loadingmuchoftheirlong-

standingresponsibilityandnowproviding

littleornohelptomunicipalities,the

ballooningneedsforhousingandhousing-

relatedservicesareputtinglocalgovernments

inanearimpossiblesituation.

BC’s Economic TransitionBritishColumbia’seconomyisgoingthrough

amajortransition.Inpart,thistransitionis

duetoalargertrendintheindustrialworld

thatismovingtowardmoreservicesandless

manufacturingasaproportionoftheeconomy.

BCisalsouniqueinanumberofways.In

particular,sectorssuchasmanufacturing

andrenewableresourcesandprocessingare

seriouslythreatened.

Duringrecentyears,aspectsofthiseconomic

transitionwere–tosomedegree–masked.

Whilethepinebeetleepidemichasdone

long-termdamagetoBC’sforests,theforestry

sectordidbenefitfromtheshort-termharvest

ofthepinebeetle-infectedstands.Further,

beforetheonslaughtoftherecessionin2008,

elementsofapparentprosperityappearedfora

shorttimeasaresultofboomsinthehousing

market,government-financedinfrastructure

projects,consumerspending,andnaturalgas

production.

Inordertofullyappreciatethedirectionof

theBCeconomy,itisimportanttopayspecial

attentiontotheresourcesectors.Landand

resourceshavelongbeentheprimarysources

ofwealthformany,andthesourcesofgreat

richesforsome.Thefishery,nowinseriousif

notfataldecline,wasatonetimeatthecoreof

theBCeconomy.Forestry,alwaysasourceof

considerablewealthcreation,wasthesingle

mostimportantcontributortoBC’sascendancy

withintheCanadianeconomybythemiddle

ofthelastcentury.Miningandpetroleumwere

alwaysconsiderableindustriesbutsomewhat

lessersourcesofwealthandemployment.

However,overthelastfewyearsatransitionhas

begunintheBCeconomy.


Fisheriesandforestryareindeclinedue

tomarkets,unsustainablemanagement

andotherindustrialandpolicyfailures.A

comparativelookattherolethatforestry

hasplayedintheBCeconomyshowsthe

industry’sevidentdecline.Tenyearsago

forestrycontributeddirectlyandindirectly

toover35percentoftheannualincome

andwealthgenerationinBC.Itisnowwell

below10percent.Forestryrevenuestothe

BCgovernmentintheformofstumpageand

varioustaxeswerecloseto$3-billiondollars

only10yearsago.Today,thefigureislessthan

$500million.Currently,timber-harvesting

jobsarelessthanone-thirdtheirnumberin

themid-1990s.Millshaveclosedallacrossthe

provinceandmoreclosuresareexpectedover

thenexttwotothreeyears.

FurtheringBC’stransition,naturalgas,

andtoalesserextentmining,aredisplacing

renewableresourcesineconomicimportance.

Whilenaturalgassawaperiodofstrong

marketsandextremelyhighpricesforashort

periodprecedingtherecession,accounting

forcloseto10percentofprovincial

governmentrevenues,theoutlookforthe

nextdecadeismuchlessencouraging.Prices

havedroppedbytwo-thirdsoftheirpeak,

andmarketoversupplywilldominateover

foraprolongedperiodasnewsourcesare

discoveredanddeveloped.

Beyondresources,otherareasarechanging

too.BC’smanufacturingsectorhasstruggled

toattractnewcapitalinvestment,andthe

hightechsectors,ahopedforsourceofnew

opportunities,havegrownverylittle.The

growingsectors,intermsofjobcreation,

areconstruction,tourism,public-sector

employment,andlower-payingjobsinthe

servicesector.

Overall,thetransitionoverthelastfew

yearshasbeenoneofdeclineinthehigh-

valuesectors.Construction,non-renewable

resourcesandgovernmentspendinghave

providedatemporarycushion,butdonot

havethecapacitytosupportalong-term

sustainableeconomybasedonhighwages

andstrongreturnstoinvestment.Atransition

thathasthecapacitytosupportlong-term

prosperityandwealthcreationrequires

growthinhigh-valuesectorsadequateto

replacetherelativelosesintheweakening

sectors.

Constructionasamajorsourceofgrowth

injobsandbusinessactivityislargelythe

resultofahousingconstructionboomand

largegovernmentspendingoninfrastructure.

Neitherofthesefactorscanbesustainedat

recentlevels.Housingdemandishardto

predict,buttheunusualcircumstancesofthe

pre-recessionyearsareunlikelytocontinue.

Moderatinghouseprices,higherinterest

rates,andaslowrecoveryfromtherecession

willallhaveadepressingeffectonthepace

ofnewconstruction.Governmentspending

onconstructionwillalsomoderateasthe

deficitanddebtreductionassumeagreater

importanceingovernmentspendingplans.

25 LOCaL PROsPeRity

BC’scompetitivepositionisweakduetothe

weaktransitiontoahigh-valueeconomy.The

mostimportantmeasureofcompetitiveness

isoutputpercapita.BCistheonlyprovince

inCanadawherebusiness-sectorproductivity

actuallyfellbetween2003and2008.Output

percapitaisbelowthatofCanadaasawhole

andofthemajorcompetingprovinces.

Aproductive,competitiveeconomytoday

dependsuponhighlevelsofnewinvestment

inmodernplantsandequipment,andon

robustresearchanddevelopmentspending.

BCislagginginbothrespects.

Itiswidelyagreedthatacompetitive,high-

productivity,high-valueeconomymustlook

toexternalexportsasasourceofmarkets.

Studiesoverwhelminglyfindthattheless

amodern-industrialeconomysellsinto

exportmarkets,thelessitisabletoachieve

economiesofscaleandacquiretechnology

neededtobecompetitive.Again,BCperforms

badlyintermsofexports.

6 -

5 -

4 -

3 -

2 -

1 -

0 -

1971 1981 1991 2001 2011 2021 2031

F

G

H

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1971 1981 1991 2001 2011 2021 2031



child

elderly

$58000 -

53000 -

48000 -

43000 -

38000 -

33000 -

28000-

23000 - 1999 2001 2003 2005 2007

CAN

BC

AB

ON

1999 2001 2003 2005 2007

CAN

BC

AB

ON

1998 2000 2002 2004 2006

CAN

BC

AB

ON

2.7% -

2.5 -

2.3 -

2.1 -

1.9 -

1.7 -

1.5 -

1.3 -

1.1 -

0.9 -

0.7-

0.5 -

1999 2001 2003 2005 2007

CAN

BC

AB

ON

$35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000-

5000 -

K

$40,000 -

35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

0 -

20,4

26

20,6

88

21,2

98

22,

337

2

8,35

9

3

3,83

1

34,1



2 Kootenay/Boundary

3 Okanagan


1 2 3 4 5 6 7

5 Northern Interior


7 Northeast

Dollars

80% -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

40% -

35 -

30 -

25 -

20 -

15-

10 -

Chart h: alberta, British Columbia, Ontario and Canada per capita gross domestic product, �998-2008

Chart i: alberta, British Columbia, Ontario and Canada business capital investment as percentage of gross domestic product, �998-2008

6 -

5 -

4 -

3 -

2 -

1 -

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1971 1981 1991 2001 2011 2021 2031

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child

elderly

$58000 -

53000 -

48000 -

43000 -

38000 -

33000 -

28000-

23000 - 1999 2001 2003 2005 2007

CAN

BC

AB

ON

1999 2001 2003 2005 2007

CAN

BC

AB

ON

1998 2000 2002 2004 2006

CAN

BC

AB

ON

2.7% -

2.5 -

2.3 -

2.1 -

1.9 -

1.7 -

1.5 -

1.3 -

1.1 -

0.9 -

0.7-

0.5 -

1999 2001 2003 2005 2007

CAN

BC

AB

ON

$35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000-

5000 -

K

$40,000 -

35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

0 -

20,4

26

20,6

88

21,2

98

22,

337

2

8,35

9

3

3,83

1

34,1



2 Kootenay/Boundary

3 Okanagan


1 2 3 4 5 6 7

5 Northern Interior


7 Northeast

Dollars

80% -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

40% -

35 -

30 -

25 -

20 -

15-

10 -

Chart J: alberta, British Columbia, Ontario and Canada research and development investment as percentage of gross domestic product �997-2007

6 -

5 -

4 -

3 -

2 -

1 -

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1971 1981 1991 2001 2011 2021 2031

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child

elderly

$58000 -

53000 -

48000 -

43000 -

38000 -

33000 -

28000-

23000 - 1999 2001 2003 2005 2007

CAN

BC

AB

ON

1999 2001 2003 2005 2007

CAN

BC

AB

ON

1998 2000 2002 2004 2006

CAN

BC

AB

ON

2.7% -

2.5 -

2.3 -

2.1 -

1.9 -

1.7 -

1.5 -

1.3 -

1.1 -

0.9 -

0.7-

0.5 -

1999 2001 2003 2005 2007

CAN

BC

AB

ON

$35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000-

5000 -

K

$40,000 -

35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

0 -

20,4

26

20,6

88

21,2

98

22,

337

2

8,35

9

3

3,83

1

34,1



2 Kootenay/Boundary

3 Okanagan


1 2 3 4 5 6 7

5 Northern Interior


7 Northeast

Dollars

80% -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

40% -

35 -

30 -

25 -

20 -

15-

10 -

26 LOCaL PROsPeRity

Creating Two British ColumbiasThefourchallengestoBC’seconomy,as

discussed,resultinagrowingeconomicgap

betweentheruralandlargeurbanareas–two

BritishColumbias.Unemploymentratesin

manyruralcommunitiesarenowdoublethat

oflargeurbancommunities.Averageincomes

aresignificantlyloweraswell.

ArecentstudybyBCStatslookedatBC

regionaldistrictsintermsoftheeconomic

hardshiptheirresidentsareexperiencing.The

tenworstoffcommunitiesarelistedbelow.

Anydistrictwithahardshipindexabovezero

issufferinganunusualdegreeofhardship–the

highertheindexrating,theworsethehardship

inthatcommunity.Thetenworstoff,outofa

totalof26,areallindifficultstraits.Tellingly,

allbutoneregionisruralandallareresources

dependent.

Chart K: alberta, British Columbia, Ontario and Canada per capita exports (2002 constant dollars), �998-2008

6 -

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child

elderly

$58000 -

53000 -

48000 -

43000 -

38000 -

33000 -

28000-

23000 - 1999 2001 2003 2005 2007

CAN

BC

AB

ON

1999 2001 2003 2005 2007

CAN

BC

AB

ON

1998 2000 2002 2004 2006

CAN

BC

AB

ON

2.7% -

2.5 -

2.3 -

2.1 -

1.9 -

1.7 -

1.5 -

1.3 -

1.1 -

0.9 -

0.7-

0.5 -

1999 2001 2003 2005 2007

CAN

BC

AB

ON

$35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000-

5000 -

K

$40,000 -

35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

0 -

20,4

26

20,6

88

21,2

98

22,

337

2

8,35

9

3

3,83

1

34,1



2 Kootenay/Boundary

3 Okanagan


1 2 3 4 5 6 7

5 Northern Interior


7 Northeast

Dollars

80% -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

40% -

35 -

30 -

25 -

20 -

15-

10 -

6 -

5 -

4 -

3 -

2 -

1 -

0 -

1971 1981 1991 2001 2011 2021 2031

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1971 1981 1991 2001 2011 2021 2031



child

elderly

$58000 -

53000 -

48000 -

43000 -

38000 -

33000 -

28000-

23000 - 1999 2001 2003 2005 2007

CAN

BC

AB

ON

1999 2001 2003 2005 2007

CAN

BC

AB

ON

1998 2000 2002 2004 2006

CAN

BC

AB

ON

2.7% -

2.5 -

2.3 -

2.1 -

1.9 -

1.7 -

1.5 -

1.3 -

1.1 -

0.9 -

0.7-

0.5 -

1999 2001 2003 2005 2007

CAN

BC

AB

ON

$35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000-

5000 -

K

$40,000 -

35,000 -

30,000 -

25,000 -

20,000 -

15,000 -

10,000 -

5,000 -

0 -

20,4

26

20,6

88

21,2

98

22,

337

2

8,35

9

3

3,83

1

34,1



2 Kootenay/Boundary

3 Okanagan


1 2 3 4 5 6 7

5 Northern Interior


7 Northeast

Dollars

80% -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

40% -

35 -

30 -

25 -

20 -

15-

10 -

Chart L: average employment income, British Columbia health regions, 2005

27 LOCaL PROsPeRity

Region hardship Rank

Queen Charlotte- Skeena 1.16 1

Kitimat-Stikine 1.14 2

Alberni-Clayoquot 0.92 3

Mount Waddington 0.92 4

Fraser-Fort George 0.82 5

Cariboo 0.70 6

Buckley-Nechako 0.62 7

Powell River 0.44 8

Nanaimo 0.29 9

Thompson-Nicola 0.28 10

table �: economic hardship index, ranked by degree of hardship, by regional district, 2009

Rural,resourcedependent,remote

andnortherncommunitiesfacespecial

challenges.Economicdistressand

uncertaintyisendemicinsuchcommunities

today.Forexample,thelossofforestry

productmillsremovesanimportantpart

ofthetaxbasewithoutacorresponding

reductionincosts.Inturn,thissituation

underminesacommunity’sabilitytoachieve

financialviability.

Suchcommunitiesmust,andare,turning

theirattentiontoeconomicdevelopment

anddiversification.Intheabsenceofaviable

economicbase,thereislittlepossibility

ofmaintainingataxbasesufficientto

financeneededservices.Moreover,when

theeconomicbaseisthreatened,thelocal

property-taxbasecannotsupportinvestments

intheveryeconomicrenewalneededto

reversethisdeclineinlocalgovernment

revenues.

28 LOCaL PROsPeRity

Inthefirsttwochapters,

welookedatthemainsources

ofrevenueforlocalgovernments

inBCandtheeconomicchallengesthatmay

impactrevenues.Growinginfrastructure

deficitshavecombinedwiththeoffloading

ofresponsibilitiesfromseniorlevelsof

governmenttoplacemorepressureonlocal

governments.Yet,despitetheincreasein

financialpressures,BC’slocalgovernments

haveaccesstorelativelynarrowbasesofown-

sourcerevenue.

Inaddition,manyofBC’scommunitiesare

strugglingtomaintainaviableeconomic

baseinthemidstofaverydifficulteconomic

transitionmarkedbytheerosionofhigh-

valueindustries.IfBC’scommunitiesareto

successfullyadapttoachanging,globalized

economy,ourlocalgovernmentswillrequire

accesstoamorediverserangeofrevenue

sources.

Inthischapter,weproposespecific

areaswherelocalgovernmentshavethe

opportunitytodiversifyandgrowtheir

revenues.Wefocusonthreemainareas:

newtaxesandashareofexistingtaxes,

opportunitiestoincreasesalesofservices,

andotherrevenueoptions.

TaxesBC’slocalgovernmentscanmakebetteruse

oftaxationpowerstoincreasefundingfor

municipalneeds.Thissectionexploreshow

BCmunicipalitiescanaccessnewrevenues

bysharing–ornegotiatingagreatershare

of–existingtaxes,ordevelopingnewtaxation

tools.

i. Taxes – Provincial Sales TaxAsofJuly1,2010,theBritishColumbia

governmentcombinedtheprovincialsalestax

withthefederalgoodsandservicestaxusing

thefederalcollectionandadministrative

process.Thecombinedtaxiscalledthe

harmonizedsalestax(HST),andalthough

thefinalrateremainsat12percent,the

provincialportionwillbecollectedona

broaderbaseofgoodsandservices

IntermsofsharingthenewHST,local

governmentsmaywanttolookatthesales

taxmodelinSaskatchewan.There,the

provincialgovernmentagreedtotransferone

percentagepoint–or20percent–ofits5per

centprovincialsalestaxtolocalgovernments.

Inits2009budget,theSaskatchewan

governmentprojecteditwouldtransfer$167-

millioninrevenuetolocalgovernments.This

isa19percentincreaseovertheprevious

fundingtransferredtolocalgovernmentsin

thatprovince.

Revenue sources for Local Government

ChaPteR

3

29 LOCaL PROsPeRity

IftheBritishColumbiagovernment

transferred20percentofitssalestaxrevenue

tolocalgovernments,theresultwouldbe

$627-millioninunconditionaltransfers

duringthefirstfullyearofHST,risingto$667-

millioninyeartwo.

Thisideaappearstohavebroadsupport

amonglocalgovernmentsinBC.Several

resolutionsweresubmittedtothe2009and

2010UnionofBCMunicipalities(UBCM)

conventionscallingupontheprovincial

governmenttoshareaportionofitssales

taxrevenue.Inaddition,whenThinkCity

surveyedlocalgovernmentleaders,88.9

percentagreedorstronglyagreedthatBC

shoulduseSaskatchewan’spolicyasamodel

andtransferashareofthenewHSTtolocal

governmentsinBC.

ii. Taxes – Local Sales TaxesAnotheroptionlocalgovernmentscanpursue

iscollectingtheirownsalestaxes.Thiswould

bemoredifficultandcostlytoimplementand

administerthanasimpletransferofexisting

salestaxrevenues,butremainsanoptionthat

doesnotrequiresharingexistingprovincial

revenuesbutwouldrequirechangesto

provinciallegislation.

Municipalsalestaxesarewidelyused

togeneraterevenueinmanyEuropean

andAsiannations.Suchtaxesarealso

commonplacethroughouttheUnitedStates,

wheremanystatesallowlocalgovernmentto

chargeawiderangeofsalestaxes.Municipal

salestaxesareemployedinatleast16

Americanstates,suchasCalifornia,Florida

andTexas,andincludesomeofthecountry’s

biggestcities.Dallas,forexample,hasan8.25

percentsalestax,St.Louishasa6.325sales

tax,NewYorkCityhasan8.875percentsales

tax,andCalifornia’ssalestaxesrangefrom

8.25percentto10.75percent.

USsalestaxesaretypicallysegmented

anddirectedbylegislationtoveryspecific

purposes.Missouriallowslocalgovernments

tocollectsixsalestaxesforgeneralrevenue

(uptoonepercent),capitalimprovement

(upto0.5percent),economicdevelopment

(upto0.5percent),transportation(upto0.5

percent),stormwaterandparks(upto0.5

percent),andfireprotection(upto0.25per

cent).NewMexicoallowslocalgovernmentto

collectseveralsalestaxesforgeneralrevenue

(upto1.25percent),capitalimprovement(up

to0.25percent),environment(upto0.0625

percent),infrastructure(upto0.25percent),

andqualityoflife(upto0.25percent).

30 LOCaL PROsPeRity

iii. Taxes – Property Transfer TaxApropertytransfertaxwouldallowlocal

governmenttocapturesomeoftheincrease

inlandvalueeachtimeapropertyissold.

Itisanefficientwayofcapturingasmall

percentageoftheincreaseinlandvalue.

Theprovincialpropertytransfertax

isbudgetedtobringin$900-millionin

revenuefortheprovincialgovernmentinthe

2010-2011fiscalyear.Thetaxisappliedto

thesaleofeachpropertyatarateofoneper

centonthefirst$200,000invalue,andtwo

percentofthevaluegreaterthan$200,000.

Therevenuegeneratedbythistaxisvery

closelycorrelatedwiththefluctuationsof

therealestatemarket.Asrealestatevalues

inBritishColumbiahaveclimbedsteadily

inrecentyears,thepropertytransfertaxhas

becomealargercontributortogovernment

revenues.

TheCityofTorontohasrecentlyintroduced

asimilartaxcalledthemunicipalland

transfertax(MLTT).AsofFebruary2008,the

TorontobegantocollecttheMLTTunder

thelegislativeauthoritygiventoitbyits

provincialgovernmentundertheCityof

TorontoAct,2006.Thetaxiscalculatedon

detachedhousesatarateof0.5percenton

thefirst$55,000invalue,risingto1percent

ofthevaluebetween$55,001and$400,000,

and2percentofthevalueover$400,000.

Forcommercialpropertyandmulti-family

residentialproperties,theratesaresomewhat

lowerwiththeportionover$400,000taxedat

arateof1.5percentandanyvalueover$40-

milliontaxedat1percent.Inthe2009fiscal

year,theMLTTraised$184-million,overtwo

percentofToronto’s$8.7-billionoperating

budget.

Thepropertytransfertaxallowslocal

governmentstocaptureasmallreturnonits

investmentininfrastructureandservicesthat

sustainpropertyvalues.Italsoensuresthat

localizedincreasesinpropertyvaluecanbe

equalizedandsharedacrossthejurisdiction

sothatalltaxpayersbenefit.Assessedat

thetimeofsale,thistypeoftaxrecognizes

that–untilapropertyissold–anincreasein

landvaluedoesnottranslateintoanincrease

inincomeformanyhomeowners.

Somecriticsclaimpropertytransfertaxes

willdeterinvestment.However,many

jurisdictionsinNorthAmerica,including

theBritishColumbiagovernment,have

apropertytransfertax,andthereislittle

empiricalevidencetosupportclaimsthat

suchataxinhibitsinvestmentinrealproperty.


iv. Taxes – Road Pricing Roadpricingisaneconomicconceptthat

supportsdirectchargesoruserfeesappliedto

theuseofroads.Roadpricinghastwodiscrete

objectives:revenuegeneration,usuallyfor

thefinancingandmaintenanceofroad

infrastructure,androadpricingforpurposes

oftransportationdemandmanagement.The

1993GreaterVancouverRegionalDistrict

Transport2021studyrecommendedthe

useofroadpricingmeasurestoreduce

congestion,provideclearerpricesignals

tousersforthecoststheyincurand

imposeonothers,andtoraiserevenuesfor

transportationimprovements.

Localgovernmentsthroughouttheprovince

alreadybenefitfromoneroad-pricingtool,in

theformofparkingfees.However,otherroad-

pricingtools,suchastolls,congestioncharges

andlicensefeesarenotcurrentlyavailable

toBC’smunicipalities.Theprovincial

governmentitselfhasembracedtollsasa

meansoffinancingmajorroadinfrastructure

projects.Formunicipalities,however,the

implementationofsuchtoolswouldrequire

newlegislativeauthority.Furthermore,there

areotherissuestoaddressregardingtolls,as

elaboratedonintheGoldenEarsBridgecase

study.

Case Study: Golden Ears Bridge The Golden Ears Bridge is a six-lane bridge in Metro Vancouver that spans the Fraser River and connects Langley on the south side with Pitt Meadows and Maple Ridge on the north side. Opened in mid-2009, traffic volumes have been lower than expected. This case illustrates that there can be problems of revenue leakage where alternate non-tolled routes exist. According to TransLink figures, the Golden Ears Bridge is not meeting its revenue targets. While daily traffic volumes have slowly increased in recent months, they remain significantly below TransLink’s original estimates. As a result, TransLink increased tolls on the new bridge on July 15, 2010 to capture additional revenue.

This raises questions about the approach to tolling for the Port Mann Bridge, the new Patullo Bridge, and other major projects. There seems to be no obvious reason why some of these bridges and highways should be tolled while others, like the Lions Gate, Pitt River, and Alex Fraser bridges are not.

32 LOCaL PROsPeRity

Anetworkorsystemtollwouldhavethe

advantageofcapturingtollrevenuesfrom

allroutesandnotdistortingtrafficpatterns

asdriversattempttoavoidtolls.Infact,

asystem-widetollwouldallowpricingto

fluctuateinresponsetotrafficvolumes.High

demandroutesduringpeakperiodscould

bepricedhigherthanlowdemandroutes

duringoffpeakperiods.Portugal’sViaVerde,

anelectronictollingsystemwhichcoversall

highwaysandbridgesinthecountry,isagood

exampleofsystemtollingappliedatamacro

level.

Asidefromtolls,congestioncharges

areanotherroadpricingoptionworth

considering.Congestionchargesaremore

likelytofindpoliticalsupportwithinamajor

citybecausetheyextractrevenuefromnon-

residents,who,nevertheless,areusingcity

streetsandservicesbutdonotpayproperty

taxes.ThegeographyofMetroVancouver,

withitsbridgesandlimitedroutesintothe

city,makeitagoodcandidateforacongestion

charge.

Singaporeintroducedtheworld’sfirst

successfulcongestionpricingschemein1975.

Nowcongestionchargesarewidespread,with

well-knownexamplesinBergen,Stockholm,

ShanghaiandLondon.InNorthAmerica,San

Franciscoiscurrentlyexploringthisformof

roadpricing.InNewYork,MayorMichael

Bloombergandamajorityofhiscitycouncil

votedinfavourofacongestionchargein2007,

onlytoseeitstallinthestatelegislature.

FollowingtheleadofCanada’slargestcity,

licensefeesareourfinalexampleofroad

pricingthatBC’slocalgovernmentsmay

wanttoconsiderpursuing.In2008,Toronto

wasgiventheauthoritybyitsprovincial

governmenttointroduceapersonalvehicle

tax(PVT)of$60annuallyoneachpersonal

vehicle,and$30annuallyoneachpersonal

motorcycle.Torontocollectedrevenuesof

$51.7-millionfromitspersonalvehicletaxin

2009.Therewasanattempttointroduceafee

forvehiclesinMetroVancouverin2000,but

thatlevyfailedtoreceivesupportfromthe

provincialgovernmentatthetime.

33 LOCaL PROsPeRity

v. Taxes – BC Carbon TaxIn2008,BritishColumbiaintroduced

acarbontaxatarateof$10pertonne,

risingto$30pertonneby2012.Thetaxis

appliedtovirtuallyallfossilfuels,including

gasoline,diesel,naturalgas,coal,propane,

andhomeheatingfuel.Whilethecarbon

taxiscomprehensive,itisweakenedbythe

manyexemptionsgrantedtothelargest

industrialemittersintheprovince,suchas

thoseforaluminumsmelting,leadandzinc

production,andthetransportationsector.

Therearealsovalidcritiquesaboutthe

disproportionateimpactthatthecarbontax

hasonlower-incomehouseholds.Thetax

creditsintendedtocushiontheimpacton

low-incomehouseholdshavenotkeptpace

withincreasestotherateofthecarbontax.

Thebottom40percentoftheincomeearners

inBCwillpaymoreincarbontaxesthanthey

willreceiveintaxcreditsandincometax

reductions.Furthermore,itispreciselythese

peoplewhoareleastabletoaffordthecapital

investmentsrequiredtoreducetheirenergy

consumption.Incontrast,higherincome

familieswillfinditeasiertoreducetheir

consumptionandupgradetheirhomesfor

energyefficiency.

Althoughthecarbontaxisprojectedto

generate$1.85-billioninitsfirstthreeyears,it

isdesignedtoberevenueneutralbecausethe

governmenthasreducedincometaxesand

businesstaxesbythesameamount.

Insteadofrequiringthatthismoneybe

usedtocutothertaxesforindividualsand

business,localgovernmentscouldbenefit

fromredirectingthesefundstowardprograms

andprojectsthatwillactuallycutgreenhouse

gasemissions.Resolutionsonthisissuewere

submittedtoboththe2009and2010UBCM

conventions.

WhenThinkCitysurveyedlocalgovernment

leadersthroughoutBC,77.9percentagreed

orstronglyagreedthattheprovincial

governmentshoulddirectcarbontax

revenuestowardinitiativestocutgreenhouse

gasemissions,whichwouldalsoimprove

alocalgovernment’sbottom-line.Public

transit,energysavingretrofits,district

energysystems,upgradedsewageandwaste

managementsystems,renewableenergy

generationprojects,moreefficientvehicle

fleets,andvariousothertechnologyupgrades

wouldnotonlyreducethegreenhousegas

emissionsofmostlocalgovernments,they

wouldalsohelplocalgovernmentstosave

moneythroughreducedenergycosts.


vi. Taxes – Gas TaxesFederal Gas Tax

OneimportantnewsourceofrevenueforBC’s

localgovernmentshasbeenthefederalgas

taxfund(GTF).InBCtheGTFisadministered

underanagreementbetweentheUnion

ofBCMunicipalitiesandthefederaland

provincialgovernments.Thegastaxprovides

revenuetolocalgovernmentformunicipal

infrastructureandrelatedprojects.Thestated

goalofBC’s2005-2015gastaxagreementis

thatfederalgastaxfunding“…willprovide

localgovernmentsinBritishColumbiawith

asourceofstable,predictableandlong-term

fundingtowardsenvironmentallysustainable

municipalinfrastructuretohelpthem

addresstheirinfrastructureneedsandmeet

sustainabilityobjectives.”

ThemoneyfromtheGTFcanbespent

onavarietyofeligibleformsofcapital

infrastructure.Theseincludepublic

transit,communityenergysystems,water

andwastewaterprojects,solidwaste

management,andcapacity-building

programs.Alloftheseprojectsareintended

toreducegreenhousegasesbyallowinglocal

governmentstoinvestincleanertechnologies

andmunicipalsystems.

Inmanyrespects,thisisgoodpublicpolicy

becauseitchannelsthegastaxrevenuesinto

publictransitandotherprojectsthatreduce

emissions.However,thegastaxagreement

doesnotallowthesefundstobespenton

operationalneeds,onlyoncapitalprojects.

Unfortunately,thisisaseriousoversight

becauseoperatingfundingisdesperately

neededtosustainmanyservices,suchas

publictransit,thatarecrucialtoreducing

greenhousegasemissions.

Withoutoperatingfunding,eventhebest

capitalinvestmentswillnotfunctionatpeak

efficiency,thereforedeprivingthepublicof

theirfullbenefit.Forexample,acleanfuelbus

isoflittleusewhenit’ssittingidlebecause

thereisn’tmoneytopaydrivers’salaries.

Similarly,fundingstafftrainingorcapacity-

buildingplansmakeslittlesenseatatime

whenlayoffshavebumpedrecentlytrained

civicemployeesintopositionswherethey

areunabletousetheirexpertise.Inorder

torealizethefullbenefitofthesecapital

investments,municipalitiesneedtobeable

toaccessoperatingfundingtoensurethat

anadequateleveloftrainedstaffareinplace

whentheyareneeded.

35 LOCaL PROsPeRity

Provincial Gas Tax

Whenitcomestotheprovincialgastaxwithin

theMetroVancouverregion,TransLinkhas

legislativeauthoritytocollectanadditional

gastaxof15centsperlitretofundpublic

transit.IntheVictoriaregionaltransitservice

area,BCTransitisauthorizedtocollectan

additionalgastaxof3.5centsperlitrefor

similarpurposes.

Theprovincialgovernmentcollectsagastax

of14.5centsperlitreincommunitiesoutside

oftheVancouverandVictoriametropolitan

regions.Manyofthesecommunitiesalsohave

publictransitserviceoperatedbyBCTransit,

butlacksimilarlegislativeauthorityfromthe

provincialgovernment.Thereisnoobvious

reasontocontinuethisinequity.Smaller

communitiesalsoneedreliabletransitservice

andshouldbeeligibleforagastaxsimilar

tothetaxcollectedinMetroVancouverand

Victoria.

Finally,localgovernmentscouldbegiven

therighttocollecttheirowngastax,in

additiontogastaxescollectedbythefederal

andprovincialgovernments.Localgastaxes

wouldhelptorecognizethecurrentreality

thatallthreelevelsofgovernmenthave

responsibilitiesconnectedtotransportation

andenvironmentalpolicies.Allthreelevelsof

governmentrequiretheresourcesnecessary

tofulfilltheirrespectiveresponsibilities.

vii. Taxes – Hotel Room TaxSince1990,BC’smunicipalitieshavebeen

abletolevyatwopercentadditionalhotel

roomtaxontopoftheprovince’seightper

centhotelroomtax.However,whilelocal

governmentsandschooldistrictshave

successfullylobbiedforexemptionsfrom

theHST,itsintroductionmeanstheregular

eightpercenthoteltaxceasedtoexistas

ofJuly1,2010.Thosemunicipalitiesthat

levythetwopercentadditionalhotelroom

taxwillstillbeabletocollectthisrevenue

fornow(Chilliwack,NorthVancouver,Oak

Bay,Parksville,PrinceRupert,Qualicum

Beach,Richmond,Rossland,Saanich,

Smithers,Surrey,Vancouver,Victoriaand

Whistler).However,atpresentthestatusof

theadditionalhotelroomtaxinfutureyears

remainsunclear.

AcrossCanada,manymunicipalities

collecthotelroomtaxes,sometimescalled

destinationmarketingfees.Forexample,

inAlberta,CalgaryandEdmontoncharge

onepercentinadditiontothefourper

centprovincialtax.AndinOntario,the

communitiesofGreaterTorontoArea(GTA),

Ottawa,SaultSte.Marie,Kingston,Kenora,

Hamilton,St.Catharine’s,Burlington,

Stratford,Dryden,andtheVillageatBlue

Mountain(Collingwood)chargethree

percent.IntheMaritimes,Halifaxand

CharlottetownchargetwopercentandSt.

John’schargesthreepercent.InQuebec,hotel

roomtaxesgotothelocaltourismmarketing

associations.

36 LOCaL PROsPeRity

viii. Taxes – Sin TaxesTaxesareoftenusedtodiscourageformsof

behaviourthataredeemedtobeunhealthy

orsociallyundesirable.Thesetaxesare

sometimesreferredtoas“sintaxes,”suchas

taxesonalcoholandcigarettes.Theyarealso

intendedtorecoupsomeofthesocialcosts

foradditionalcareservicesoraddictions

treatment.

In2006,theOntariogovernmentgave

Torontotheauthoritytoimposeasalestax

onalcohol,inadditiontotheprovincialtaxes

alreadycollectedonalcoholsales.Although

Torontohasnotyetimposedanalcoholsales

tax,itcoulddosoatanytime.IfBCfollowed

Ontario’sexample,localgovernmentsinthis

provincescouldthentaxalcoholinviewofthe

policingandsocialservicecostsassociated

withover-consumption.

Theconceptofsintaxescouldalsobe

extendedtootherharmfulsubstances

andactivities,suchasgamblingandother

behavioursthatsocietywishestodiscourage.

37 LOCaL PROsPeRity

Sales of ServicesAfterpropertytaxes,salesofservicesarethe

nextlargestcategoryofown-sourcerevenue

forlocalgovernments.Therearesignificant

opportunitiesforlocalgovernmenttoexpand

theirsalesofservicesandtakeadvantageof

theirexistingexpertiseandinfrastructure.

Theprincipalareaswherelocalgovernments

couldincreasetheirrevenuesaresalesof

energy,garbagecollection,waterandsewer

services.

i. Sales of Services – Energy SalesBritishColumbia’selectricalsystemhas

historicallybeenrunbylargeutilitiessuchas

BCElectric,anditspublicly-ownedsuccessor,

BCHydro.Thegovernmenthasexerteda

highdegreeofcontroloverthegeneration,

transmissionandsaleofelectricalpower.As

aresult,BritishColumbianshaveenjoyed

someofthelowestelectricityratesinNorth

America.

BCHydroprovideselectricitytomostof

BritishColumbia,andFortisBCprovides

powertoseveralcommunitiesinthe

Kootenaysandsoutherninteriorofthe

province.SixcommunitiesinBC(Nelson,

NewWestminster,Kelowna,Summerland,

PentictonandGrandForks)havetheirown

municipalelectricityutilitiesbecausethey

wereinoperationpriortothecreationofBC

Hydrointhe1960s.Mostofthesemunicipal

utilitiespurchaseelectricityfromeitherBC

HydroorFortisBC–onlyNelsonHydroowns

andoperatesitsowngenerationfacilitiesat

BonningtonFalls.

Inotherprovinces,municipally-owned

electricalutilitiesaremuchmorecommon,

despiteatrendtowardprivatizationinrecent

years.Edmonton’sEPCORwasrecently

partiallyprivatized,andPrincetonLightand

PowerwassoldtoFortisBC.Thesepolicy

decisionsreducepubliccontrolofacritical

pieceofeconomicinfrastructureandclosethe

dooronpotentialsourcesofpublicrevenue.

Ironically,energyprivatizationishappening

atpreciselythetimewhenenergypricesare

forecasttoincreasedramaticallyandwhen

environmentalandeconomicchallenges

demandamoreaggressiveandfarsighted

responsethantheprivatesectorisusually

abletoprovide.

Inrecentyears,theprovincialgovernment

hasmadedramaticchangestoenergypolicy

inBritishColumbia.Themostsignificant

policychangeisthedecisiontorestrict

BCHydro’sabilitytobuildnewgeneration

facilities,requiringBCHydrotomeetits

futureenergyneedsbypurchasingpower

fromindependentpowerproducers(IPPs).

Thischangehasbeencontroversial,andcould

erodeoneofBC’scompetitiveadvantages–an

integrated,publicly-operatedelectricalutility

thatprovideslowcost,lowcarbonemission

power.

38 LOCaL PROsPeRity

Whileitisquestionablewhetherthis

policydirectionisinthepublic’sinterest,it

doespresentcertainopportunitiesforlocal

governmentstobecomeinvolvedinfor-profit

electricalgeneration.Localgovernments,First

Nationsandsomecommunitycooperatives

areamongtheentitieseligibletosellpowerto

BCHydro.

BCHydrohasthreeprogramsunderwhich

itpurchasespower:thecallsforpower

program,thestandingofferprogram,and

thenetmeteringprogram.BCHydroissues

callsforpower(similartoarequestfor

proposals)periodicallyandinvitesproposals

forpowerprojects.Theythenselectsuccessful

proposalsandnegotiateenergypurchase

agreements.

In2007,BCHydrobroughtinthestanding

offerprogramtoencouragesmall-scale

renewableenergyprojectsthatgenerate

between50kWand10MW.Proponentsare

requiredtosignaminimum20-yearenergy

purchaseagreementwithBCHydro.Itis

possibleforalocalgovernmenttogenerate

powerforitsowninternaluseandsellany

surpluspowerunderthestandingoffer

program.

Thenetmeteringprogramisintendedto

encouragemicro-scaleprojects,suchas

installingphotovoltaicsolarpanelsonthe

roofsofbuildingsorgeothermalheating

systemsinnewbuildings.Underthis

program,hydrocustomersreceivecreditfor

anyelectricitytheygenerate,andifatthe

endoftheyeartheyhavegeneratedmore

powerthantheyhaveconsumed,BCHydro

willpaythecustomerforthedifference.

Althoughparticipationinthisprogramis

unlikelytobecomeanet-revenuesource,it

wouldreducetheelectricalcostsincurredby

localgovernmentsforthedailyoperationof

municipalbuildingsandfacilities.

Localgovernmentsarewellpositioned

togeneratepowerforsalebecauseoftheir

existinginfrastructurebaseandengineering

capacity.Byestablishingamunicipally-owned

utility,localgovernmentscantakeadvantage

oftheirexistingland,buildings,infrastructure

andexpertise.Anadditionaladvantagefor

localgovernmentisthatmunicipally-owned

utilitiesareexemptfromregulationbythe

BCUtilitiesCommission(BCUC).Thishas

importantimplications,sincetheBCUC

regulatespricesandthecapitalstructureof

utilities(i.e.,thedebtversusequityratioand

otherfinanceconcerns).Localgovernment

utilitiesarethereforefreetodeterminetheir

ownrates,prioritiesandtoleranceforrisk.

Oneofthemostimportantadvantagesof

publicownershipisthatlocalgovernments

canmakeinvestmentsandundertakeprojects

withlongertimehorizonsandlowerrates

thanmostprivatesectorcompanies.Theyalso

havetheflexibilitytolookbeyondimmediate,

bottom-lineconsiderationsandbalancetheir

returnoninvestmentwithcustomerrates,

long-termenergysecurityandenvironmental

considerations.


leadersthroughoutBC,68.5percentagreed

orstronglyagreedthattheirgovernmentwas

lookingforwaystocreateenergyforinternal

useand/orexternalsales.

39 LOCaL PROsPeRity

ii. Sales of Services – Drinking Water System EnergyAlmostalllocalgovernmentsareinvolvedin

providingdrinkingwater.Inordertodothis

theymaintainavastinfrastructureofpipes

tobringwaterfromfreshwatersourcesto

households.Somemunicipalitieshavefitted

thesepipeswithturbinestoharnessthe

energyindrinkingwaterflowingthroughtheir

pipes.CitiessuchasPortlandandTacomaare

generatingelectricityinthismanner.

In2004,theDistrictofWestVancouver

installedasystemofthiskind,theEagle

Lakehydroelectricproject.Previously,West

Vancouverusedasystemofpressurereducing

valvestoreducethepressureofthewater

flowingdownfromtheEagleLakeReservoir.

Theyreplacedthevalveswitha200kW

turbineatacostof$450,000.Theprojectis

expectedtopaybackthe$450,000capital

investmentover10to12years.

Anotherexampleofthistypeofprojectis

theLakeCountryhydroelectricgenerating

station,aprojectthataddedtoexisting

infrastructurewiththeinstallationofa

1.1MWhydroelectricturbineaspartofthe

EldoradoReservoirsystem.Thisproject

generatesapproximately4,000MWhours

annuallythatissoldtoBCHydro.

iii. Sales of Services – LandFill BiogasLandfillsgiveoffsignificantamounts

ofmethane,agreenhousegasthatis25

timesmorepotentthancarbondioxidein

trappingheatintheatmosphere.Capturing

andburningthisgascutsgreenhouse

gasemissions,andalsoproducesenergy.

Capturingthegascanbeanexpensive

process,andoftenrequiresmajorcapital

investment.Ingeneral,thelargerlandfillsite,

thebettertheeconomiesofscaleforsuch

projects.

Therearealreadyseveralprojectstocapture

landfillgasinBritishColumbia.Theseinclude

theHartlandlandfillintheCapitalRegional

District,theVancouverlandfillandthe

GlenmorelandfillinKelowna.


iv. Sales of Services – Municipal Solid WasteMunicipalsolidwastecanbeburnedin

incineratorsthatconvertwaste-to-energy.

Localgovernmentalreadycollectsthewaste,

andneedstodisposeofit.Althoughthere

areimportantconcernsaboutthetoxicityof

emissions,thelatesthigh-efficiencyfurnaces

areabletoburnmuchcleanerthantraditional

incinerationmethods.

Afterimplementingprogramstomaximize

diversionratesthroughexpandedrecycling

andcompostingprograms,localgovernment

willstillbeleftwithsolidwastethatmustbe

disposedof.Highefficiencywaste-to-energy

systemsareanoptionforlocalgovernment

indealingwiththeirmunicipalsolid-waste

problems.Althoughitisnotaperfect

solution,itmustbebalancedagainstthe

environmentalcostofalternatemethodsof

disposal,suchasthecreationofnewlandfill

sites.

MetroVancouver’swaste-to-energyfacility

inBurnabyprocessesabout20percentofthe

region’sgarbageandgeneratesabout135,000

MWperyearthatissoldtoBCHydro,earning

$6-millionannuallyforMetroVancouver.

v. Sales of Services – Anaerobic DigestionAnaerobicdigestionofgasesfromsewage

haslongbeenasourceofenergyinsewage

treatmentplants,andbiogasproductionis

currentlyinplaceatsewagetreatmentplants

inVancouver,PrinceGeorgeandNanaimo.

Energyfromwastewatertreatmentdigestion

islikelyonlyviableincommunitiesofatleast

50,000people,andtheeconomiesofscale

improvewithlargerpopulationsandsewage

volumes.Approximatelyonemillionlitres

ofsewageperdayisneededtoproducenine

kilowatts.

TheWhistlerwastewatertreatment

plant,ownedandoperatedbytheResort

MunicipalityofWhistler,extractsambient

heatfromtreatedwastewaterandprovides

95percentoftheheatingandcoolingneeds

for2,200homes,covering85,000square

metres.Ithasbeenabletocutgreenhouse

gasemissionsby90percentcomparedto

conventionalsystems.Afteritsfirstyearof

operation,thesystemisalreadysavingmoney

forthemunicipality.Theplantiscombined

withastate-of-the-artcompostsystemthat


transformsbiosolids,residentialfoodwaste

andwoodchipsintohigh-gradecompost.The

compostingsystemhasthepotentialtodivert

5,000tonnesannually,or20percentofthe

municipality’swaste.

TheHyperiontreatmentplantinLos

Angelesproducesabouteightmillioncubic

feetofmethanebiogas,whichisconvertedto

electricity.TheDeerIslandsewagetreatment

planttreats360milliongallonsofwastewater

eachdayfromtheGreaterBostonarea.Itis

abletosupply20percentofitsownpower

needsthroughmethanegasextractionand

hydroelectricityproducedaswastewater

dropsfromtheplantintotheoutfalltunnel.In

total,theelectricitytheplantgeneratessaves

over$16-millioninannualoperatingcosts.

Montana’sHelenawastewatertreatment

facilitytreats2.68milliongallonsof

wastewaterperday.Thetreatedwastewater

isdisinfectedwithultra-violetlightand

methanegasfromthedigestionprocessis

usedtomeettheplant’sheatingandenergy

requirements.

Thereisalsopotentialtouseanaerobic

digestion–thebreakingdownofwasteinthe

absenceofoxygen–onagriculturalwasteand

greenwaste.Again,largevolumesoforganic

matterarerequiredinordertomakeenough

gastomaketheeconomicsviable.InCanada,

Toronto’sDufferinfacilityisanexampleof

anaerobicdigestionofsolidwaste.

Toronto’sgreenbinprogramcollectsorganic

greenwastefromover500,000single-family

households.Alongwithorganicwastefrom

cityparks,thishouseholdgreenwasteis

processedattheDufferinfacility.Theprogram

generatesrevenuesfortheCityofToronto

andhasachieveda44percentdiversion

rate,andaimstoreach70percent.Asimilar

programinMetroVancouverwouldextend

thelifeofexistinglandfills,reducemethane

gasemissionsfromlandfills,andgenerate

revenuefortheregionaldistrict.


vi. Sales of Services – Biomass and Wood WasteBiomass,intheformofagriculturalwaste

orwoodwaste,canbeausefulenergy

resourceinmanycommunities.Forinstance,

Revelstokeundertookacommunityenergy

planningprocessin1997.Theprocessfocused

onadistrictheatingsystem,aresidential

energyretrofitprogram,and,thecreation

ofanenergyservicescompanytoserveits

institutionalandcommercialbuildings.

Today,thepeopleofRevelstokearethe

proudownersofabiomassenergysystem

thatuseswastewoodfromtheDownie

Timbersawmilltoproduceenergyforits

districtheatingsystem.Thewasteisburned

toprovidesteamforthesawmill,withthe

surplussteamusedtoheatmunicipaland

commercialbuildingsinthedowntownarea.

TheRevelstokeCommunityEnergy

Corporationiswholly-ownedbytheCity

ofRevelstoke.Theirprogramsreduce

greenhousegasemissions,produceelectricity

andgeneraterevenues.Thesawmillistheir

largestcustomer,andwasamajorpartner

inthedeal.Theprojectcostapproximately

$5-million,whichwasprovidedthrough

acombinationofloans,grants,andcivic

reserves.

vii. Sales of Services – Community Energy CooperativesCommunityenergycooperativesarecompanies

ownedbytheirmembers,notshareholders.

Therearetwokindsofcooperatives:producer

co-opsthatallowproducerstoselltheirpower

locally,andconsumerco-opsthatallow

consumerstogrouptogethertobuypower

atlowerratesthantheycouldindividually.

Communityenergycooperativeshavebeenan

importantforceindevelopingrenewableenergy

inDenmark,GermanyandtheNetherlands.For

example,theCityofCopenhageninitiatedthe

Middelgrundenwindfarm,andhelpedfoundan

energycooperativewhose8,500membersown

10ofthewindfarm’s20turbines.

WindShareinTorontoisanotherexampleofa

producercooperativeintherenewableenergy

sector.WindShareisintheprocessofdeveloping

Lakewind,a20MWwindfarminKincardine,

Ontario.Whenthewindfarmopensin2012,it

willbethelargestcooperatively-ownedwind

powerprojectinCanada.Itwillconsistof10

two-megawattturbinesstanding108-metres

high,andwillgenerateenoughelectricityto

power13,000homes.

HereinBritishColumbia,theCityofDawson

Creekplayedanimportantroleinhelpingto

establishthePeaceEnergyCooperative.This

producerco-ophelpssmallproducersselltheir

powertolargerdistributors.Aspurchasing

thetechnologyforalternativeenergy–such

aswindturbinesandphotovoltaicsolar

energysystems–isveryexpensive,producer

cooperativescanhelpwithbulkpurchaseorders

andbynegotiatingbetterpricesforenergy

producers.


viii. Sales of Services – District Heating Systems Districtheatingsystemscreateanopportunity

toprovidesteamheatingandhotwaterto

anetworkofbuildingsatlowercoststhan

stand-alonesystemsareabletoachieve.

Districtsystemsalsosignificantlycutthe

greenhousegasemissionsofparticipating

buildings.

TheLonsdaleEnergyCorporation(LEC),

ownedbytheCityofNorthVancouver,is

anexampleofasuccessfuldistrictenergy

system.LECprovidesheatandhotwater

to1,390residentialconsumersand150,000

squarefeetofcommercialspace.LEChas

grownrapidlyandisnowinabreak-even

positionafteronlyfiveyearsinoperation.

InvestinginLEChasallowedtheCityofNorth

Vancouvertoprovideacompetitivelypriced

andenvironmentallyefficientservicethat

alsoexpandstherangeofservicesthatthe

cityisabletosell.Asthenumberofbuildings

connectedtoLECcontinuestogrow,thecity

canexpecttobenefitfromanewlong-term

revenuestream.

Oneotheradvantageofadistrictenergy

systemisthatundertheprovince’s

CommunityCharter,acitycanmandate

privatepropertyownersintheimmediate

areabeconnectedtothedistrictenergy

system.Thistypeofsystemworksbestin

compact,denselybuiltareas,suchasthe

LowerLonsdalepartofNorthVancouver.

TheCityofVancouverbuiltanewdistrict

energysystemaspartoftheOlympicVillage

project.Itwillprovideheatfortheentire

developmentofover557,418squaremetres,

usingthecity’sundergroundsewagepipesas

aheatsourcetoheatthewaterandgenerate

steam.Thesystemworksbypumping

sewageintothefacility,whereambient

heatisextractedandcirculatedthroughthe

buildings.Thecoldsewageisthenpumped

intothecity’ssewersystem.

Thedistrictheatingsystemhasthecapacity

toserveupto16,000residentsandbusinesses

andwillreducegreenhousegasemissionsby

50percentcomparedtoconventionalheating

methods.Halfofthecostofthe$29-million

facilitywascoveredbygrantsandlow-interest

loansfromseniorlevelsofgovernment.The

otherhalfcamefromcitybonds,whichwillbe

repaidthroughratesbilledtofutureresidents

intheOlympicVillageneighbourhood.


ix. Sales of Services – District Electricity UtilitySimilartoadistrictenergysystem,thistype

ofutilityormicro-griddistributeselectricity

ratherthansteamtocustomersinacompact,

localarea.Usingrenewableenergysources,

andsupplementedbypowerfromBCHydro

whennecessary,thistypeofsmall-scale

utilitycouldprovideelectricitytoconsumers

indense,urbanareas.Forexample,the

districtenergycentreinTorontoispartofthe

ExhibitionPlacecomplexandisownedbythe

CityofToronto.Itprovidesheating,cooling

andelectricityfortheentirecomplex.

TheUnitedKingdom’sBoroughofWoking

providesamuchlargerexampleofhow

micro-gridscanbeusedtoprovidepower

forneighbourhoods.ThesysteminWoking

providespublicbuildingsandhousingwith

bothheatingandelectricitythatisgenerated

fromninenaturalgasco-generationplants

and11photovoltaicsolarpowersystems.

x. Sales of Services – Commercial Garbage CollectionInthelastseveraldecades,manylocal

governmentsremovedthemselvesfromthe

businessofcommercialgarbagecollection,

turningovercity-runservicestoprivate

operators.However,thetrendinrecent

yearsismovingawayfromcontractingout,

ascitiesdiscoverthatcommercialgarbage

collectionmakessenseforbothbusinesses

andtaxpayers.

Therearethreereasonsforcontracting-in

commercialgarbagecollection.Studies

haveshownitcanbemorecost-effective,

contributetogreaterwastediversionand

deliveraprofittolocalgovernmentcoffers.

Evensomeadvocatesofprivategarbage

collection,suchasBenDachis,haveeven

notedthat“duringthelastdecade,American

citieshavebeencontractingworkbackinata

fasterratethantheyhavecontractedout.”

InwesternCanadaandtheUnitedStates,

thereareseverallocalgovernmentsthat

providepublicly-runcommercialgarbage

collection,suchastheCityofBurnaby,the

DistrictofNorthVancouver,theCityof

Calgary,theCityofMedicineHatandthe

CityofSeattle.Publicly-runcommercial

garbagecollectionisoftenmorecost-effective

thanprivatecomparatorsbecauseoflarger

publicinfrastructureandeconomiesofscale.

Diversionratesfromlandfilltorecycling

aretypicallyhigherinpublicsystemsthan

thoseachievedbyprivatesectorcontractors.


AccordingtotheCityofOttawa’sDiversion

2015report,thereasonforthisdifferenceis

clear:

“When waste materials have limited

commercial value, the private sector limits

recycling services or prices them accordingly.

Where there is insufficient demand for

recycling due to the lack of regulatory

requirements or the size of the local economy,

the service will not be provided unless doing

so can optimize use of other systems, such as

the residential infrastructure, in an economic

fashion.”

Ottawaisnowintheprocessofphasingin

anindustrial,commercialandinstitutional

wastestrategywiththegoalofincreasing

diversionratesfrom17percentto60per

centby2015,whichwillextendthelifeof

municipallandfillsandhelpprotectthe

environment.

Increasinglocalgovernmentinvolvement

incommercialgarbagecollectionisalso

beneficialinreducingcostsforbusinesses

byprovidingcompetition–directlyand

indirectly.Directly,localgovernmentscan

buildonexistingpublicly-runresidential

garbagecollectionservicestooffer

competitiveprogramsthatlowercostsfor

businesses.Indirectly,thepresenceofapublic

sectorcommercialgarbagecompetitorcan

helpbolsterfairnessinthemarket.

Anexampleofhowbusinesscanbenefitis

theCityofToronto’syellowbagprogram,an

innovativepre-paidsystemofcommercial

garbagecollection.Thegoalsoftheprogram

aretoreducewasteandincreaserecyclingand

organiccollection,tocreateaharmonized,

fairserviceforbusinessesacrossthecity,and

todramaticallylowerthecostsofgarbage

collectionanddisposal.

Recognizingthatmanysmallbusinessesdo

notgeneratelargeamountsofgarbage,the

programcollectstheirgarbageonceperweek,

muchlikeitdoesforresidents.Businesses

whoregisterareentitledtofreerecyclingand

organicscollection.Generally,commercial

establishmentsoflessthanfourfloorsand

lessthan500squaremetresofgroundfloor

spacequalifyfortheprogram.


Competitionincommercialgarbage

collectioncanalsoindirectlyinfluencethe

behaviorofprivatecontractorstoprevent

collusionandkeepcostsincheck.In2009,

theFederalCompetitionBureau(FCB)

investigatedclaimsfromcentralVancouver

Islandthatasmallnumberofcompanies

weremanipulatingthemarketforcommercial

garbagecollection.Thecompaniesinvolved

lockedcustomersinusinglong-term

contractsthatincludedhighlyrestrictive

terms,suchasautomaticrenewalclauses,

significantpenaltiesforearlycontract

terminationandrightsoffirstrefusal.The

FCBruledthatthecontractsresultedin

substantiallylesscompetitivemarkets,

leadingtohigherpricesandreducedchoice

forbusinesses.

xi. Sales of Services – Franchise FeesBC’slocalgovernmentshavelongcharged

franchisefeestoutilitiesthatusemunicipally-

ownedstreets,alleys,poles,conduitsand

rights-of-way.Thesefranchisefeesare

typicallychargedtoelectricutilities,pipelines,

naturalgascompaniesandtelephoneand

cablecompanies.

Revenuesthatmayberaisedfrom

naturalgasprovidersareanexampleofthe

importanceoffranchisefees.ForBC’slocal

governments,uptothreepercentofthe

valueofnaturalgassaleswithinmunicipal

boundariesarepayableasfranchisefees.

However,theprovincialgovernmenthas

restricted,andsometimesprohibited,local

governmentsfromchargingfranchisefees

withoutprovidingcompensationtothe

affectedmunicipalitiestooffsetthelossof

thesefranchisefeerevenues.TheUBCMhas

identifiedrestrictionsonfranchisefeesasan

areawhereimprovementisneeded.

Forexample,theCityofNanaimodetailsthe

impactofthe1989VancouverIslandNatural

GasPipelineAct:

“The City’s inability to impose a three per cent

franchise fee on Terasen (Centra Gas) means

that the costs of Terasen (Centra Gas) doing

business in Nanaimo must be borne by city

taxpayers. It is important to note that the

costs to municipal taxpayers from Terasen’s

business have been substantial, especially in

light of the major expansion of natural gas

infrastructure that occurred in Nanaimo in

the early 90s. Revenues from franchise fees,

had they been allowed, would have kept pace

with the expansion-driven costs.”


xii. Sales of Services – Water PricingGoodwaterisanecessityoflifeforall

species,includinghumans.Qualitypublic

waterandsanitationarenecessaryfor

communitydevelopmentandtheprotection

ofcommunityhealth.

Decisionsaboutthemanagementofwater

andsewerservicesshouldthereforenotonly

bebasedonscientificdataandbestpractices

inpublichealth,butmustalsotakeequity

concernsintoaccount.Whenitcomesto

water,revenuegenerationmustnevertake

precedenceoverpublicsafetyandpublic

provision.Canadiancommunitiesmoved

awayfromprivateprovisionofwaterand

sewageservicesinthelatenineteenthand

earlytwentiethcenturies,aftersufferinga

seriesofepidemicsandpublichealthcrises

relatedtowater-bornediseases.Today,

mostCanadiansarethebeneficiariesofan

extensivenetworkofpubliclyoperatedand

maintainedwatersystems,thoughinmany

FirstNationsandruralcommunities,water

qualitycontinuestobepoor.

ManylocalgovernmentsinBritishColumbia

chargeforwaterataflatrate.Chargesfor

watervaryonlybytheassessedvalueofthe

property,ratherthanbythelevelofwater

usage.Somestudieshaveshownthatflat

ratesforutilitiesdonotprovideincentives

forcustomerstolimittheirconsumption.In

areaswherewaterconservationisaconcern,

flatratesfailtomitigateexcessdemandonthe

resource,especiallyduringpeakperiodsand

timesofscarcity.

Aswithotheruserfees,waterpricingbased

onusagetendstohaveadisproportionately

negativeimpactonthosewithlowerincomes

orwithlargerfamilies.Thoseopposedtouser

feesforwaterbelievethemtobeinherently

regressiveandarguethatnecessaryservices

suchaswatershouldbeprovidedthroughthe

generaltaxationsystem.

However,therearecountervailing

argumentsabouttheneedtoconserve

scarcewaterresources.Onewaytodothat

maybetopricewaterinthesamemanner

asothermeteredutilitiessuchaselectricity

andnaturalgas.Onepossiblesolutiontothe

impactofwatermeteringonlowerincome

familiesisasteppedratestructure.Astepped

ratestructurecouldprovideeachhousehold

withareasonablyinexpensivebaserate,

andrateswouldthenincreasewitheach

incrementalstep.However,incountries

suchasSouthAfrica,whichinstituteda

steppedsystemofthissortviaprivatized

“pre-paidwatermeters”,theresulthasbeen

considerablesocialtension.


Whilemostwaterconservationattention

tendstofocusonresidentialusers,itisequally

ifnotmoreimportanttofocusonlarge

commercialandindustrialusersbecause

oftheirabilitytoachievemuchgreater

conservationtargets.Asteppedratestructure

couldresultinthoselarge-volumeusersbeing

chargedratescommensuratewiththeirmuch

higherconsumptionofwater.

SomeBClocalgovernmentshavebrought

inwatermetering.Thesemunicipalities

includeVernon,Summerland,WestVancouver,

Penticton,Peachland,Gibsons,andtheCapital

RegionalDistrict.Othermunicipalities,such

asRichmond,Delta,SurreyandMapleRidge,

havebroughtinvoluntarywatermetering.

Voluntarywatermeteringisasystemthat

allowsresidentialconsumerstopaywhichever

islowerofeitherthemeteredrateortheflat

rate.

Thosewhoadvocatemeteringbelieveitto

beausefultoolinchangingpublicbehaviour.

Theybelievelocalgovernmentscouldbenefit

fromincreasedwaterrevenuesandlower

demandforexpensive,newinfrastructuresuch

asdamsandstoragereservoirs.Cranbrookis

oneofseveralmunicipalitiesintheprovince

nowlookingatwatermeteringasawayto

reducedemandanddefertheneedtobuild

newstoragereservoirs.

Aftercitizenapprovalinavoteheldin2008,

theTownofGibsonsinvested$1.4-millionto

installonewatermeterforeachcommercial

andresidentialproperty.Theprojectwas

completedin2009.Gibsonshasdonethis

inordertohelpeducateresidentsaboutthe

amountofwatertheyconsumeandtoprovide

anincentivetouseless.

Kamloopshasalsorecentlydecidedto

proceedwithwatermeters,withthehopethat

watermeteringwillreduceconsumptionand

aidconservationeffortsinthisverydrypartof

theprovince.

Othersopposedtowatermeteringare

concernedthatitisafirststeptoward

privatization.Manypeopleareworriedabout

thecommodificationofwaterandbelievethat

feesbasedonusagecreateareadyrevenue

streamthatisveryattractiveforwould-be

waterprivatizers.


Whetherornotwatermeteringis

implemented,itisimportanttorecognizethat

meteringalonewillnotdoenoughtoachieve

theconservationgoalsofarapidlygrowing

province.What’sneededisacomprehensive

visionforbetterstewardshipofwater

resources.

Regulationofwateruseisalsoacritical

conservationtool.Inordertoaddressthe

problemofwaterconservation,weneed

tolimittheamountsoakedupbythe

largestwateruserssuchasgolfcourses

andlargeindustrialoperations.Manylocal

governmentsaretakingstepstoencourage

re-useofgreywater.Aswell,lawn-watering

restrictionsandpubliceducationaboutthe

needforwaterstewardshipareimportant

toolsforallmunicipalities.

50 LOCaL PROsPeRity

Other RevenuesTherearemanyothersmallerrevenuesources

availabletolocalgovernments,whichare

usefulindiversifyingthetaxbaseandthereby

reducingdependencyonpropertytaxesand

salesofservices.Inthissectionweexplore

optionsthatcouldgeneratenewrevenueor

stoptheleakageofexistingrevenue.

i. Other Revenues – Transfers Localgovernmentsarecreationsofthe

provinciallegislature.Theyaregranted

powersthroughprovinciallaws,suchas

theCommunityCharterandtheLocal

GovernmentAct.Atthemostbasiclevel,

localgovernmentpowerstoraiserevenueare

derivedfromprovincialgovernments.Inthat

sense,alllocalgovernmentrevenuesinvolvea

sharingortransferofprovincialrevenues.

Propertytaxisjustonepossiblemechanism

fortransferringorsharingrevenue.Thistax

hastheadvantageofbeingattachableto

propertythatalocalgovernmentserves,and

thereforereflectstherelationshipbetween

servicesprovidedandtherevenuesource.

Theideathatpropertyownersshouldpayfor

servicesprovidedtotheirpropertyappears

fair.However,theextenttowhichlocal

governmentservicescanbeconsideredas

servicestopropertyhasbecometenuous.

Communitiesthataresimilar,intermsof

numbersandusesofproperties,mayhave

verydifferentdemandsforservicesdepending

uponsocio-economiccharacteristicsand

otherfactors.Manyservicesprovidedbylocal

governmentsaregeneralgovernmentservices

topeople.Thedemandfortheseserviceshas

arelativelyinsignificantrelationshiptothe

valueoftaxablepropertiesinthecommunity.

Forinstance,certainkindsofpolicingmay

beneededtoagreaterdegreeinsome

communitiesforreasonsonlytenuously

connectedtotheprotectionofpropertyand

residentslocatedwithintheboundsofthe

community.Thesamemaybetrueofcertain

kindsofsocialservicesthatareprovidedto

meetprovincialobjectives.

Furthermore,similarcommunitieswith

similarneedsanddemandsmayhavehighly

divergentabilitiestopayforequivalent

servicesduetodifferenteconomicconditions.

Itisgenerallyagreedthatresidentsofall

communitiesshouldenjoyabasicstandard

oflocalservicestoproperty,suchasclean

water,sewagedisposal,wastecollectionand

disposal,pavedstreets,anddrains.However,

communitiesvarywidelyintermsofthe

incomesofresidentsandbusinesses,the

relativevaluesoftheirproperties,andthus

theabilityofpropertyownerstopaytaxes.


InBritishColumbiaoverthepastfewyears,

theforestsectorhasfallenintodecline,

decreasingtheearningsofresidentsand

businessesinruralareas.Asaresult,the

propertytaxbaseinmanyruralcommunities

hasbeeneroded,asreflectedinthedeclining

relativepropertyvaluesandthelossoftax

payingresidentsandbusinesses.Overall,

theabilityofresidentsandbusinessesto

payhascomeunderseverepressure.Those

communitiesexperiencearevenuesqueeze

ontheirlocalgovernments.Theonlywayfor

localgovernmentstoaddressthissqueeze

istocutservicesorcollectrelativelyhigher

propertytaxes.Neitheralternativeisfairon

thebasisofhorizontalequity,whichholds

thatallresidentsshouldenjoygenerallythe

samelevelsofservicesatcomparablelevels

oftaxation,regardlessofthecommunitythey

livein.

Therevenueproblemforlocalgovernments

isfundamentallydrivenbydifferencesin

thepercapitapropertytaxbaseoftheir

communitiesorregions.Similarratesoftax

bringinmuchlessrevenueinlessprosperous

communities.Inreality,adjustedrevenue

transfersfromseniorlevelsofgovernments

arerequiredtoaddressthisissue.Such

transferscouldequalizepercapitarevenue

ofthegovernmentsinquestiontoensure

thatcomparableservicescanbeprovidedat

comparabletaxrates.

Percapitagrantsprovideacertain

amountofrelief,giventhattheyassist

poorercommunitiesjustasmuchasmore

prosperousones.Equalizationtransfersare,

however,aremuchmoreeffectiveatensuring

equityamongcommunities.Suchtransfers

providea‘top-up’totherevenuesoflesswell-

offmunicipalities,raisingtheirpercapita

revenuestocomparablelevelswiththose

municipalitiesthatarebetteroff.

Equalizationtransfersworktomeet

theobjectiveofhorizontalequityandof

verticalequity,whichstatesthatbetteroff

communitiesshouldpayagreatershare

ofthecostsofservicesthanthosethatare

lesswelloff.WhileBritishColumbiaonce

hadequalizationrevenuesharingforlocal

governments,thisisnolongerthecase.

Unlessanduntilthereisareturntoasystem

ofequalizationtransferstolocalgovernments,

thefinancialproblemsoflocalgovernments

inmanypartsoftheprovincewillbecome

evermoreonerous.

52 LOCaL PROsPeRity

ii. Other Revenues – GamblingInThinkCity’ssurveyoflocalgovernment

leadersinBritishColumbia,manylocal

governmentsreportgamblingasanimportant

newsourceofrevenue.Whiletherearemany

viewsabouttheappropriatenessormorality

ofsuchexpansion,therehavebeenconsistent

trendstowardincreasedopportunitiesfor

gamblingandtheliberalizationofmany

restrictionsongambling.

Likeothersocialvices,gamblingproduces

associatedsocialcostslikeorganizedcrime,

policing,emergencyservices,familyviolence,

andaddictiontreatment.Localgovernment

oftenpicksuptherelatedexpensesand,

therefore,itisnotunreasonableforlocal

governmenttoexpectashareofgambling

revenue.

Inthecaseofnewcasinodevelopment,

localgovernmenttypicallybenefitsfrom

propertytaxes,developmentcostlevies,

amenitycontributions,andanongoingshare

ofrevenues.Theserevenuescanbequite

lucrativeandthereforeveryattractivetolocal

governments.However,thereisalimitto

theamountofgamblingtheeconomycan

support.Withseveralmajorcasinoprojects

openedorinthedevelopmentprocess,

BCmaybenearingthepointofmarket

saturation.Assuch,itisunwiseforlocal

governmentstocountongrowthingambling

revenuestocontinueatcurrentrates.

Fromaneconomicdevelopment

perspective,thereisevidencetosupportthe

ideathatgamblingtakesmoneyoutofthe

localeconomythatwouldotherwisebespent

onotherdiscretionarygoodsandservices.

Inthissense,gamblingexpansionimposes

anopportunitycostthatisbornebyother

businessesintheeconomy.

iii. Other Revenues – Development Cost LeviesDevelopmentcostlevies(DCLs)arefees

chargedtodeveloperstocompensate

localgovernmentforthecostofproviding

newinfrastructureandservicetonew

developments.Forexample,development

mayrequirenewstreets,waterandsewer

lines,andotherinfrastructure.Thereismuch

debateaboutwhatcouldandshouldbe

includedinthescopeofDCLs.Forexample,

howshouldlocalgovernmentsrecouplonger

termoperatingcostsassociatedwithnew

developments?

Theprovincecouldassistlocalgovernments

byprovidingthemwithmoreflexibilityin

determiningDCLsthataccuratelyreflectthe

truecostsofdevelopment.However,thereare

severalquestionssurroundingDCLsthatneed

tobefurtherexplored.Forexample,some

environmentalandsmartgrowthadvocates

expressconcernthatthecurrentsystemof

municipalfinancingismotivatingsomelocal

governmentstoapprovedevelopmentthat

wouldnototherwisebeapprovedbecauseof

theDCLrevenuethatwouldflowtothecityas

aresult.

53 LOCaL PROsPeRity

InThinkCity’ssurveyoflocalgovernment

leaders,weaskedwhatpercentageoftheir

totalrevenuescamefromDCLs.Themedian

figurewasonepercent.Thereareasmall

numberofmunicipalitieswhereDCLsdo

compriseanuncommonlylargeshareof

overallrevenues.Thosemunicipalities

broughtuptheaverageinoursurveyto3.9

percent.Notably,jurisdictionswhereDCLs

arealargesourceofrevenuescanbeleftquite

exposedtoanydownturnintherealestate

anddevelopmentindustry.

iv. Other Revenues – Capturing Lift Localgovernmentsoftenmakeland-use

decisionsthatdirectlyleadtoanincreasein

themarketvalueofoneormoreproperties.

Forexample,apropertyzonedforsingle-

familyresidentialusemaybeup-zonedto

allowforamulti-family,residentialhigh-rise.

Thevalueofthepropertycanincreaseby

millionsofdollarsasaresultofthistypeof

decision.Theamountofthisincreaseiscalled

“thelift”anditaccruesdirectlytotheowners

ofthepropertiesinquestion.

Mostlocalgovernmentstrytocapturesome

oftheliftthroughvariousmeans,including

requiringsomeamenitycontributionsfrom

developersasaconditionofdevelopment

approval.Forexample,thedevelopermay

berequiredtocontributesomelandfora

parkorbuildachildcarefacility.However,

thisprocessisnottransparent.Negotiations

happenbehindcloseddoorsbetweenthe

cityandthedeveloper.Thevalueofthe

amenitycontributionvariesfromprojectto

projectandcanleadtosuspicionthatsome

developersaretreateddifferentlythanothers

andthatpoliticalinfluencecanresultina

muchmorefavorabledeal.

Furtherresearchshouldbeundertakenon

mechanismsthatwouldallowforamore

uniformandtransparentwayofcapturing

theliftcreatedbypublicpolicyandland-use

decisions.


v. Other Revenues – Transportation-Related Land Development Transitsystemsaroundtheworld,perhaps

mostnotablythemasstransitrailwaysystem

inHongKong,arefinancedbyrevenuesfrom

propertyinvestmentanddevelopment.As

transportationisakeyfactorinfluencingland

values,governmentshavecapturedrevenue

aslandisdevelopedforhigher-densityuses.

Atpresent,BC’slocalgovernmentsrealize

littlebenefitfromtheincreaseinlandvalue

wheneveranewbridgeisopenedorarapid-

transitlineisbuilt.However,onesolution

alreadyunderwayinMetroVancouvermay

usherinaneweraintransportation-related

landdevelopment.

TransLinkistheregionaltransportation

authorityinMetroVancouver,responsible

forprovidingpublictransitandmajorroad

projectsthroughouttheregion.Asasingle

agencyresponsiblefortransportation

throughouttheentireMetroVancouver

region,TransLinkhastheabilitytoshape

developmentintheregionthroughits

investmentsintransportationinfrastructure

anditspublictransitservice.

In2008,TransLinkestablishedawholly-

ownedrealestateandpropertydevelopment

company.Thiscompanyisresponsiblefor

theacquisitionanddevelopmentoflandfor

TransLink’sownuse,andtogenerateextra

revenues,whichareforecasttobeupto$1.5-

billionoverthenext10years.Notonlydoes

thiscompanyallowTransLinktoinvestin

landforfutureuseatreasonable,fairmarket

prices,italsoallowsTransLinktorecover

someofthecostsassociatedwithmulti-

billiondollarinvestmentsintransportation

infrastructure.

55 LOCaL PROsPeRity

vi. Other Revenues – Remove Public-Private Partnership Comparator RestrictionsInordertobeeligibleforprojectfunding,

theprovincialgovernmenthasburdened

localgovernmentwithrestrictiverulesthat

requireallpublicinfrastructureprojectswith

avalueinexcessof$50-milliontogothrough

acomplicatedpublic-privatepartnership(P3)

comparisonprocess.Thisprocessismeantto

provethatthelocalgovernmentcanbuildthe

projectatalowercostthanahypotheticalP3

comparator.

TheP3comparisonprocesscanbequite

lengthyandexpensive,relyingheavilyon

outsideexpertconsultants.Itisalsoan

unnecessaryintrusiononthedecision-

makingauthorityoflocalgovernments.

Ratherthanallowingelectedmayorsand

councillorstomakedecisionsinthebest

interestoftheircommunities,theprovincial

governmentisdictatinga‘onesizefitsall’

approachtomunicipalinfrastructurefunding.

Moreover,giventheinstabilityand

dysfunctioninworldcreditmarketsoverthe

pastfewyears,andtheprivatesectorpartners’

difficultyinobtainingcapitalatreasonable

rates,governmentfinancingandcontracting

isalwaysmoresecureandoftenmorecost-

effectivethanP3models.Thedifficultyof

relyingonP3modelswasillustratedrecently

whentheprovincialgovernmentwasunable

tofindaP3biddercapableoffinancingthe

twinningofthePortMannBridge.Instead,

theychosetodeveloptheprojectusinga

traditionalgovernment-procurementmodel.

vii. Other Revenues – Collection of Tickets and FinesSomelocalgovernmentshavelobbiedthe

provincialgovernmenttomakealegislative

changethatwouldallowlocalgovernments

tocollectunpaidticketsandfinesbyapplying

outstandingamountstoanindividual’s

propertytaxbill.Courtenayhadaresolution

tothiseffectatthe2009UBCMconvention.If

implemented,thisrelativelysimplelegislative

changewouldaddresstheleakageofsome

revenueinunpaidfinesandtickets.

viii. Other Revenues – Access to Proceeds of CrimeTheprovincialgovernment’sCivilForfeiture

Actenablesthegovernmenttoseizeassets

purchasedwiththeproceedsofcrime.The

productionandsaleofillegaldrugsandother

organizedcrimeactivitynegativelyimpacts

communitiesandcauseseconomicharmto

residents,businessesandlocalgovernments.

Giventhelocalimpacts,manyofBC’slocal

governmentsbelievetheprovinceshould

enactlegislationtosharetheproceedsof

propertyseizedwithmunicipalities.The

Caribooregionaldistricthadaresolutionto

thiseffectatthe2009UBCMconvention.

56 LOCaL PROsPeRity

economic DevelopmentChaPteR

4Alllocalgovernments

spendmoneyoninfrastructure,

facilities,humanresourcesandservices.

Theseinvestmentscanhelppropel

economicdevelopmentiftheyarepartof

acoordinatedplantoattract,retainand

growbusinesses.Ahighpriorityshouldbe

assignedtoinvestmentsproventomakelocal

communitiesstrongerandmoreresilient.

Whilethepreviouschaptershavelooked

athowtofindadditionalrevenuesources

withintheexistingeconomy,thischapter

willconsiderstrategiestohelpgrowthe

economyandexpandtheeconomicbase

ofcommunitieswithresultinglong-term

benefitsintermsofalargerandmore

diversifiedtaxbaseforlocalgovernments.

Thestrategiesoutlinedwillhelptoimprove

theemploymentprospectsandqualityoflife

forresidents,andcreategrowthopportunities

andafertileenvironmentforbusiness.

Byimplementingsuchmeasures,local

governmentscanhelpfostergrowthintheir

mainbasesofrevenue.

Thesestrategiescaneffectivelycomplement

othereconomicdevelopmentinitiatives

andbepursuedincollaborationwithlocal

residents,businessesandotherlevelsof

government.

i. Housing AffordabilityThehousingaffordabilitycrisisisaproblem

formanycommunitiesinBritishColumbia,

especiallythoseintherapidlygrowinglarge

urbancentres.Theeconomicandsocial

costsofanunaffordablehousingmarketare

becomingmoreapparentashousingcosts

continuetooutpacegrowthinincomes.

Forlower-incomeearners,thecostof

thehousingoftenexceeds30percentof

householdincomeinmanycommunities.

Forinstance,inthe2006census,21per

centofGreaterVancouver’srenters–57,000

households–reportedthatrentconsumes

morethan30percentoftheirincome.These

numbersarecertainlylargernow.In2009,

averagerentsintheGreaterVancouverarea

increasedtentimesfasterthanthecostof

living,asmeasuredbyStatisticsCanada’s

consumerpriceindex.

57 LOCaL PROsPeRity

Manyfamiliesfacegrowingeconomic

insecurityandlackthediscretionaryincome

tosupportconsumerspending,education

andpersonaldevelopment,ortakeadvantage

ofinvestmentopportunities.Althoughthe

affordabilitycrisisismostacuteinMetro

Vancouver,recentCMHCdatarevealsitisby

nomeansjustabigcityproblem.

Highhousingcostsalsoplaceaburdenon

employersinmanypartsofBritishColumbia.

Ashousinghasbecomelessaffordable,many

publicandprivatesectoremployershave

hadahardertimeattractingandretaining

qualifiedstaff.Wagedemandsaredrivenby

thehighcostofliving,particularlyinMetro

Vancouver.Thelackofaffordablehousing

isthereforeakeyfactorthatreducesour

economiccompetitivenessandmakesitmore

difficultforcompaniestogrowandkeep

skilledstaff.

Policiesthathelpmakehousingmore

affordablebenefitthebroaderlocaleconomy,

asemployersareabletofindqualifiedstaff

whilemaintainingreasonablelabourcosts.

Employeesalsobenefitfromlowerhousing

costswithgreaterdisposableincomeandthe

abilitytoparticipateinagrowingeconomy

withexpandingcareeropportunities.

Localgovernmentsshouldcarefully

examinetheirzoningandland-usepolicies,

aswellastheirdevelopmentregulationsand

permittingpractices.Ineffective,overlapping

oroutdatedmunicipalregulationscontribute

tounnecessaryincreasesinhousingcosts.

Specificexemptionsandequivalenciescan

oftenreducethecostofhousingbythousands

ofdollars.Forexample,isitnecessaryto

requireaparkingspotforeachhousingunit

indenseurbanareasthatarewellservedby

transit?

Localgovernmentsneedtoviewaffordable

housingpoliciesasakeycomponentof

theireconomicdevelopmentstrategy.

Forexample,theCityofSalmonArmhas

successfullyattractednewbusinessand

employmentonthestrengthofitsrelatively

lowercost-of-living,anditsproximityto

majorcentresandtransportationcorridors.

Thecityhasprioritizedaffordablehousing

anddensificationaspartoftheirdowntown

revitalizationplan,whichfocuseson

townhousesandmulti-familybuildings

locatednearshopsandservices.Salmon

Armunderstandsthathighhousingcostsare

passedontobusinessintheformofhigher

labourcostsorlabourshortages.Thecity

understandsitsrelativeaffordabilityisa

competitiveadvantageforlocalbusiness.

TheSalmonArmEconomicDevelopment

Society(SAEDS)launchedacreative

marketingcampaignaroundtheideathat

locatinginSalmonArmleavesyou“with

moremoneyinyourjeans.”Thecampaign

targetedbusinessesinareaswithlabour

shortagesandrisingcost-of-livingsuchas

Calgary,Edmonton,RedDeerandVancouver.

Theyfocusedonfirmsinlightmanufacturing

becauseoftheireconomicspin-offbenefits.

SAEDSestimatedover200newjobsand

millionsininvestmentwereattractedtothe

communitythroughthiscampaign.

58 LOCaL PROsPeRity

RichardFlorida,inhisbookThe Rise of the

Creative Class (2004),argueslowhousing

costsareoneofthecriticalfactorsthatmake

citiesattractivetocreativeclassprofessionals.

Highhousingcostsdriveawayyoungpeople,

artists,intellectuals,andothersonthecutting

edgeoftechnological,socialandartistic

innovation.

Likeotherprofessions,creative

professionalsareoftenburdenedbystudent

debtsandlowincomesatthebeginningof

theircareers.Highhousingcostsaretherefore

cripplingtocreativeclassprofessionalsat

thepointintheircareerwhentheyaremost

likelytobeproducingcuttingedgework,and

beforetheyhavefamiliesandbecomemore

settled.Unaffordablehousingdrivesaway

thenextgenerationofinnovators,artists,

entrepreneurs,andprofessionals–exactly

thepeoplenecessarytomaintainacreative,

knowledge-basedeconomy.

Othercriticalfactorsinattractingcreative

professionalsincludeculturaldiversity

andtolerance,leadinguniversitiesand

educationalinstitutions,qualitypublic

servicesandamenities,andenvironmental

andrecreationalamenities.

ii. Local Procurement PoliciesLocalgovernmentsarepowerfulconsumers,

purchasingmanyproductsandservices

requiredtomaintaintheiroperations.

Manylocalgovernmentsareexploring

localprocurementpoliciestoensuretheir

dollarsaresupportinglocalbusiness

whereverpossible.Asanaddedbenefit,local

procurementhelpstoavoidtheeconomicand

environmentalcostsofshippingproductsand

servicesthatcanbesourcedlocally.

Thepreferenceforlocalsourcingsupports

themultipliereffect,allowingmoremoneyto

circulateinthecommunitylonger.Whenbuy-

localpoliciesaccompanyethicalpurchasing

policies,thebenefitsaremorevisibleinthe

community.Evenifyoudonotincludethe

benefitofsustainingemploymentandincome

contributingtothelocaltaxbaseinthe

equation,theuseoflocalsuppliersisoften

competitivewithoutsidesuppliers.

InOctober2009,Torontoadoptedalocal

foodprocurementpolicyaftermorethan

2,000Torontoresidentstoldtheirpoliticians

toavoidjet-laggedfoodandbuylocalfirst.

Thecitysetatargetof50percentlocalfood

forcivicfacilitiessuchasdaycares,shelters

andseniors’homes.Theirlocalfoodpolicy

willresultinfresher,healthierfood,withless

associatedgreenhousegasemissions.Further,

thepolicyhelpstosupportOntariofarmersby

providingamarketfortheirproducts.

59 LOCaL PROsPeRity

AnotherexampleistheUniversityof

Waterloo’sprocurementpolicy,which

establishesthepublicinstitutionasa

Canadianleaderwhenitcomestolocal

procurementpolicies.Theirpolicyincludesa

preferencefor“…productsthatareproduced

orlocatedlocallyorregionallytoreduce

shippingandpackagingrequirements

(storage,chemicaltreatmentforfreshness).”

Selectingpreferredoriginsofproducts,asa

meanstoreduceshippingandpackaging,

doesnotcontravenetradeagreements

becausethepolicyisconnectedtoreducing

impactsontheenvironment.

TheSt.Catherines–ThoroldChamberof

CommerceapplaudedWaterloo’smoveand

calledupon“allpublicinstitutions–including

butnotlimitedtohospitals,post-secondary

institutions,schoolboards,andagenciesto

producegreenprocurementstandardsthat

aremodelledafterleadinggreenstandards

inCanada…andthatallgreenprocurement

standardsincludeproximitytoproduct

clausestoreducetransportationimpacts.”


leadersinBritishColumbia,60percent

reportedtheirlocalgovernment’seconomic

developmentstrategyincorporatestoolssuch

aslocalprocurement,localhiringand/or

communityeconomicdevelopment.

IntheUS,thereiswidespreaduseoflocal

procurementasaneconomicdevelopment

tool.A2007surveybytheNational

AssociationofStateProcurementOfficials

foundthat39statesusethelocationofafirm

asatiebreaker,ifallotheraspectsofabid

areequal.Infact,halfofthe50states,halfof

the26largestcitiesandfiveofthe18largest

countiesofferbetweenafourandtenpercent

uplifttolocalbusinessesonlocalgovernment

contracts.

Unfortunately,whileothernationsseethe

benefitsoffosteringtheirowneconomies

withlocalprocurementpolicies,theCanadian

governmentiscurrentlypursuingtrade

policiesthatcouldinhibitourownabilityto

doso.Untilnowthefederalgovernmenthas

neverboundsub-nationalgovernmentsunder

theWorldTradeOrganization’sagreement

ongovernmentprocurement.However,the

proposed“BuyAmerican”agreementwould

forthefirsttimeincludeprovincialand

territorialgovernments,andmunicipalities

withapopulationover50,000.

Similarly,thedraftCanada-European

Uniontradeagreement(CETA)textwould,

ifenacted,underminetheabilityoflocal

governmentstoimplementlocalprocurement

policies.Accordingtoresearchpublishedby

theCanadianCentreforPolicyAlternatives

andtheCentreforCivicGovernance,thereare

seriousconcernsthatthelanguageinthedraft

CETAtextwouldeffectivelyprohibitlocal

procurementpoliciesandwouldfacilitatethe

privatizationofpublicservices,suchaswaste

management,drinkingwater,andpublic

transit.

60 LOCaL PROsPeRity

iii. Working with First NationsInthe21stcentury,therightsofFirst

Nationsmustbeaccommodated.Thereis

agrowingbodyofcaselawthatestablishes

theobligationsforallparties,includinglocal

government.Somelocalgovernmentshave

concernsabouthowtheywillbeaffectedby

treatysettlements,anditisimportantthat

theseconcernsbeaddressedbyseniorlevels

ofgovernment.Whilenegotiatingtreaties

isclearlytheresponsibilityofseniorlevels

ofgovernment,localgovernmentscouldbe

affected.However,manylocalgovernments

havealsorealizedthattreatieshavethe

potentialtobringrealeconomicbenefitsto

communitiesthroughouttheprovince.

ANovember2009studytitled“Financialand

EconomicImpactsofTreatySettlementsin

BritishColumbia”byPriceWaterhouseCoopers

concludedthatifall60FirstNationscurrently

intheBCtreatyprocesscompletetreaties

by2025,theycouldreceiveanetbenefitof

$10.28-billion.BCcouldreceive$6.4-billionin

economicbenefitsafterdeductingsettlement

costs.Aspartofthesetreatysettlements,

federalmoneythatotherwisewouldnotbe

spentinBCwillbeavailabletoFirstNations

inBC.

Thelegaluncertaintysurroundingtitleto

thelandbaseoftheprovinceisasignificant

barriertoprivatesectorinvestmentinthe

province.Thesettlingoftreatiesestablishesa

morefavourableclimateforinvestmentand

development.

FirstNationsgovernmentsareimportant

partnersinthedevelopmentoflocal

economies.Oncetheyareempoweredwith

legislativeauthorityandresources,they

willbeabletoactivelypromoteeconomic

developmentwithintheirterritories.This

economicactivitywillultimatelybenefitall

BritishColumbians,particularlysomesmaller

communitiesthroughoutruralBCthatare

strugglingwithsevereeconomicchallenges.

ManyFirstNationshavealreadystartedto

takeonsomeoftherevenueinstrumentsand

servicedeliveryresponsibilitiestraditionally

associatedwithlocalgovernments.For

example,in2006TerasenandtheWestbank

FirstNationreachedanoperatingagreement

thatresultedinTerasenpayinga3.09percent

franchisefeetotheWestbankFirstNation,and

collectingitfromgascustomersonbandlands.


Localgovernmentsaroundtheprovince

havestartedtobuildrelationshipswith

localFirstNationsbypartneringonlocal

projectsandinitiatives.Suchventuresinclude

localhiringandtraining,partneringon

local-revenuegenerationprojects,sharing

infrastructureformunicipalservices,and

otherjointprojects.Whentreatiesaresettled,

manylocalgovernmentswillhavebuilt

allianceswithFirstNationsatthelocallevel.

Theseintergovernmentalpartnershipswill

haveveryimportantimplicationsforlocal

economicdevelopment.

Anexampleofsuchapartnershipiswhen,

in2008,theCityofPentictonsignedan

agreementwiththePentictonIndianBandto

providesanitarysewagetreatmentforband

landsonthewestsideoftheOkanaganRiver.

Thebandwillpaythecityforthecapitaland

operatingcostsinanagreementamortized

overa20-yearperiod.Theagreementwill

benefittheenvironmentandhelptodiversify

thearea’seconomybyallowingthebandto

developthelandforindustrialpurposes.

In1988,inthesamepartoftheprovince,the

OsoyoosIndianBandestablishedtheOsoyoos

IndianBandDevelopmentCorporation

(OIBDC)toundertakeeconomicdevelopment

projects.Overthelast20years,theOIBDC

hasbeenhighlysuccessfulinestablishing

businesspartnershipsandjointventures

withinvestorsandgovernments.TheOIBDC

workswithlocalmunicipalandregional

authoritiesonsynchronizedplanning,suchas

theregionalmarketingandpromotionplan.

A2006agreementbetweentheOIBDC,the

provincialgovernmentandtheMountBaldy

SkiCorporationhasresultedintheband

purchasinganownershipstakeintheresort.

Over90agreementshavebeensigned

betweenlocalgovernmentsandFirst

Nations,coveringmatterssuchasgeneral

cooperationandprotocolagreements,

transitservice,waterandwastewater

treatment,fireprotection,andotherlocal

services.Treatynegotiationsmaybethe

responsibilityofseniorlevelsofgovernment,

butformaltreatiesarenotnecessaryforlocal

governmentstoexplorepartnershipswith

FirstNations.Together,thetwopartiescan

strengthenlocaleconomies.

62 LOCaL PROsPeRity

iv. Columbia Basin TrustTheColumbiaBasinTrust(CBT)wascreated

in1995tobenefitthesoutheasternpartof

BritishColumbia(theColumbiabasin),which

wasseverelyaffectedbythe1964Columbia

Rivertreaty.Thistreatyledtotheconstruction

ofthreestoragedamsinthebasin(the

Duncan,KeenleysideandMicadams),and

theLibbyDaminMontana.Withoutpublic

consultation,thegovernmentoftheday

displaced2300residents–wholosttheir

communitiesandfarmstoflooding.

Inthe1990s,peopleandcommunities

inthebasinapproachedtheprovincial

governmentseekingjustice.Thegovernment

respondedandbeganthenegotiations

towardthecreationoftheColumbiaBasin

Trust.Theprovincialgovernmentagreedto

invest$276-milliontoinstallhydroelectric

generationfacilitiesinthethreeColumbia

basindams,andafurther$250-millionfor

variouscommunitydevelopmentprojects.

TherevenuefromtheCBTdamsgoestoward

anendowmentthatfundsawiderange

ofcommunityprograms,socialservices,

affordablehousing,scholarshipsand

youthprograms,smallbusinessloansand

venturecapitalinvestments.Thismoneyis

re-circulatedintheeconomyoftheregion

anddirectlybenefitslocalbusinessesand

residents.

WhentheprovincesetuptheCBT,italso

transferredfundstoCBT’sjoint-venture

partnerinpowerprojectdevelopment,the

ColumbiaPowerCorporation(CPC).Todate,

thejointventurepartnershaveinvestedin

threehydroelectricpowerprojects,witha

fourthintheadvancedstagesoffeasibility

planning.

TheCBTprivateplacementsincludeall

investmentstheCBTmakesinbusinesses

locatedintheColumbiabasinregion.The

investmentstakedifferentforms,butthey

generallyfitintothreecategories:

Real Estate:CBThasanownershipinterest

inanumberofseniors’carefacilitieslocated

inthebasin.Collectively,theseproperties

containmorethan800livingsuitesandoffer

arangeofservicesdependingontheneeds

oftheresident.

Direct Lending:Onaselectbasis,CBT

investsdirectlyinbasin-basedbusinesses.

Theinvestmentrisksandfinancialreturns

accruefullytoCBT,astheyexclusively

managetheinvestments.

63 LOCaL PROsPeRity

Loan Syndication:Inpartnershipwith

regionalcreditunions,CBTinvestsinbasin-

basedbusinesses.Theseinvestmentsare

managedonajointbasiswiththecredit

unionsandbothpartiessharetherisk,as

wellasthereturn.

TheCBT’spriorityisinvestment

opportunitieslocatedintheColumbiabasin.

However,giventhelimitationsofinvesting

inasmallregion,thereisabalanceoffunds

thatisavailableforinvestmentinaportfolio

ofmarketsecurities,suchasshort-term

deposits,bondsandequities.

TheCBTalsofundsthebasinbusiness

advisorsprogram(BBA)tobuildeconomic

capacityinbasincommunitiesby

strengtheningandsupportingexisting

businesses.TheBBAprogramassistssmall-

andmedium-sizedindependentbusiness

operatorsintheColumbiabasinbyproviding

free,one-to-oneconfidentialbusiness

counsellingandassessmentservices.TheBBA

programalsoarrangesandsharesthecosts

ofspecializedconsultingservices,iftheyare

recommendedbyBBAstaff.

TheColumbiaBasinTrustprovideslocal

communitieswiththecontrolandfinancial

resourcestoshapetheirowneconomicfuture.

Itwillensurethattheregionreceivesafair

shareoftheongoingdownstreambenefits

oftheColumbiaRivertreaty.TheColumbia

BasinTrustisagoodmodelforhowresource-

basedcommunitiesthroughoutBCcanbe

empoweredwiththecapacity,mandate

andresourcestoengageineconomic

developmentatthelocallevel.

v. Community BondsCommunitybondsareaformofborrowing

fromwithinthelocalcommunityanda

mechanismforlocalgovernmenttoraise

fundsforcapitalprojects.Thesebondsare

issuedbythelocalgovernmentandare

administeredthroughtheBCMunicipal

FinanceAuthority(BCMFA).Allcommunity

bondsareguaranteedbyBCMFAandcarry

thesameAAAcreditratingasotherBCMFA

services.

Thelocalgovernmentissuingthebondis

responsibleforpromotingandsellingthe

bonds.Thelocalgovernmentmustreceivethe

assentofelectors,eitherthroughreferendum

orthealternateapprovalprocess.Twochief

advantagesofcommunitybondsarethat

theycreateastrongsenseofcommunity

ownership,byencouragingbuy-intolocal

projects,andinterestispaidtolocalresidents,

thuskeepingthecostofinterestwithinthe

community.Typicallythesebondshavebeen

usedforsmall-scalelocalinfrastructure

projects.Forexample,theVillageofNew

Denverraised$220,000in2005forthepaving

oflocalroads,andtheVillageofMontrose

raised$200,000in2004forelectricalsystem

upgradesandpowerlineinstallation.


Onereasonwhycommunitybondsare

notmorewidelyusedisthedifficulty

localgovernmentsoftenhaveinoffering

commerciallycompetitiveinterestrates.

Localgovernmentsareusuallyabletoborrow

atlowerratesthroughBCMFA.In2008,the

CityofKelownaexaminedthefeasibilityof

usingcommunitybondstopartiallyfinance

theirnew$46millionMissionRecreation

ParkAquaticCentre.Atthetimethecityhad

concernsabouttheirabilitytosellcommunity

bondsgiventheotherproductsavailableto

investors.Ultimately,Kelownadecidedtouse

moretraditionalfinancingmethods.

Inanattempttomakecommunitybondsa

moreattractiveinvestmentvehicle,Senator

JerryGrafsteinintroducedabill(S-203)in

2009whichwouldhavemadetheinterest

earningsoncommunitybondstax-exempt,

amongotherchanges.However,thebillhas

beencriticizedbecausemostinstitutional

investorsarealreadytax-exemptorenjoy

specialtaxstatus,andmostindividual

investorsearninvestmentandinterest

incometax-freeintheirregisteredretirement

savingsplansandtax-freesavingsaccounts.

In2003theOntarioMunicipalEconomic

InfrastructureFinancingAuthority(now

InfrastructureOntario)introducedamore

centralizedmodelofcommunitybondscalled

Ontarioopportunitybonds.Thesebondswere

exemptfromprovincialincometaxandwere

usedtofinancelocalinfrastructureprojects

throughoutOntario.InfrastructureOntario

concludedthebonds“maynotbethemost

efficientproductstousetoraisefundsfora

broaderinfrastructureloanprogram”andthe

programwasdiscontinued.

Intheearly1990s,thegovernmentof

Saskatchewandevelopedacommunity

bondsprogramtomobilizelocalpeople,local

capitalandlocalresourcesfornew,diversified

businessandmanufacturingdevelopment.

Thesecommunitybondsoriginatedin

responsetotheprovincialneedtodiversify

theruraleconomyandcreatejobstooffset

theeffectsofmassivestructuraladjustment

inSaskatchewanagricultureandanextremely

limitedgovernmentfiscalposition.

NatWest,alargeBritishbank,sells

communitybondsoverthecounteras

aninvestmentproduct.Thebondsare

guaranteedbythegovernmentandthe

purchasercanchoosetodirecthowmuch

interesttheywanttocontributetocommunity

projects,andwhichcommunitiestheywishto

investin.

WiththesupportoftheBCgovernment,

localgovernmentscouldpartnerwith

banksandcreditunionstomarketsimilar

investmentproducts,raisemoneyforlocal

projectsandkeeptheinterestpayments

inourcommunities.Thepolicychallenge

wouldbetodevelopthelegalandtaxation

frameworkwherethiskindofprogramwould

makefinancialsense,bothforinvestorsand

forlocalgovernments.


leadersinBritishColumbia,48.2percentsaid

theywouldbeinterestedinexploringtheuse

ofcommunitybondsandmunicipalrevenue

bondsastoolsforfinancingcapitalprojects.

30percentsaidtheywerenotinterestedin

thisoption,and21.8percentsaidtheydidn’t

know.

65 LOCaL PROsPeRity

vi. Caisse de dépôt et placement du QuébecOneofthekeyweaknessesintheBCeconomy

concernstheavailabilityofinvestment

capitalintheprovince.Studieshaveshown

thatsmall-andmedium-sizedbusinessesin

BCandCanadahavemoredifficultyfinding

investmentcapitalthantheircompetitors

inothercountries.Therelativelysmallsize

ofoureconomy,structureofthebanking

industry,governmenttaxpolicies,theroleof

institutionalinvestorsandtherisk-tolerance

levelofinvestorsareallfactorslimitingthe

availabilityofinvestmentcapitalinBritish

Columbia.

Theprovince’staxsubsidyforlabour

sponsoredinvestmentfunds(LSIFs),such

astheWorkingOpportunityFund,has

provedbeneficialforbusinessinvestment

intheprovince.Anotherwinningstrategy

couldbetofollowQuebec’sexampleof

howpublic-sectorpensionfundscanbe

usedasanimportantsourceofinvestment

capital.CreatedbytheQuebecgovernment

in1965,theCaissededépôtetplacement

duQuébecisoneofthelargestinstitutional

fundmanagersinCanadaandNorthAmerica.

Itmanagespublicandprivatepensionand

insuranceplans,andinvestsprimarilyinfixed

incomesecurities,equitymarkets,private

equityandrealestate.Itisthelargestpension

fundinCanada,with$220.4-billioninassets

undermanagement.

BritishColumbiahasasimilarinstitutionto

managepublic-sectorpensionfundsinthis

province,theBCInvestmentManagement

Corporation(BCIMC).TheBCIMChas

$74.5-billioninassetsundermanagement,

andalsoinvestsinbonds,Canadianand

internationalequities,privateequityand

realestate.Themaindifferencebetweenthe

twoorganizationsisthattheCaissededépôt

etplacementduQuébechasalwayshad,as

partofitsmandate,anexplicitcommitment

toinvestintheeconomicdevelopmentof

Quebec.TheBCIMChasnosuchmandateto

investinBritishColumbia,withtheresultthat

thiscapitalismanagednodifferentlythanit

wouldbeifitwerebasedoutsidetheprovince.

66 LOCaL PROsPeRity

In1967,CaissechairmanClaudePrieur

statedtheirphilosophyasfollows:

“Between two investments of similar

quality and price, the one that seems most

susceptible of favouring the economic

development of the province is preferred,

even if, in doing so, it is necessary to sacrifice

somewhat the diversification of the portfolio.”

Eventoday,despitesomechangesin

policyovertheyears,theorganization’s

missionstatementreflectsthatgoalasakey

principleguidingtheCaisse:“Themission

ofthefundistoreceivemoneysondeposit

asprovidedbylawandmanagethemwitha

viewtoachievingoptimalreturnwithinthe

frameworkofdepositors’investmentpolicies

whileatthesametimecontributingto

Quebec’seconomicdevelopment.”

Thispolicyhasprovedtobeaveryeffective

economicdevelopmenttool,providing

necessarycapitalforbusinessinvestment

andexpansioninQuebec.Overthepast

45years,sinceitsinception,theCaissede

dépôtetplacementduQuébechasprovided

investorswithreturnscomparabletoother

similarpensionfundsandinvestmentvehicles.

Importantly,ithasalsoplayedasignificantrole

indevelopingQuebec’seconomy.

ExploringtheuseofCaissededépôtet

placementduQuébec’smandate,asamodel

fortheBCIMC,isaneconomicdevelopment

optionthatcouldprovebeneficial.

Implementationwouldrequirethatthe

provincialgovernmentamendthelegislation

governingtheBCIMCandappointaboard

ofdirectorswillingtooverseesuchashiftin

policy.


leadersinBritishColumbia,43.5percent

agreedorstronglyagreedthatBritish

Columbiashouldcoordinateitspublicsector

pensionplanstoprovideapoolofinvestment

capitalforbusinessdevelopmentandprovide

forlocalandprovincialgovernmentfinancing.

31.1percentsaidtheydisagreedwiththis

option,and25.4percentsaidtheydidn’tknow.

67 LOCaL PROsPeRity

vii. Encouraging ClustersOneofthemostpowerfulconceptsin

regionaleconomicdevelopmentoverthe

past20yearsisthedevelopmentofindustrial

clustersasacentraleconomicdevelopment

strategy.HarvardeconomistMichaelPorter

haswrittenextensivelyaboutclusters,and

othereconomistshavefurtheredhisresearch

withmoredetailedstudiesonhowandwhy

clustersaresoeconomicallycompetitive.

Theclusterconceptdetailsthatfirmsrealize

significanteconomicbenefitsbylocatingnear

otherfirmsinthesameindustryorrelated

industries.Networksofrelatedsuppliersand

sub-contractorsgrow,developingexpertise.

Specialized,industry-specifictertiaryservices

suchaslaw,finance,andmarketingalso

springuptoservethecluster.

Somewell-knownhistoricalclustersinclude

SiliconValleyinCalifornia,thewatch-making

clusterinSwitzerland,thefashion/design

clusteraroundMilan,Montreal’saerospace

industry,andFinland’stelecommunications

industry.

Foroveracentury,cheapenergyprices

haveallowedmaterialstobetransportedvast

distancestohighly-capitalizedmanufacturing

plantslocatednearmajorconsumermarkets.

Theautomobileindustryistheclassicmodel

ofthisstructure.But,asenergycostsseem

settoincreasedramaticallyinthenextfew

decades,thecostsoftransportingmaterials

vastdistancestomanufacturingcentreswill

become–andarealreadybecoming–less

viable.Sincetransportationandinventory

costsaddnovaluetothefinalproduct,

industrialcompanieswillseekwaysto

shortentheirsupplylinesbybringingtheir

suppliersandsub-contractorsclosertogether.

Itislikelythatthiscenturywillwitness

atransformationwherebytheformation

anddevelopmentofindustrialclusterswill

becomemoreintenseandcritical.Insucha

situation,universitiesandresearchinstitutes

areveryimportantasincubatorsand“growth

poles”inaknowledge-basedeconomy.

Governmentsupportforresearchand

development,linkagesbetweenacademics

andindustry,andeaseofcommercialization

arecriticalfactorsinbuildinguphighly

competitivetechnologyclusters.Again,

thevalueofinvestmentineducationand

trainingforaknowledge-basedeconomy

cannotbeoverstated.CarlyFiorina,former

CEOofHewlettPackard,toldagroupofUS

governorsin2002,“Keepyourtaxincentives

andhighwayinterchanges;wewillgowhere

thehighlyskilledpeopleare.”

68 LOCaL PROsPeRity

Localgovernmentsmustappreciatethe

significanceofclusters.Othereconomic

developmentstrategiesrelyonattracting

investmentwithlowtaxesorotherpublic

subsidiesandincentives.Cluster-based

economicdevelopment,ontheotherhand,

isverystable.Beingpartoftheclusteris

thecompetitiveadvantageforfirms.Asa

result,hostcommunitiesareshieldedfrom

thenegativeimpactsoftaxcompetition.

Ofcourse,areasonablebusinesstax

environmentisimportant,butitisbyno

meansacriticalfactorinthelocationof

industrialclusters.

Researchonlocationaldecision-making

byleadersofsmall-andmedium-sized

enterprises(SMEs)suggeststhatpredominant

factorsinclude:presenceofsuppliers,access

tocapitalandskilledlabour,advancedlocal

researchinstitutes,qualitytransportation

infrastructure,andqualitypublicservices.

Historically,governmenteconomic

developmentagenciesinCanadahave

attemptedtocreateclustersbyattracting

large“anchorfirms”withsubsidies,taxbreaks

andotherincentives.Smallerfirms,soitwas

thought,wouldbeattractedtosetupnear

theselargefirms.Attemptsinthisveinhave

notoftenprovensuccessful,astheyareoften

fartoodependentonthesuccessofonelarge

anchorfirmratherthanthebroadercluster.

ThecaseofNortel,onceCanada’sgreat

hopeintelecommunications,illustratesthe

perilsofthisapproach.Giventhepotential

problemsofmismanagement,market

competition,mergersandtakeovers,it

seemsunwisetoplaceallofoureconomic

developmenteggsinonebasket.Thehistory

ofregionaleconomicdevelopmentinCanada,

throughagenciessuchasWesternEconomic

Diversification(WED)andtheAtlantic

CanadaOpportunitiesAgency(ACOA),isnot

particularlyencouraging.

Researchonsuccessfulclusterinitiatives

aroundtheworldshowsthatusuallythe

impetusandleadershipforthecluster

comesfromwithintheindustry–notfrom

government.Attemptsbygovernments

tocreateclustersinadvancedcapitalist

economieshavenotbeensuccessful.

However,governmentsupportfor,and

involvementin,clusterinitiativesisvery

importantinaligningpublicpoliciesin

waysthatsupporttheclusters’growthand

diversification.

69 LOCaL PROsPeRity

Howthendoesthestateencourage

thedevelopmentofclusterformation?

Investmentinresearchanddevelopment

anduniversitiesisobviouslyakeymeans

ofchannelingpublicresourcesintoareas

wherethereislikelihoodofcommercialspin-

offs.Otherpolices,suchasqualitypublic

educationandskills-trainingprograms,

moderntransportationinfrastructure,and

asupplyofinexpensivepropertyzonedfor

commercialandindustrialuse,allhelptolay

thefoundationfordynamiccompanies.

Communitiescanalsoworktohelpbolster

theirexistingbusinesses.Thismayormay

noteventuallyleadtoclusterformation,but

itdoeshelptonurtureexistingcompanies

andjobs.Oneoptionistostrengthenthe

competitivenessofexistingindustrialfirmsby

attemptingtoattractsupplierstolocatenear

thecompanieswhoarealreadyoperatingin

thecommunity.Somebusinessleadersin

BritishColumbiahavesuggestedtheywould

beopentosuchapproachesfromtheirlocal

government,iftheywereaskedtoparticipate.

Notallfirmswouldparticipateinsuch

initiatives,butthosethatdoaremorelikelyto

maintainandexpandtheiroperationsinthe

community.

Oneapproachtoencouragethistype

ofclusterformationisforeconomic

developmentofficersandlocalgovernment

officialstomeetwitheverysignificant

manufacturingcompanyinthemunicipality

andaskiftheywouldliketoseetheirlargest

suppliersbroughtcloser.Iftheansweris

affirmative,representativesofboththelocal

companyandthelocalgovernmentcould

jointlyapproachthesupplierfirm.Whenlocal

officialsworktogetherwithlocalbusiness

leaders–toidentifyopportunitiesandsell

thebenefitsoftheircommunity–theyhave

anadvantagebecausetheyarebuildingon

existingrelationshipsratherthantryingto

attractcompanieswithwhomtheylackany

connection.

70 LOCaL PROsPeRity

viii. Import SubstitutionClusterdevelopmenttendstobemost

successfulinlarger,moreeconomically

diversifiedcommunities.Incontrast,smaller

ruralcommunitiesareoftendependent

onasingleindustryorlargeemployer.

Thechallengefacingthesecommunitiesis

economicdiversification.AsMichaelShuman,

researchandpublicpolicydirectorofthe

BusinessAllianceforLocalLivingEconomies

(BALLE),haswritten:

A rural community needs to avoid

dependence on large firms. Instead, it should

focus their efforts on developing multiple

new business sectors that expand the local

skill base, increase entrepreneurship, and

reduce a town’s vulnerability to global

commodity markets. It needs, in short, to

develop new clusters.

Case Study: Hardwick, United StatesHardwick, Vermont has built a new economic cluster around local food. “Cutting-edge restaurants, artisan cheese makers, and organic orchardists turning fruit into pies are some of the new businesses that have added 75-100 jobs” in a community of approximately 3,000. Non-profits, such as the Center for an Agricultural Economy and institutions like the University of Vermont, have played a key role in working with organic farmers and small food producers on solutions to issues such as marketing, research and transportation.

By focusing on high-value, specialty organic agriculture and food processing, Hardwick’s farmers are building a market for quality local food that traditional economic models would not have predicted. As Andrew Meyer, who was instrumental in bringing farmers and entrepreneurs together noted, “… if Vermont is going to have a future in agriculture we need to look at what works in Vermont, and that is not commodity agriculture.”

A key factor in Hardwick’s success has been cooperation among the farmers and small-scale food processors in the cluster. The benefits of this cluster arrangement include: cross-promotion, marketing, and access to small-scale capital through local networks.


Case Study: Güssing, AustriaIn the early 1990s, Güssing was a dying rural community of 4,000 people in Austria. Its traditional logging and farming industries were in steep decline. The mayor saw an opportunity to create a district heating system, fueled by local wood waste. His goal was to completely abandon fossil-fuel-based energy and to supply the town of Güssing – and subsequently the whole district – with regionally available renewable energy sources. First, all public buildings in the town were provided alternatives and required to stop using fossil fuels. As result of the energetic optimization of buildings in the town, expenditure on energy was reduced by almost 50 per cent. Subsequently, a wood-burning plant was built, providing heat for 27 houses. Later, a facility was constructed that turns rapeseed into car fuel.

In 1998, with Vienna’s Technical University, a pilot project to gasify wood chips under high temperatures was built in Güssing. The process had gas fueling a Jenbacher engine, which produces electricity. Its by-product, heat, is then used to produce warm water for the district heating system. Embracing these technological advances encouraged research and development to continue. Today, Güssing hosts a team of trained technicians and imported scientists.

The renewable-energy project did in fact expand to the region. Currently, there are 27 decentralized power plants within Güssing County. Güssing now has an annual energy turnover of about €14-million. The region has developed into an important location for industries with high-energy consumption, such as parquetry production or hardwood drying. The highlight is Blue Chip Energy, the first high-efficiency solar cell production in Austria. The company is a joint venture with Solon AG, who came to Güssing only because they can power the plant with clean energy from the renewable resources.

72 LOCaL PROsPeRity

Ruralcommunitiesinterestedinpursuing

importsubstitutionstrategiescanlookto

examplessuchasHardwickandGüssing,

aswellasthosedescribedinthesource

documentslistedattheendofthispaper.As

MichaelShumanargues:

“Both the Hardwick and Güssing examples

demonstrate that substituting homegrown

business for imports does not mean de-

linking from the global economy. In fact,

it’s just the opposite. By focusing first

and foremost on local demands for food

and energy, and by creating cutting-edge

businesses to meet these demands, both

communities were naturally able to grow

new, powerful export-oriented industries.”

Importsubstitutionstrategiesareneither

cheapnoreasyforastrugglingrural

community.Ittakestimeandresourcesto

conduct“leakage”analysis,andtoidentify

themostpromisingnewclusters.Thereis

alsothefurtherchallengeofbringingtogether

entrepreneurs,educationalinstitutions

andeconomicdevelopmentprogramsto

advancethesenewclusters.It’salwaysa

challengetosellnewideastoconsumers,

investorsandpolicymakers.Butitisless

expensiveandmorevaluabletodothisrather

thancontinuingwithtraditionaleconomic

developmentstrategies,mostofwhich

attempttolurebigcompanieswithmassive

subsidiesandtaxgiveaways.

Theeconomicdevelopmentideaspresented

inthischapterarepromisingeconomic

developmenttoolsforlocalgovernments,

andfortheprovinceasawhole.Theseideas

becomeevenmorepowerfulwhenthey

arecombinedwithsuccessfuleconomic

developmentinitiativesalreadyinplaceat

thelocallevel.Suchstrategiesaimtodiversify

oureconomy,improvelocalmultipliereffects

withhigh-valueindustries,keepmoney

circulatinglongerinourcommunities,

andattractandretainbusinessinvestment

andhumanresourcetalent.Together,they

provideablueprintforamoreself-sufficient,

moreentrepreneurial,andmoresustainable

economy.

73 LOCaL PROsPeRity

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ProvinceofBritishColumbia.NewsRelease:“Major Industrial Property Taxation Review Underway.”March10,2010.Hunter,Justine.“A learner’s guide to shaping B.C.’s political agenda.”GlobeandMail.March11,2010.Palmer,Vaughn.“Liberals mull options on tax dispute.”VancouverSun,January16,2010.Warkentin,Grant.“Catalyst tax rate not overwhelming enough, says judge.”CampbellRiverMirror.December31,2009.Finlayson,Jock.“Some thoughts on industrial property taxation in British Columbia.”BCBusinessCouncilpresentationtothe2009UBCMConvention.September29,2009.CanadianManufacturersandExporters,BritishColumbia.“Manufacturing BC – Outlook 2020.”2009.FederationofCanadianMunicipalities.“Policy statement on municipal finance and intergovernmental arrangements.”March,2009.FederationofCanadianMunicipalities.“Building Prosperity from the Ground Up: Restoring Municipal Fiscal Balance.”June,2006.FederationofCanadianMunicipalities.“Our Cities, Our Future.”BigCityMayors’Caucus.June2006.

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Goldberg,etal.“Homeless Count 2005: On our streets and in our shelters.”MichaelGoldberg;EberlePlanningandResearch;JimWoodward&AssociatesInc.;DeborahKrausConsulting;JudyGraves;InfocusConsulting;JohnTalbotandAssociates.SocialPlanningandResearchCouncilofBC.September,2005.Woodward,etal.“Research Project on Homelessness in Greater Vancouver.”JimWoodward&AssociatesInc.;EberlePlanningandResearch;DeborahKrausConsulting;JudyGraves;MayCommunications.GreaterVancouverRegionalDistrict(MetroVancouver).July,2002.BCStats.B.C.GDPbyIndustry–NAICSAggregationsandAuthor’sEstimates.Jothen,Kerry.“Achieving a highly skilled, high performance workforce in British Columbia.”BusinessCouncilofBC.September,2009.CharteredAccountantsofBC.“Live Work Invest in BC: Check up 2009.”Accessedat:http://www.bccheckup.com/bccheckup.php?cat=5ChartH:BCStats.Provincial Comparisons of Various Performance Indicators. ChartI:BCStats. Provincial Comparisons of Various Performance Indicators.ChartJ:BCStats.Provincial Comparisons of Various Performance Indicators.ChartK:BCStats. Provincial Comparisons of Various Performance Indicators.

75 LOCaL PROsPeRity

ChartL:BCStats.Social-Economic Profiles - Health Service Delivery Areas.Accessedathttp://www.bcstats.gov.bc.ca/data/sep/hsda/hs_main.aspChartM:BCStats.Social-Economic Profiles - Health Service Delivery Areas.Accessedathttp://www.bcstats.gov.bc.ca/data/sep/hsda/hs_main.aspChapter 3 Municipalities Today: An electronic information source for local governments in Saskatchewan.SaskatchewanMinistryofMunicipalAffairs.May,2009.CBCNews.“Big property tax cut highlights Saskatchewan budget.”Accessedat:http://www.cbc.ca/canada/saskatchewan/story/2009/03/18/budget-main.html660News.com.“Saskatchewan temporarily shelves plan to share PST revenue with municipalities.”Accessedat:http://www.660news.com/news/national/article/22844--saskatchewan-temporarily-shelves-plan-to-share-pst-revenue-with-municipalitiesProvinceofBritishColumbia. 2010 Budget. Budget and Fiscal Plan - 2010/11 to 2012/13.UnionofBCMunicipalities.2009 UBCM Convention Resolutions.Accessedat:http://www.ubcm.ca/EN/main/convention/past-conventions/2009-convention.html

UnionofBCMunicipalities.2010 UBCM

Convention Resolutions.Accessedat:http://www.ubcm.ca/EN/main/convention/past-conventions/2010-convention.htmlInstituteforLocalSelfGovernment.Brochure:“Municipal Finance Quick Reference.”2004.Accessedat:http://www.ilsg.orgSlack,Enid.“Municipal Finance in Canada.”InstituteonMunicipalFinanceandGovernance,MunkCentreforInternationalStudies.PresentationtoChineseDelegation.March19,2007.FederationofCanadianMunicipalities.“Our Cities, Our Future.”BigCityMayors’Caucus,FederationofCanadianMunicipalities.June,2006.CityofDallas.“Major Revenue Sources.”2005.MissouriMunicipalLeague.“Municipal Revenue Sources.”2010.NewMexicoMunicipalLeague.“Municipal Revenue Sources in New Mexico.”2006.Accessedat:http://www.nmml.orgCityofToronto.“Budget Summary 2009.”CityofToronto.“Toronto Personal Vehicle Tax.”Accessedat:http://www.toronto.ca/legdocs/mmis/2010/ex/bgrd/backgroundfile-32876.pdfCityofToronto.“2009 Toronto Financial Statements.”www.toronto.ca/legdocs/mmis/2010/ex/bgrd/backgroundfile-32920.pdf-2010-08-06

76 LOCaL PROsPeRity

CTVNews.“Golden Ears Bridge tolls may be reduced.”May14,2010.Accessedat:www.ctv.ca/servlet/ArticleNews/print/CTVNews/2010/20100514Sinoski,Kelly.“TransLink considers reducing tolls to get more traffic on Golden ears Bridge.”VancouverSun.June2,2010.Steele,Amy.“One year later, Golden Ears Bridge tolls hiked.”MapleRidge-PittMeadowsTimes.July2,2010.Accessedat:http://www.mrtimes.com/story.html?id=3227614Wikipedia.Search:“Electronic toll collection.”Accessedat:http://en.wikipedia.org/wiki/Electronic_toll_collectionWikipedia.Search:“Congestion charge.”Accessedat:http://en.wikipedia.org/wiki/Congestion_chargeWikipedia.Search:“Via Verde.”Accessedat:http://en.wikipedia.org/wiki/Via_VerdeProvinceofBritishColumbia.BalancedBudget2008Backgrounder:“B.C.’s Revenue-Neutral Carbon Tax.”2008.InfrastructureCanada.“Gas Tax Agreement: Canada-British Columbia-Union of BC Municipalities.”September19,2005.Langlois,LouisA.“Towards a permanent federal gas tax transfer.”FederationofCanadianMunicipalities.February23,2007.ProvinceofBritishColumbia.MinistryofFinanceTaxBulletin:“Hotel Room Tax Act.”January,2010.

HotelAssociationofCanada.“Room Taxes on Lodging Industry in Canada.”June,2010.Accessedat:www.hotelassociation.caCommunityEnergyAssociation.“Policy and Governance Tools.”September2008.Accessedat:http://www.communityenergy.bc.ca/resources/cea-publications-0CommunityEnergyAssociation.“Powering Our Communities.”September2008.Accessedat:http://www.communityenergy.bc.ca/resources/cea-publications-0CommunityEnergyAssociation.“Utilities and Financing.”February,2008.Accessedat:http://www.communityenergy.bc.ca/resources/cea-publications-0CommunityEnergyAssociation.“Heating Our Communities.”September2007.Accessedat:http://www.communityenergy.bc.ca/resources/cea-publications-0CanadianUnionofPublicEmployees.Briefingnote:“New wastewater treatment systems include public resource recovery.”January,2010.CityofToronto.“Green Bin Program.”Accessedat:http://www.toronto.ca/greenbin/index.htmCityofToronto.“Siting new organic processing facilities.”Accessedat:http://www.toronto.ca/greenbin/organics_processing/index.htmWindShare.“Community Wind Power.”Accessedat:www.windshare.ca/about/community_wind_power.html

77 LOCaL PROsPeRity

WindShare.“The Lakewind Project.”Accessedat:www.windshare.ca/lakewind/index.htmlBaker,Linda.“Heating the ‘Hood.”Planning.AmericanPlanningAssociation.December,2009.Dachis,Ben.“Free the Garbage Hostages.”GlobeandMail.July17,2009.CityofOttawa.“Diversion 2015: Industrial, Commercial and Institutional (IC&I) Waste 3R Strategy.”April,2009.CityofToronto.“Yellow Bag Program - Commercial Collection.”Accessedat:www.toronto.ca/yellowbag/index.htm,www.toronto.ca/garbage/commercial/index.htmCompetitionBureauofCanada.NewsRelease:“Competition Bureau Cracks Down on Joint Abuse of Dominance by Waste Companies.”June16,2009.CityofNanaimo.“Position Paper 1.2 - Natural Gas Franchise Fees.”Accessedat:www.nanaimo.ca/assets/Municipal~Hall/City~Council/.../citypos12.pdfManjak,Scott.“The politics of water.”CranbrookDailyTownsman.April15,2010.Accessedat:http://www.dailytownsman.com/article/20100415/CRANBROOK0304/304159950/the-politics-of-waterTownofGibsons.“Project Details.”Accessedat:www.gibsonswater.ca/files/project-details.php

Young,Michelle.“City OKs plan for water meters.”KamloopsDailyNews.March17,2010.Accessedat:http://www.kamloopsnews.ca/article/20100317/KAMLOOPS0101/303179966/-1/KAMLOOPS/city-oks-plan-for-water-metersShore,Randy.“TransLink’s $1.5B real estate empire.”VancouverSun.March19,2008.Wikipedia.Search:“TransLink.”Accessedat:http://en.wikipedia.org/wiki/TransLinkTransLink.“2010 10-Year Transportation and Financial Supplemental Plan.”SouthCoastBritishColumbiaTransportationAuthority.July31,2009.Chapter 4RealEstateBoardofGreaterVancouver.“Housing Price Index for Greater Vancouver.January, 2010”.Accessedat:http://www.rebgv.org/housing-price-index?region=all&type=all&date=2010-01-01CanadaMortgageandHousingCorporation.NewsRelease:“National Rental Vacancy Rate Increases in October 2009”.Accessedat:http://www.cmhc.ca/en/corp/nero/nere/2009/2009-12-16-0815.cfmStatisticsCanada.“Consumer Price Index, by province (monthly)”.Accessedat:http://www40.statcan.ca/l01/cst01/cpis01k-eng.htmSmartGrowthBC.“Downtown Salmon Arm Smart Growth Process: Final Results and Background Report”.August,2009.

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Isakov,Andre.“The City of Salmon Arm”.GoingLocal:InspirationalstoriesoflocalgovernmentandlocaleconomyinBritishColumbia”.Page21.CentreforCivicGovernance.February,2009.Florida,Richard.“The Rise of the Creative Class”.BasicBooks,2002.Isakov,Andre.“Sustainable and Ethical Purchasing in Vancouver”.GoingLocal:InspirationalstoriesoflocalgovernmentandlocaleconomyinBritishColumbia”.Page44.CentreforCivicGovernance.February,2009.TorontoEnvironmentalAlliance.NewsRelease:“Council says ‘Yes!’ to Local Food and Farmers”.October31,2008.Mwanzia,Kithio.“Niagara’s Green Procurement Policy”.St.Catharines-ThoroldChamberofCommerce.October,2008.O’Neill,Barry.“Americans light years ahead of us on ‘local first’ economics”.July21,2009.Accessedat:http://www.cupe.bc.ca/news/commentary/316Sinclair,Scott.“Buy American Basics”.CanadianCentreforPolicyAlternatives.February9,2010.Sinclair,Scott.“Negotiating from Weakness: Canada-EU trade treaty threatens Canadian purchasing policies and public services”.CanadianCentreforPolicyAlternatives.April,2010.

Shrybman,Steven.“Municipal Procurement Implications of the Proposed Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union”.CentreforCivicGovernance.May28,2010.PricewaterhouseCoopers.“Financial and Economic Impacts of Treaty Settlements in British Columbia”.BCTreatyCommission.November18,2009.TerasenGas.NewsRelease:“Terasen Gas reaches operating agreement with Westbank First Nation”.September20,2006.Accessedat:http://www.terasengas.com/_AboutUs/News/OperatingAgreementWestbankFirstNation.htmCityofPenticton.NewsRelease:“Penticton Indian Band and City of Penticton sign Sewage Treatment Service Agreement”.May21,2008.Accessedat:http://www.penticton.ca/pib/default.aspIsakov,Andre.“Osoyoos Indian Band. Going Local: Inspirational stories of local government and local economy in British Columbia”.Page31.CentreforCivicGovernance.February,2009.OsoyoosIndianBand.“Mt. Baldy Media Kit 06/07”Accessedat:www.skibaldy.com/media/MK_baldy_winter06.pdfColumbiaBasinTrust.ColumbiaBasinTrustwebsite:www.cbt.org.Pagesaccessed:http://www.cbt.org/Investments/?Private_Placements,http://www.cbt.org/Funding/?Programs

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Wikipedia.Search:“Columbia Basin Trust”http://en.wikipedia.org/wiki/Columbia_Basin_TrustMunicipalFinanceAuthorityofBC.“2007 Annual Report”.Page11.Isakov,Andre.“Community Bonds”.GoingLocal:InspirationalstoriesoflocalgovernmentandlocaleconomyinBritishColumbia”.Page64.CentreforCivicGovernance.February,2009.

Parsons,G.F.“Community Bonds: A New Approach to Community and Economic Development”.CommunityDevelopment,Volume24,Issue2,pages196-212.September1993.SaskatchewanUrbanMunicipalitiesAssociation.“Discussion Paper: Municipal Bonds”.June,2009.Hallett,Dan.“Ontario Opportunity Bonds”.May5,2003.Accessedat:https://secure.globeadvisor.com/education/insight/article.html?/education/insight/20030505.htmlCityofKelowna.NewsRelease:“City Considering Community Bonds”.January2,2008.Accessedat:http://www.kelowna.ca/iNews/scripts/nws002.cfm?News_ID=1102&Category=CURRENTGilbert,Richard.“City of Kelowna considers issuing bond to help cover infrastructure costs”.JournalofCommerce.January21,2008.Accessedat:http://www.journalofcommerce.com/article/id26078S

DebatesoftheSenate.BillS-203.2ndSession,40thParliament.May6,2009.NatWest.“Community Bonds”.Accessedat:http://www.natwest.com/personal/savings/g3/medium-term/community-bond.ashxLeung,etal.“Are There Canada-U.S. Differences in SME Financing?”DannyLeung,CésaireMeh,&YazTerajima.WorkingPaper2008-41.BankofCanada.October2008.CaissededépôtetplacementduQuébec.“2008 Annual Report”.Accessedat:http://www.lacaisse.com/en/Pages/Accueil.aspxCaissededépôtetplacementduQuébec.Brochure:“We invest ourselves to go further as a responsible business”.Accessedat:http://www.lacaisse.com/en/Pages/Accueil.aspxWikipedia.Search“Caisse de dépôt et placement du Québec”.Accessedat:http://en.wikipedia.org/wiki/Caisse_de_d%C3%A9p%C3%B4t_et_placement_du_Qu%C3%A9becBCInvestmentManagementCorporation.“2008-2009 Annual Report”.Accessedat:http://www.bcimc.com/BCInvestmentManagementCorporation.“Assets under administration”.Accessedat:http://www.bcimc.com/investments/assetmix.aspBCInvestmentManagementCorporation.“Investing in the Future: 2009 – 2012 Business Plan Summary”.March30,2009.Accessedat:http://www.bcimc.com/

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Solvell,etal.“The Cluster Initiative Greenbook.”OrjanSolvell,GoranLindqvist,ChritianKetels.Accessedat:http://www.cluster-research.org.August,2003.Carroll,etal.“Cluster Based Economic Development: A Comprehensive Strategy to Secure NW Ohio’s Economic Future.”MichaelC.CarrollandNeilReid.September2004.Fiorina,Carly.QuotedinFlorida,Richard.“The Rise of the Creative Class”.Page6.BasicBooks,2002.AssociationofCanadianCommunityColleges.“Colleges and Institutes and Canada’s SMEs: A Partnership for Innovation.”February,2007.

CanadianManufacturers&Exporters,BritishColumbia.“Manufacturing BC – Outlook 2020.”2009.Bula,Frances.“A Tale of Two Cities”.BCBusiness.February3,2010.Schuman,Michael.“Local Clusters of Self-Reliance”.March13,2009.Accessedathttp://small-mart.org/Burros,Marian.“Uniting Around Food to Save an Ailing Town”.NewYorkTimes.October8,2008.Wikipedia.Search“Güssing”.Accessedat:http://en.wikipedia.org/wiki/Güssing


i. Survey MethodologyThinkCityundertookthisprojectwiththe

assistanceofanadvisorycommitteethat

includedourkeypartners,includingSimon

FraserUniversity’sPublicPolicyProgram

andCUPEBC.Thisgrouphelpedtodevelop

thesurveyquestionsandprovidedadviceon

surveymethodology.Duringthefallof2009,

ThinkCityassembledacontactlistofmayors,

councillors,andseniorcitystaffforalllocal

governmentsintheprovince.

ThesurveywascreatedusingSurvey

Monkey,awidelyusedsurveywebsite.In

Novemberof2009,adescriptionofthe

survey,itspurpose,andasecurelinktothe

surveyweredistributedbyemailtomayors,

councillors,andseniorcitystaffineverylocal

governmentinBritishColumbia.

Threefollowupemailsweresentoverthe

nextthreemonthstoencourageasmuch

participationfromlocalgovernmentofficials

aspossible.Afterthreemonths,inFebruary

of2010,thesurveywasclosedandtheresults

weretabulated.

aPPenDix a • think City survey

Intotal,193individualsparticipatedinthe

survey.Amongthem,97localgovernments

intheprovincearerepresented,comprising

51percentofalllocalgovernments.Large,

mediumandsmallmunicipalitiesfromevery

regionoftheprovincearerepresented.

ThinkCitywouldliketothankeveryonewho

tookthetimetoparticipateandshareyour

knowledgeandexperiencewithus.Hereare

theresultsofthesurvey.

82 LOCaL PROsPeRity

ii. Survey Results

Question 1: Residentialpropertytaxes

accountforwhichpercentageofyourtotal

revenues?

Average 49.1%

Median 48%

Question 2:Businesspropertytaxesaccount

forwhichpercentageofyourtotalrevenues?

Average 19.9%

Median 15%

Question 3:Developmentcostleviesaccount

forwhichpercentageofyourtotalrevenues?

Average 3.9%

Median 1%

Question 4: Inthecurrentfiscalclimate,

isyourlocalgovernmentcontemplating:

(checkallthatapply)

Taxationincreases 74.7%

Taxationcuts 6.7%

Increasesin 34.3% expenditure

Cutsin 39.3% expenditure

Nosignificant 24.2%

changes

Question 5:Hasyourlocalgovernment

receivedrevenuefromanynewsourcesinthe

lastfouryears?

Yes 56.4%

No 43.6%

Question 6:Ifyouanswered“Yes”toQuestion

5,pleasebrieflydescribethosenewrevenue

sources.

ThinkCitylookedcarefullyatalltheanswers

tothisquestiontoidentifycurrentstepsthat

localgovernmentsaretakingtodiversify

theirrevenuesources,andreflectedmany

ofthesebestpracticesinchaptersthreeand

four.

Question 7:Giventhecurrenteconomic

downturn,hasyourlocalgovernment

haddifficultycollectingtaxesfromlarge,

industrialtaxpayers?

Yes 15.2%

No 84.8%

Question 8:Doesyourlocalgovernment

haveaneconomicdevelopmentstrategythat

incorporatestoolssuchaslocalprocurement,

localhiringand/orcommunityeconomic

development?

Yes 59.8%

No 40.2%

83 LOCaL PROsPeRity

Question 9:Ifyourgovernmenthadnew

revenuesequaltofivepercentofyour

currentbudget,whatwouldbeyourtopthree

prioritiesforthatnewrevenue?

Infrastructure/maintenance 37%

Financialreserves/taxreduction 15%

Recreation,sports,artsandculture 13%

Tourism/economicdevelopment 9%

Environmentalprograms/projects 8%

Housingandsocialprograms 6%

Policingandfireservices 6%

Improvingcurrentprograms/staffing 6%

Question 10:TheProvinceofSaskatchewan

hasagreedtotransferanamountequal

toonepercentagepointorone-fifthofits

fivepercentprovincialsalestax(PST)to

localgovernmentsinSaskatchewan.The

ProvinceofBritishColumbiashoulduse

Saskatchewan’spolicyasamodelandtransfer

ashareofthenewharmonizedsalestax(HST)

tolocalgovernmentsinBC.

Stronglyagree 66.3%

Agree 22.7%

Disagree 1.8%

Stronglydisagree 0.6%

Don’tknow 8.6%

Question 11:BritishColumbia’scarbontaxis

estimatedtogenerate$1.85billioninitsfirst

threeyears.Insteadofrequiringthat100per

centofthismoneybeusedtocutothertaxes

forindividualsandbusiness,theprovincial

governmentshoulddirectthesefunds

towardspublictransit,energysavingretrofits

ofpublicbuildings,andotherlocalinitiatives

tocutgreenhousegasemissions.

Stronglyagree 46.6%

Agree 31.3%

Disagree 9.8%


Don’tknow 7.4%

Question 12: Energygenerationandsales

representsanopportunityforsomelocal

governmentstocreateanewsourceof

revenue.Ourlocalgovernmentislookingfor

waystouseoursystems,assets,andnatural

resourcestocreateenergyforinternaluse

and/orexternalsales.

Stronglyagree 27.8%

Agree 40.7%

Disagree 17.9%


Don’tknow 8.0%


Question 13:IntheUnitedStates,manylocal

governmentsissuetax-freebondsbacked

bytolls,utilityrevenues,andotherrevenue

streams.Thesemunicipalrevenuebondsare

typicallyusedtofinancelargecapitalprojects.

Ifthisoptionwasmadeavailabletolocal

governmentsinBC,ourlocalgovernment

wouldbeinterestedinexploringit.

Stronglyagree 19.4%

Agree 28.8%

Disagree 19.4%


Don’tknow 21.8%

Question 14:Largepublicsectorpension

fundssuchastheOntarioTeachers’Pension

Plan,theCaissededepotetplacement

duQuébec,andtheOntarioMunicipal

EmployeesRetirementSysteminvestin

privateequity,realestatedevelopment,

governmentbondsandothersecurities.

BritishColumbiashouldsimilarlycoordinate

itspublicsectorpensionplanstoprovide

apoolofinvestmentcapitalforbusiness

developmentandlocalandprovincial

governmentfinancing.

Stronglyagree 14.9%

Agree 28.6%

Disagree 22.4%


Don’tknow 25.4%

Question 15: Someeconomistshavenoted

thatmunicipaltaxesandfeesmayhave

aregressivedistribution(meaningthat

theyimpactlowerincomehouseholds

disproportionately).Localgovernments

shouldlookattheirtaxpoliciesthroughthe

lensoftaxfairnessforlower-incomepeople.

Stronglyagree 13.7%

Agree 39.1%

Disagree 26.7%


Don’tknow 14.3%

85 LOCaL PROsPeRity

Intotal,ThinkCityreceived193

individualresponsestooursurvey.

97localgovernmentsarerepresented,

comprising51percentofalllocal

governmentsinBritishColumbia.

Large,mediumandsmallmunicipalities

fromeveryregionoftheprovince

arerepresented.Thefollowinglocal

governmentssubmittedoneormore

responses.

CityofAbbotsford

CityofArmstrong

CityofBurnaby

CityofCampbellRiver

CityofChilliwack

CityofCoquitlam

CityofCranbrook

CityofDawsonCreek

CityofEnderby

CityofFernie

CityofFortStJohn

CityofGreenwood

CityofKamloops

CityofLangley

CityofNelson

CityofNorthVancouver

CityofParksville

CityofPenticton

CityofPittMeadows

CityofPortAlberni

CityofPortCoquitlam

CityofPortMoody

CityofPowellRiver

CityofPrinceRupert

CityofRevelstoke

CityofRossland

CityofSalmonArm

CityofSurrey

CityofVancouver

CityofVernon

CityofVictoria

CityofWhiteRock

CorporationoftheDistrictofOakBay

Districtof100MileHouse

DistrictofBarriere

DistrictofColdstream

DistrictofDelta

aPPenDix B • survey Respondents

86 LOCaL PROsPeRity

DistrictofElkford

DistrictofHighlands

DistrictofInvermere

DistrictofKitimat

DistrictofLakeCountry

DistrictofMapleRidge

DistrictofNorthCowichan

DistrictofNorthVancouver

DistrictofPortEdward

DistrictofPortHardy

DistrictofSaanich

DistrictofSechelt

DistrictofSicamous

DistrictofSooke

DistrictofSquamish

DistrictofSummerland

DistrictofTofino

DistrictofTumblerRidge

DistrictofUcluelet

DistrictofVanderhoof

DistrictofWestKelowna

DistrictofWestVancouver

DistrictofNorthVancouver

RegionalDistrictofCariboo

RegionalDistrictofCentralKootenay

RegionalDistrictofNanaimo

RegionalMunicipalityofNorthernRockies

ResortMunicipalityofWhistler

TownofComox

TownofCreston

TownofGibsons

TownofGolden

TownofLadysmith

TownofLakeCowichan

TownofOsoyoos

TownofPortMcNeill

TownofPrinceton

TownofSidney

TownshipofEsquimalt

TownshipofLangley

VillageofBelcarra

VillageofBurnsLake

VillageofCacheCreek

VillageofCanalFlats

VillageofFruitvale

VillageofGoldRiver

VillageofHazelton

VillageofKaslo

VillageofKeremeos

VillageofLionsBay

VillageofLumby

VillageofMcBride

87 LOCaL PROsPeRity

VillageofMontrose

VillageofNewDenver

VillageofPortAlice

VillageofPortClements

VillageofPouceCoupe

VillageofSilverton

VillageofTelkwa

VillageofValemount

88 LOCaL PROsPeRity

About the AuthorsJames FletcherJamesFletcherisaresearcherandwriter.He

specializesinissuesofsustainability,local

governance,planningandurbandesign,and

publicengagement.HehasaBAingeography

andisanassociatememberofthePlanning

InstituteofBritishColumbia.Jamesisa

candidatefortheSchoolofPublicPolicyat

SimonFraserUniversity.

Doug McArthurDougMcArthurisaprofessorintheSchool

ofPublicPolicyatSimonFraserUniversity

inVancouver,BritishColumbia.Heteaches

andwritesonpublicpolicytheoryand

process,forestry,resources,northern

development,negotiations,aboriginalpolicy,

andgovernance.FormanyyearsDougwasa

seniorpublicservantintheBritishColumbia,

SaskatchewanandYukongovernments.

Heisafrequentcommentatoronpublic

policyissues.

About Think CityLaunchedin2002,ThinkCitybelievescitizens

canmakethebestdecisionaboutthekindof

citytheywant,whentheyaregiventhetime,

supportandtoolstheyneed.

ThinkCityworksto:

a)helpcitizensrealizetheissuesfacingtheir

communitiesanddevelopcollective

solutions;

b)facilitatethestrengtheningofcivilsocieties

withincommunitiesandacrossBritish

Columbia;

c)educatecitizensonwaystoprotecttheir

environment,strengthenlocaleconomies,

andensuretheprotectionofindividual

rightsandaccesstobasicservices;and

d)providecommunitieswitheducational

toolstoassistinthelong-term

developmentofhealthiersocieties.

Asaresultofourwork,ThinkCityhas

developedexpertiseinproducinglarge-scale

citizenparticipationexercisesthroughpublic

forums,workshops,surveysandhallmark

conferences.Morerecently,ThinkCityhas

expandedonitsroleasacivicissuesconvenor

tobegindevelopingpolicysolutionsthrough

ourDreamVancouverprocessthatwas

launchedinOctober2007.

ThinkCitySociety

www.thinkcity.ca

[email protected]

POBox65506,StnF

Vancouver,BCV5N5K5

89 LOCaL PROsPeRity

AcknowledgementsThinkCityandtheauthorswouldliketo

thankalloftheelectedofficialsandlocal

governmentstaffwhotookthetimeto

participateinoursurvey.Yourinputand

commentsgreatlycontributedtothevalueof

thisproject.

ThinkCitywouldalsoliketoacknowledge

theassistanceofthefollowingpeopleand

organizationsinthepreparationofthisreport:

CharleyBeresford,CanadianCentrefor

PolicyAlternatives,CanadianUnionofPublic

Employees,ColumbiaInstitute,CarlFletcher,

SethKlein,NeilMonckton,LouiseOnarheim,

BlairRedlin,ShaunaRusnak,SimonFraser

UniversitySchoolofPublicPolicy,Terry

Sunderland.

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