Property Tax, Development Fees, Infrastructure, and the Feds

One of the questions I get from time to time is, with new construction and increasing population, why does property tax increase?

Each new resident and business requires additional city services, such as protective services, transit, recreation, and other services, such as libraries. Inflation also drives property tax, as providing the same level of service costs more each year.

Another local government responsibility is infrastructure, including roads, water mains, sewer lines, parks, and municipal facilities such as libraries, recreation centres, and cultural centres.

While municipalities, school boards, TransLink, and the Metro Vancouver Regional District charge fees for each new development project to help support new infrastructure, these fees don't cover all the infrastructure required to support growth. The federal government has been encouraging local governments to reduce these fees because it believes the fees contribute to the cost of building new housing. I posted about this last fall.

Municiliates also need to renew or replace existing infrastructure, which is primarily funded by property tax and utility fees. The federal government and provincial governments also contribute to some of these renewal projects. Canada's existing municipal infrastructure requires significant renewal after decades of underinvestment. Local governments are responsible for about 60% of all publicly owned infrastructure in Canada.

I recently read a slide from the Federation of Canadian Municipalities stating that, on average, each housing unit in Canada requires $126,000 in local government infrastructure. We aren't collecting anywhere near that today with property tax or development fees at any local government in Canada.

So what does this mean? Local governments are playing catch up, which is why property taxes increase year-over-year in every municipality in Metro Vancouver. Rapid growth also puts a strain on local governments; there is an opportunity for the federal government to come to the table with meaningful, predictable funding to support local government infrastructure. Asking local governments to reduce fees without providing a meaningful alternative funding source doesn't make a lot of sense to me.