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grish
05-01-2007, 02:56 PM
what do you fine members of c2e and guests think of the following idea?

Allow property owners opportunity to pay a lump sum towards their property taxes for 3,5, or 10 years ahead.

The benefit to a resident--essentially a freeze on taxation amount which may offer significant savings. The pre-paid amount may also be selected to be, say, 2% lower than the current taxation amount. The exact amounts to be determined after proper consultation.

The benefit to the city is that the city will have a much bigger cash flow now for capital projects. Projects may be financed and build now at "now" prices. Therefore the city doesn't have to borrow (essentially it will borrow from its own citizens).

Dusty Bear
05-01-2007, 03:29 PM
I don't think its feasible for several reasons.

But the part that stood out the most is the suggestion that the city could take the money upfront and spend it now. So what happens when the city needs money in future years? It already spent the tax revenue for those years.

If the city wants to finance projects, it should borrow the money, either as loans or some type of municipal bond. Taxes should be a reliable, year-to-year source of revenue.

Plus it's a really bad way for spending to get out of control. You're just giving politicans way too much temptation to spend.

grish
05-01-2007, 04:54 PM
i guess the idea is that having cash flow now will reduce future expenditures as the same projects will be build at pre-inflation rates. this is similar to bulk purchasing.

i see your point with city admin going spend-happy with all this cash. definitely some safety net must be in place.

i think a trial period of 2-3 years may be introduced to see how many people would take up this offer.

m0nkyman
05-01-2007, 05:49 PM
I'm far from being a socialist, but a system that would so strongly favour the well off who could run the numbers and afford to make this work over those who would not be able to pay in advance, is pretty socially regressive. That dog won't hunt.

grish
05-01-2007, 08:39 PM
/\ I need you to explain your point a little bit more.

If you are concerned that this system will hurt the lesser-off people consider this:

In year 1 of a 5 year program the city collects an extra $10 million and uses it to finance a capital project. In year 5 this project would have cost the city $15 million due to various forms of inflation. So the city then would save $5 million that it will not have to collect through an increase in taxes. Suppose, over the 5 years, the city looses $3 million due to pre-pay taxes being fixed. The $2 million savings is passed on the entire city thus reducing all of our taxes by a few bucks.

The numbers are just an example. But this is sort of the thing that I envision.

RichardS
05-01-2007, 11:18 PM
I think what m0nkyman is saying correlates to the concern that those that pay up front can avoid the increases, thereby getting a better deal than those who can't fork over 10K. Plus any shortfall or bad spending by a council would be made up by those who didn't pay up front by...you guessed it...even HIGHER taxes.

Your math assumes a) arithmetic inflation (aka no booms) and b) politician's integrity...both fallible beyond extreme...

Pre-paying just opens up all sorts of issues with our inability to not predict the future, bad planning/spending, and the political hell that would ensue should we try to recover extra money from those who prepaid. Yearly reviews is the best we're going ot get for a little while...

It is the same reason why a condo I was recently looking at turned DOWN my offer to prepay the condo fees for 10 years in advance...

m0nkyman
06-01-2007, 10:09 AM
I think what m0nkyman is saying correlates to the concern that those that pay up front can avoid the increases, thereby getting a better deal than those who can't fork over 10K. Plus any shortfall or bad spending by a council would be made up by those who didn't pay up front by...you guessed it...even HIGHER taxes.


Pretty much.

Dusty Bear
08-01-2007, 02:57 PM
Grish, taxes pay for much more than infrastructure. In fact, a lot of the money the city receives for infrastructure comes from the provincial and federal governments.

Certainly, there would be savings by building now if costs continue to climb. But the city still needs to pay for annual operating costs, everything from salaries to maintaining emergency vehicles. So it still needs a reliable, predictable source of annual revenue, i.e. taxes.

Finally, I think there's a strong argument in favour of debt financing for infrastructure. An interchange, for example, can cost well over $100 million. Should we pay for it all now, and let future generations use it without contributing to the cost? Or should the cost be spread out so that all of those who use the infrastructure contribute to the cost?

Well managed and planned debt financing can also help the city build infrastructure now, rather than later.

Sonic Death Monkey
08-01-2007, 04:04 PM
Instead of "prepaid taxes" how about the City sell bonds akin to Canada Savings Bonds?

Dusty Bear
08-01-2007, 04:33 PM
Sonic Death Monkey, municipal bonds have been and are currently used in many cities. I don't know if Edmonton has issued bonds in its past or has the authority to do so.

That's one option under debt financing. In effect, the city is borrowing from people who buy bonds.

I'd probably consider buying some.

grish
08-01-2007, 06:21 PM
i guess that would also work and it has precedent. i wonder who would regulate such enterprise--the province or the fed?

Dusty Bear
08-01-2007, 07:42 PM
Hi grish, it would fall under the provincial government - they are responsible for the Municipal Government Act.

Again, cities might already have this authority. I'm not sure.