July 23, 2012

Municipal compensation drives up fees and taxes

View from the Board | Philip Hochstein

When you paid your municipal taxes earlier this month you may have been wondering why they went up.

The Independent Contractors and Businesses Association (ICBA) of B.C. was wondering that too – which is why we looked into municipal spending.

Since 2000, civic spending (adjusted for inflation) has gone up 46 per cent. Over the same time, population growth was 12 per cent.

In other words, spending grew four times faster than the population. You can stop wondering why the cheque you stroke to city hall every year gets bigger and bigger – spending is out of control.

As goes spending, so goes taxes. Since 2007 municipal taxes are up almost three times the rate of inflation with the average tax bill up 17 per cent compared to inflation just under six per cent. Municipal governments treat taxpayers like limitless ATMs.

Then there are the fee increases imposed on the purchasers of construction services.

Charges for everything from building permits, development cost charges, and sewer hook ups to rezoning fees and administrative charges are up – an average of 128 per cent since 2001 across B.C. – or almost seven times the 19 per cent inflation in the same period.

This means higher prices for our clients, and in the end higher rents and lower affordability for homeowners, renters and commercial lessors.

The ICBA has looked at what’s driving the tax and fee increases – municipal wages. Staffing eats up more than half a typical municipal budget.

And, municipal workers get compensation that’s, on average, between 30 and 40 per cent higher than people doing the same work in the private sector.

Higher wages are just the start. Compensation costs are driven sky high by rich benefits like longer holidays, more sick days, sick days bankable to an extra six months of pay, and gratuity days.

You may think a gratuity is something you hand over at a restaurant for good service.

In the City of Vancouver, taxpayers are giving employees extra time off, if they just show up to work.

In other words, taxpayers are being asked to give more of their own paycheques to keep giving municipal workers pay and perks those taxpayers will never see. Let’s be clear – the overly rich packages for unionized workers are only part of the problem. The same firehose of taxpayer cash is keeping the management at most city halls richly rewarded.

Big public sector unions offer up the straw man argument that everyone should get similar unaffordable benefits.

It’s an easy argument to make when you’re backed by forced dues as a condition of employment and the myth of a bottomless supply of taxpayer money. Businesses that offered similar programs would have to shutter their doors – or reduce staff to reduce costs. For the record, there are no benefits or pensions for those without a job.

What can construction companies do?

They can raise their voices and pressure politicians to bring pay and benefits in line with the private sector.

It’s a ballot box winner. The Canadian Taxpayers Federation’s recent province wide poll showed 74 per cent of people think higher compensation is unfair and 80 per cent want compensation brought in line.

Collective bargaining in the public sector has failed the people who foot the bill. In the private sector affordability always plays a part, but not in the public sector when the pockets of the taxpayer are seen as bottomless.

The ICBA is promoting the idea of Public-Private Compensation Equity legislation – something that would restore balance to the compensation earned by public sector workers and put government spending on a sustainable footing.

Until this kind of legislation brings pay equity, taxpayers will continue to fork over growing portions of their own paycheques to ensure public sector workers get richer pay and perks. That’s just not fair.

Philip Hochstein is the president of the Independent Contractors and Businesses Association of British Columbia. Phil is also a member of the Journal of Commerce Editorial Advisory Board. Send comments or questions to editor@journalofcommerce.com.

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