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A failure in tax reform Re: School taxes on residential property and community sustainability I am writing to express my total concurrence with Bob Barnett's editorial of 19 April 2002 in which he expressed the view that "the (property) taxation issu

A failure in tax reform

Re: School taxes on residential property and community sustainability

I am writing to express my total concurrence with Bob Barnett's editorial of 19 April 2002 in which he expressed the view that "the (property) taxation issue is at the heart of sustainability" for the community of Whistler, as well as with Alison Taylor's article and Paul O'Mara's and Eileen Tomalty's comments on this subject, published on 15 March, 2002.

What I would like to do is add some comments and detailed information that might throw further light on the inequities in the school tax system as presently administered by the provincial government and some recent changes attempted in order to grant some relief with respect to residential property.

Not a School Tax per se

The first and most important thing to note is that it is no longer a tax system that directly supports the local school district where the taxes are collected. It is simply a provincial tax levied on residential properties throughout the province and the proceeds go into the province's Consolidated Revenue Fund. The total amount of these taxes to be collected and the rates to be applied are not fixed by legislation but are set annually by an administrative act of the government without debate in the Legislature. They have the arbitrary power to set different rates of tax in separate school districts (there are 59 in B.C.), and even to set different rates for separate communities within the same school district. These school district boundaries are really meaningless and the tax is a "school" tax in name only.

Home Owners Grant as Part of the Tax System

The next most important thing to note is that the Home Owners Grant ("HOG") is given by the province as a credit against school tax levied on permanent resident homeowners, much like the Basic Exemption in the Income Tax system. It effectively means that at grants of $745 for seniors and disabled owners and at this year's mil rate of 2.8910 mils set by the province for the Howe Sound School District, the first $257,700 of their home assessed value is not taxed. For all other homeowners, their grant of $470 means the first $162,500 of their assessment is exempt. However, this exemption is denied to and taken away from permanent resident owners whose assessments exceed $525,000. No similar removal of a basic exemption is found in the income tax system and this serves only to dramatically increase the proportion of tax born by higher assessed properties.

In Whistler the average single family home assessment for permanent resident owners is estimated at approximately $650,000, meaning that well over half of these owners who live and work in Whistler are denied the benefit of the HOG, at a savings to the province of over $600,000 in total annually. The total of the grants that were allowed in Whistler came to only $578,106 in 2001. By comparison in Squamish, where the average single family assessment is $191,376 this year, virtually all the permanent resident owners receive the full HOG, totalling $1,790,201 in 2001.

Whistler's Share of District Tax

The Pique editorial stated that in 2000, Whistler paid 68 per cent of the school taxes in the district, but when you calculate the net amount actually paid after allowing for the HOG credits, it turns out that Whistler paid 84.6 per cent of the net residential school taxes paid in the district and Squamish paid 8.2 per cent. This year, because of further assessment increases, Whistler owners will likely pay closer to 89 per cent of the net residential school taxes and Squamish owners, where assessments pretty well stayed the same as last year, will pay closer to 5 per cent.

Comparison with Municipal Taxes

Another useful comparison to make when assessing the relative burden of the provincial school tax and the ability of owners to pay the tax is to look at the ratio between it and the general municipal and local services taxes (including sewer, water and recycling/garbage parcel taxes) imposed on the same properties. In Whistler, for permanent resident owners of single family dwellings, the ratio is 1.1 to 1 ($2,067 local vs. $1,879 school.) The ratio in Squamish is a wildly different 16 to 1 ($1,302 local vs. $83 school). This spread had grown rapidly over the past 10 years during which time net school taxes on a fairly typical single family home in Whistler (mine) have increased by 213 per cent from $860 in 1991 to $2,690 this year. In the same period, my municipal taxes increased by only 30 per cent.

To put this another way, an average individual permanent resident owner of a single family home in Whistler will pay a school tax this year of $1,879 (denied the HOG) on an average assessment of $650,000, but single family homeowners in Squamish will pay a net tax of only $83 on an average assessment of $191,376, or 4.5 per cent of the average tax in Whistler which is a staggering 22 times greater. This in spite of the fact that the median of family incomes in Squamish is higher than in Whistler. The average net tax paid in the entire province last year was $323, or over 3 times higher than the average paid in Squamish.

Hardship Cases

A number of individual cases of severe hardship have been identified in Whistler, where senior resident owners have experienced assessment increases in the order of 20 per cent within the space of 1 year. As an example, an increase from $500,000 in 2001, when their net tax was $752, to an assessment of $600,000 in 2002 resulted in a school tax bill this year of $1,736, a 130 per cent increase in 1 year, due largely to their loss of the HOG. Their municipal tax increase was only 5 per cent.

Failed Attempt to Obtain Relief

These obvious and severe inequities are due to the fact that property assessments in Whistler bear no relationship to the rest of the district, or the rest of the province for that matter, where entirely different market forces are at work. Recognizing this, a proposal for the granting of some relief was presented to the province to be applied in cases where the average single family assessment in a particular community was significantly greater than the rest of its district. That particular community would then be treated as a stand-alone school district and a lower mil rate set for that community. In response the province amended its legislation so as to permit different mil rates being set for communities within the same school district, but then the administration set up two strict tests to be met before this could be implemented:

Firstly — the average single family assessment in that community had to exceed the average in the rest of its district by at least two times.

Secondly — the resulting tax saving for the community as a stand-alone district, when applying the province's allocation formula, must be greater than 20 per cent.

The first test clearly conforms with the government's public statement that it "will enable the province to address situations where the variation (in average assessments) becomes excessive." The variance ratio in Whistler is 4.2 times the rest of the district and by far the greatest of any other community in the province. The only other community that even came close was Tofino, at 2.3 times.

The second test was given no justification or rational whatsoever and only served to eliminate Whistler where the relief would have amounted to $1,327,600 in total dollars but only 10 per cent of the total tax. Tofino still qualified for relief because its resulting saving, though only $301,300, came to 49 per cent of its total tax, meaning their taxes were cut in half. The only logical explanation for imposing this test appears to have been solely to avoid the province having to absorb the much greater amount of relief in terms of total dollars that would otherwise have been extended to Whistler. We have by far the most excessive variance in assessments, but no relief was granted. The cost to the province could have been avoided or reduced quite simply by re-allocating all or part of the tax over the rest of the district that pays far below the provincial average.

What is all the more astounding is that West Vancouver is treated as a stand-alone school district, separate from its adjacent communities in North Vancouver, with the result that their total school taxes in 2002 are $3,269,000 lower than what their taxes would be if it were combined with these other communities in the same school district for tax purposes. Average assessments in West Vancouver are closely in line with Whistler's and yet their school tax mil rate is 13.5 per cent lower than Whistler's.

Substantial 2002 Tax Increases

The B.C. Finance Minister's announcement this year of a 2 per cent increase in school taxes on the residential properties turned out to be understated by almost one-third when the actual increase amounted to 2.9 per cent, or $29,535,130 above the gross taxes levied in 2001. What wasn't stated is that this represents an increase of 5.6 per cent in the net return to the province after allowing for the HOG credits, assuming that they will be the same as last year. The province-wide taxes on commercial properties also increased by another $12,880,906 over the last year, for a total increase of over $42 million.

The total of all school taxes levied in Whistler this year on both residential and commercial properties is $25,604,484, an increase of $4,268,044 or 20 per cent over last year, while the total taxes levied in Squamish actually decreased, dropping slightly to $5,506,667 from $5,525,306 – and still no relief was extended to Whistler. Something is seriously out of balance here.

What Happens Next?

The school tax burden imposed in Whistler must be viewed by any clear thinking person as truly appalling and completely unacceptable under any assessment of a tax system that is supposed to be fair and equitable. The continued oppression of Whistler taxpayers under this system is in dire need of correction and relief. The province's arbitrary failure to act requires explanation and a commitment to address these inequities and to bring fairness into the system in the future. We certainly have the right to expect that some response will be forthcoming from our local M.L.A., who has been kept apprised of these concerns, as well as from the Minister of Finance.

Hopefully our municipal government, which has worked hard to try and hold the line on its taxation of property, will press hard for change at the provincial level and perhaps obtain the support of the Union of B.C. Municipalities in this regard at its next conference in September, which coincidentally is being held in Whistler. Perhaps others who object to these continuing and excessive increases in our school taxes will also speak out.

As had been stated, the fundamental issue is one of affordability of housing if this community is to be sustainable. Unless significant change is effected in the province's regional property taxation structure, the tax burden will result in driving out permanent residents, who form the heart of the working community that is the engine driving this resort.

Garry Watson

Whistler