Friday, February 8, 2008

Prospects for assessment growth and tax increases

New figures from the Canada Mortgage and Housing Corporation (PDF) show a substantial drop in the number of new housing starts in the London area in January year-to-year from 406 in January 2007 to 112 last month, a 72 per cent decrease (note that the figures reported in the London Free Press are incorrect). This was the poorest housing start growth performance among all Canadian metropolitan centres over 10,000 in population with the exception of Thunder Bay, and although one month's numbers will not determine housing prospects for the entire year, they can appear to illustrate a trend predicted last year by the Real Estate Investment Network identifying London as only a middling prospect for real estate investment opportunity in Ontario. Together with deteriorating economic outlooks both south and north of the border, especially in the housing and manufacturing sectors, and the news reported last month that property assessment growth of 1.51 per cent in London last year was the lowest rate of increase since 2004, the CMHC statistics signal a hard road ahead in London's assessment base this year.

Dependable and healthy growth in assessment revenue has for a number of years been used by City administration to fund spending growth well in excess of increased property tax rates that themselves have climbed 31 per cent since 2000, or in other words to mitigate property tax rate increases that would otherwise have been that much higher. Unfortunately for London taxpayers who are already among the most heavily burdened municipal taxpayers in Ontario, spending growth during that time of several multiples of the rate of inflation has largely been used to entrench and expand the City's spending obligations to new programs and agencies from which it will be reluctant to sever dependencies, or to liabilities such as the cost of servicing a $350 million debt that will reach $59.8 million in 2008, or almost 6.5 per cent of the City's overall 2008 budget. Unless Council actually reduces spending to programs and departments, a flat rate of assessment growth — or even a potential decline in property valuations — will expose London taxpayers to the full brunt of spending increases in their property tax rates. With London's unemployment rate rising since last October in contrast to declining rates in the rest of the country, this will come at a time when many Londoners will obviously be least able to afford it. Having incurred those obligations for political benefits, however, councillors have so far demonstrated only token gestures of restraint in a 2008 budget that will require another 4 per cent tax increase.

An intelligent and competent Council acting as representatives of taxpayers would wait to spend taxpayers' assets instead of waiting for constraints on those assets to be imposed from without. That is, while taxpayers still have assets.

See also:

Decline in assessment growth may expose London's lack of fiscal discipline
Assessment growth: stealth taxation

1 Comment:

Jake said...

Unemployment for January went up 0.2% from December also to 6.7%--well over the provincial and national average. We're not even in a recession and we are seeing the levels of unemployment that are typical of cities that are economic decline.

It is nowhere near as bad as Windsor or parts of Northern Ontario, but it is not something to be proud of. We are well on the road to becoming a city where the only job available are in the service/retail sector and professional headset wearers. The out of control spending and bureaucracy on top of inflationary tax increases will only make more investment flee.

To see council members like Nancy Branscomb and the other Killer B's become "born-again fiscal conservatives" over the police budget, yet never question spending untold millions on grants and inflationary increases in the library budget is too little too late.

The only way council can ever redeem itself at this point is to have a good number of them resign.