revenue options for canadian municipalities
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Revenue Options for Canadian Municipalities. Enid Slack Institute on Municipal Finance and Governance Presentation to Canadian National Summit on Municipal Governance July 11, 2005. Outline of Presentation. Background on municipal finance Fiscal challenges facing municipalities - PowerPoint PPT PresentationTRANSCRIPT
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Revenue Options for Canadian Municipalities
Enid SlackInstitute on Municipal Finance and Governance
Presentation to Canadian National Summit on Municipal Governance
July 11, 2005
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Outline of Presentation Background on municipal finance
Fiscal challenges facing municipalities
Revenue options - existing sources
Need for a mix of taxes at the local level
Revenue options – new sources
Revenue sharing versus taxing authority
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Background on Municipal Finance – Expenditures Municipal expenditures, Canada, 2003:
Transportation (19%) Health, social services, social housing (13%) Fire and police protection (17%) Water, sewers, garbage (17%) Recreation and culture (12%) Debt charges (4%) Planning and
development (2%) Other (16%)
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Background on Municipal Finance –Revenues Municipal revenues, Canada,
2003:
Property and related taxes – 53% User fees – 23% Provincial transfers – 15% Federal transfers –1% Other revenues – 8%
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Fiscal Challenges Facing Municipalities Offloading of services
International competitiveness
Urban sprawl
No diversification of revenue sources
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Fiscal Challenges – Success on Fiscal Measures Municipalities have done well on
fiscal measures:
Size of the operating deficit Amount of borrowing for capital Rate of property tax increases Reliance on provincial grants Extent of tax arrears
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Fiscal Challenges –Infrastructure and Services
Fiscal health may been achieved at the expense of the overall health of Canadian municipalities:
The state of municipal infrastructure (water, sewers, roads etc.)
The quality of service delivery
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Revenue Options – Existing Sources
Property taxes
User fees
Development charges
Borrowing
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Property Taxes Good tax for local governments
(related to benefits received, property is immovable, visible tax)
Modest increase
Over-taxation of business
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User Fees Price at marginal cost
Altering behaviour versus generating revenues
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Development Charges Appropriate to pay for growth-
related costs associated with development
Marginal versus average cost pricing
Tool to reduce sprawl
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Borrowing Appropriate to pay for capital
expenditures
Debt charges relative to own-source revenues have fallen in Canadian municipalities
Need for new debt instruments
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Municipal Access to Other Taxes Cities should have access to a mix
of taxes:
Range of expenditure responsibilities (need revenues to match)
Services used by commuters/visitors Revenues that grow with the
economy Increase municipal flexibility
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Revenue Options – New Tax Sources
Income tax
Sales tax
Fuel tax
Hotel tax
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Taxes per Capita, 2000LA Atlanta Chicago Boston Detroit Toronto
Property
General Sales
Selective Sales
Income
Other
Total
$461
153
205
0
194
$1,013
$1,038
558
332
0
175
$2,103
$444
147
415
0
85
$1,091
$962
0
65
0
65
$1,092
$383
0
142
480
35
$1,040
$1,005
0
0
0
0
$1,005
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Non-Tax Revenues per Capita, 2002
LA Atlanta Chicago Boston Detroit Toronto
User Fees
Transfers- Federal- State/Prov.- Local- Total
Other Revs.
Total Revs.
566
98935
161,049
307
$2,935
945
6030
262352
640
$4,040
264
111360
0471
264
$2,090
508
430902
01,332
236
$3,168
687
2041,101
81,314
534
$3,575
281
52422
96570
198
$2,054
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Income Tax Revenue elasticity
Appropriate to finance social service expenditures
Large potential revenues
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Sales Tax Revenue elasticity
Taxes commuters and visitors
Incentive for cross-border shopping
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Fuel Tax Benefit tax if used to pay for roads
Not as good as tolls to reduce congestion
Not very elastic
Limited revenue potential
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Hotel/Motel Occupancy Tax Taxes visitors to pay for the
services they use (e.g. roads, policing)
Limited revenue potential
Potential “cross-border” problems
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Revenue Options: Revenue sharing versus local taxing authority Municipalities should set their own tax
rates: Autonomy Flexibility Accountability Stability and predictability
But have to address border problems
Expenditures and tax rates need to be determined on a regional basis
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Concluding Comments Municipalities face fiscal challenges
Municipalities would benefit from new sources of revenue
Municipalities could also do more with existing revenue sources