Keith Gerein: Could a municipal sales tax be the revenue revolution Edmonton needs?

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This column should probably begin with a viewer discretion warning, as subject matter may offend.

So cover your eyes if you must, keep the lights on, avoid reading alone — do whatever you have to do to protect yourself because I am about to discuss two things that assuredly feature on any list of Albertans’ greatest revulsions.

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Sales taxes and Toronto.

If you’re still reading and not yet collapsing in horror, know I feel awful mentioning not just one but both unpleasantries in the same breath. Unfortunately, it couldn’t be helped, because the news I want to discuss is that Toronto is proposing to establish a one per cent municipal sales tax as part of a package of options to address increasing budget pressures.

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City staff there estimate such a tax, tacked onto the GST and PST, could generate between $800 million and $1 billion a year.

As you might suspect, the idea hasn’t been particularly well received by other orders of government. But in the remote chance it succeeded, it could be a massive game changer for municipalities.

I use the plural term, because if the concept is somehow established in Canada, it’s not a stretch to think Alberta’s big cities might want to ask for the same thing.

To be clear, no leader in Edmonton or Calgary is calling for this right now. And given that most Albertans — other than economists — tend to rate sales taxes somewhere below sinus infections and poor-fitting shoes, the provincial government is sure to disapprove anyway.

Still, while this lands in the category of hypothetical scenarios almost certainly never to happen, it is at least worth a speculative exploration.

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In Edmonton’s case, if such a tax generated even a quarter of what Toronto expects, and it was put toward specific imminent needs — say housing and social services — that could be a giant help in addressing the city’s most frustrating issues. The province should actually like that because they would be the biggest beneficiaries in reduced costs to the health and justice systems.

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Sales tax revenue alternatively could be put toward climate initiatives, or used to build infrastructure projects that would otherwise take years and a lot of debt financing.

In the realm of fairness, the tax would apply to city-dwellers and visitors alike, including residents of surrounding municipalities who often use Edmonton’s services but don’t pay property taxes toward them. And for what it’s worth, municipal sales taxes have been used for a long time in many U.S. cities.

As I said, I don’t think this idea is going anywhere anytime soon.

At the same time, we need to start talking about municipal revenue more seriously, because the traditional model of property taxes and provincial grants is starting to fray amid the complex social crises that big cities are increasingly forced to manage.

With all this piling up, we can’t do business as usual and expect a different result. The math doesn’t work.

So if you don’t support a sales tax, there are other options of varying quality on the table. Toronto, among others, is mulling a bunch of proposals such as higher parking fees, a levy on commercial parking spots, and imposing higher taxes on vacant homes. A further recommendation calls for higher land-transfer taxes on expensive homes, a twist on the “mansion tax” idea pitched unsuccessfully by Edmonton Coun. Michael Janz.

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Additional shared services with neighbouring communities, higher fees on developers and more city-owned businesses are among other ideas that have been pitched.

However, while some of these might be inevitable, none really offers a revolutionary change in the funding framework that a sales tax does, which means they’re likely insufficient to manage the emerging storm.

Here in Alberta, the UCP government is apparently exploring a more robust alternative, of allowing municipalities to keep all property tax they collect each year rather than continuing to transfer a big portion of it to the province. Theoretically, that could work just as well, or even better, for cities when compared with a new sales tax, though I wonder how the province will make up the lost revenue to its own coffers.

Of course, when any talk of new municipal funding is initiated, it tends to be accompanied by discussion of municipal responsibilities.

In part, this refers to cities making sure they are efficiently using the money they already have.

Every city has things that can be cleaned up in this regard. Edmonton is no exception, but it is worth noting that the city has embarked on a significant restructuring based on a motion called OP-12 that was passed at the last budget. If council sticks with it — a big if — the motion calls for the city to find $60 million in savings over four years, while also directing administrators to redirect another $240 million into core operations.

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That’s the other part of the responsibility conversation. In some cases that may mean municipalities getting out of lines of business that aren’t offering much benefit or are duplicating the efforts of others. But in other cases, it may mean taking on a bigger role for issues that are being neglected.

Coun. Andrew Knack, for example, has suggested the city fully take over accountability for the housing portfolio, since the province seems to have partially abdicated the file anyway.

Whichever way we go on this — more funding for cities, more responsibility, or both — it’s clear we are rapidly approaching the time when a break from the status quo is inescapable. Navigating through that will take some political courage from legislatures and Ottawa, who have benefited from the system the way it is.

Unfortunately, without such leadership, I fear we will continue to watch our biggest population centres slide further into dysfunction, disrepair and disintegration. Viewer discretion advised.

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