Calgary’s new mayor, Naheed Nenshi (who happened to be the University of Calgary Student’s Union President one year when I was attending there), is wrong when it comes to how to pay for infrastructure and services in the growing communities being developed around the edges of the city.
City council will have to hike levies imposed on community developers to meet Calgary’s fiscally unmanageable demand for services in burgeoning suburbs. We have to be able to finance growth in a better way than we’ve been doing and it does mean that the acreage assessment will have to go up.
Umm… The problem with this plan is that increasing levies on developers, while providing a revenue stream for the city (so long as the city is growing), has a perverse effect. It raises property values. The developers will pass this cost on to people building new homes. And since prices in the resale market are linked to the cost of building new homes, resale prices will also rise to match. This will drive people out of the housing market, but perhaps worse will further inflate people’s sense of wealth and continue to distort borrowing patterns.
On the radio, I heard the good mayor say:
The property taxes we will generate from these new developments over the next 25 (?) years aren’t enough to pay for the infrastructure and services.
If this is true, then isn’t is also true that the city has never generated enough tax revenue to fund infrastructure and services? The answer is YES. Because a significant portion of the City’s budget comes from the Provincial government, and funding for capital projects has often been a split of munipal, provincial and even federal funding.
If the mayor wants to create a truly sustainable system of funding infrastructure and services, the correct answer is to make the people of Calgary pay for it directly instead of trying to claim that “Developers get off easy”. If the City wants more money to spend, raise property taxes for everyone rather than distorting the marketplace (which is really a hidden tax).