Why Calgary's property taxes are skyrocketing

Printer-friendly version
Appeared in the Calgary Herald

If you live in Calgary and you check your property tax bill this month, rest assured you are not imagining things: property taxes really are on the rise and way above inflation.

Some background: Calgary's property tax bill has two components, with the city's share at 56 per cent and the province's at 44 per cent.

Since 2007, the earliest year for which I have statistics, the province has hiked its rate beyond inflation in five of seven years. But the provincial government also dropped its taxes twice, in 2011 and this year.

In contrast, City Hall jacked up its property tax take beyond inflation in six of the past seven years (2007 was the lone exception).

This year happens to be the worst, with the city's hike in property taxes at 13.1 per cent compared to an estimated inflation rate of 1.4 per cent. (That comes from Statistics Canada's most recent year-over-year increase and is assumed for 2013). If that inflation estimate holds, City Hall's portion of the property tax increase will be nine times the Statistics Canada rate of inflation for Calgary.

The only reason homeowners will escape the full effect of the 13 per cent city increase is because the province dropped its taxes on your property by four per cent. That produced the blended increase of 5.5 per cent.

City Hall's above-inflation increases have been a constant occurrence most years and here's what it means for homeowners: Had the city and province stuck to inflation-only increases starting in 2007, a homeowner with a $2,500 property tax bill in 2006 would see a $2,858 bill this year. Instead, the charge will be $3,430, or an extra $572. The cumulative effect over seven years is an extra $1,538.

A property that started with a $3,500 bill in 2006 but was subject to inflation-only increases since 2007 would receive a bill this year for $4,001. Instead, the bill is $4,802, an $801 difference this year and $2,100 more over seven years.

Water, drainage and wastewater fees have also jumped way above annual inflation over seven years. Annual increases ranged from 3.9 per cent to 21.3 per cent depending on the year and item. This year, drainage, water and wastewater fees will jump by 4.9 per cent, 7.5 per cent and 13.5 per cent respectively.

For the record, there are more properties in Calgary now than in 2007, meaning the city provides more services, but it also received more in property taxes and fees.

As the Canadian Federation of Independent Business showed recently, the City of Calgary spent $1 billion more on operations in 2011 than it would have under a population growth plus inflation scenario since 2000.

The city's justification for above-inflation increases is that its own costs "typically increase at a higher rate than goods and services considered in consumer or household inflation." The City of Calgary even produces its own higher inflation estimate to back up that assertion.

For example, between 2007 and 2013, the city's self-created inflation ranged from a low of 1.8 per cent (2009) to 5.9 per cent (2008). In 2013, the rate is estimated to be 3.3 per cent.

City-created inflation numbers are wildly higher than Statistics Canada's version. (The only exception was in 2007.)  According to Statistics Canada, Calgary's inflation ranged between a high of just 2.2 per cent in 2011, with the low being a small dip in prices in the recession of 2009.

So, with the exception of 2007, the city's annual self-created cost of doing business was double, triple, or quadruple the rise in consumer prices spotted by Statistics Canada.

Since 2009, the city's property tax increases have been higher than even its own self-induced inflation rate. In 2009, City Hall inflation was 1.8 per cent while the property tax increase courtesy of Calgary was 5.3 per cent. In 2010, the rates were 4.1 per cent and 4.8 per cent, respectively. In 2011, the city said its costs increased by 3.2 per cent; it hiked property taxes by 10.4 per cent.

In 2012, City Hall inflation was 3.7 per cent; the city's property tax hike was 5.1 per cent. In 2013, the city pegs its internal cost increase at 3.3 per cent. The city portion of your property tax bill? Going up, by 13.1 per cent.

The City of Calgary's costs rose way beyond inflation in the real world because Council and senior city staff have failed to exert more control over costs, including total public-sector compensation, always the biggest line item in any budget.

Thus, spot the flaw in the reasoning that emanates from City Hall: Costs rise more quickly for services provided by the city because the cost of city services rise more rapidly.  The logic is circular. The real-world effect is dramatically higher property taxes.

Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.