Real Estate Taxation is a Shell Game

The real estate market, whether it is through development charges, market value assessment rates, land transfer taxes, capital gains taxation or broader application of provincial sales tax rates, has become an easy target for ever increasing varieties of tax applications. It is important to recognize that, whatever the source, all tax revenue ultimately combines into one common pool of funds that fuels the engine of our Canadian public sector.

This past week Pelham Town Council held a public meeting to seek input concerning a newly released development charge background study that proposes increasing the residential development charge applied to new house permits from $6,349.00 to 15,799.00 (+148%) in Fenwick, from $9,114.00 to 11,3979.00 (+25%) in Fonthill and from $6,439.00 to $8,669.00 (+36%) in the rest of Pelham. The Region of Niagara is also currently in the process of reviewing the implementation of a $5,000 (+86 %) development charge increase.

Despite the fact that the development charge rates in Pelham have already been increased 150%-350% between 2001-2009, during an unprecedented construction boom cycle in our local economy, the same study indicates that the development charge reserve fund for the Town of Pelham as of December 31, 2008 had a deficit balance of $108,295.

Given that the development charge cost allocation formulas appear to have not been sufficiently accurate to generate reserve revenue during peak income generating conditions, one cannot help but be concerned about the capacity of our local housing market to fund similarly derived calculations during a recessionary cycle. The fact that no new building permits were issued during the months of Jan-Feb 2009 compared to the total of 10 issued between Jan-Feb 2008 is a strong indication of the potential fiscal challenge that lies ahead.

Furthermore, it can be argued that it is actually counterproductive at this time to introduce any new expense that may negatively impact the affordability and marketability of our local housing industry. The local residential home building sector both directly and indirectly provides significant employment producing spin off effects that contribute exponentially to the long term prosperity of the Pelham economy.

The challenges associated with paying for growth are by no means a Pelham only problem. Home buyers, home builders and residents in municipalities all across Ontario are all finding themselves caught in the shrapnel of a system for funding infrastructure expenditures that presupposes an inflationary market cycle.

As municipal tax payers our questions concerning real estate taxation should not simply be - will it increase my tax assessment today? It also needs to be: Why is there a continual need to increase the municipal component of the overall tax burden? How sustainable are our current funding formulas? -and - What economic stimulus impact can be derived from adding new sales taxes during a time of reduced consumer spending?

It is my fear that until more citizens, regardless of our individual political ideology or whether we work in the private or public sector, are willing to fully contemplate the answers to these questions and more, we will all continue to be pawns in the ongoing taxation shell game that exists between our municipal, regional, provincial and federal levels of government. Our Town Council and staff have invited us to participate in the process. Let's take the time and become part of the solution.

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