OSOYOOS TIMES-December 8, 2010

By Paul Everest – Osoyoos Times

While Osoyoos’s population and the rate of inflation in B.C. only grew by 32.8 per cent between 2000 and 2008, the Town’s operational spending increased by 102.1 per cent in the same time period, according to a new report from the Canadian Federation of Independent Business.
The report, titled BC Municipal Spending Watch, compared the growth of municipal spending from 2000 to 2008, the last year for which government spending data is available, with increases in population and inflation.
It found that municipal operating spending across the province grew by nearly 58 per cent while population and inflation grew by 29 per cent in that eight-year period.
That discrepancy means municipal spending across B.C. exceeded population and inflation growth by 2.01 times between 2000 and 2008 and the report concluded that municipal operating spending in the province is unsustainable.
British Columbians have paid for that increase in spending with higher taxes and an increase in fees for services, said Laura Jones, the federation’s vice-president for Western Canada.
In Osoyoos, municipal spending outpaced population and inflation growth by more than three times, the report states.
Operational spending includes employee wages, facility maintenance and other costs associated with the day-to-day running of a municipality but does not take into account capital spending such as cash spent on construction projects.
The federation, in its report, calls the discrepancy between municipal spending growth and population and inflation growth a “fiscal sustainability gap (FSG).”
Since Osoyoos’s municipal spending rate was a little more than three times higher than the rate of population and inflation growth between 2000 and 2008, the town’s gap is 3.12.
Between 2000 and 2006, Osoyoos’s FSG was 1.92 and between 2000 and 2007, the gap was 1.8.
The study states that, at a provincial level, each B.C. resident would have had $228 more in their pockets in 2008 if local government had kept spending increases “in line with population and inflation” while a family of four would have had $904 more to spend or save.
If Osoyoos had kept spending more aligned with population and inflation growth in 2008, the federation states, a family of four in this community would have had $1,617 more to save or spend.
According to the report, the “continued overspending” by municipal governments is financed by large increases in property tax revenues and user fees collected by a municipality.
“The most important source of operating revenue for local governments across Canada is own-source taxation, the vast majority of which is property taxation,” the report states. “In 2008, municipal governments in British Columbia generated 48 per cent of their revenue through own-source levies. The next largest source of operating revenue for local governments was the sale of services, including user fees, fines, licenses, and permits, which accounted for 38 per cent.”
In 2008, the percentage of revenue the Town of Osoyoos acquired through the sale of services was 50.71 per cent, the report states.
The report also highlights the amount of per-capita spending by a municipality and shows that provincial per-capita spending has increased between 2000 and 2008.
Osoyoos’s per-capita spending for 2008 was just below the provincial average at $1,179 and had increased by 77.9 per cent in the eight-year period being studied.
Using population and inflation growth to evaluate the sustainability of municipal operating spending is a fair and logical benchmark, Jones said.
“It’s reasonable to say in a municipality that if you have additional people living in your municipality, then you’ll have to spend more to service those people. It also makes sense to accommodate for inflation growth. Anything above that should be explained to taxpayers.”
Spending a little above the rate of population and inflation growth is fine, she added, but three times that amount is troublesome.
Jones said small businesses often bear the brunt of such overspending since they are taxed more than individual residents.
“It’s not OK with Main Street.”
The federation is calling for the creation of a municipal auditor general to deal with the increase in municipal operating spending.
The federation’s report comes at a time when the Town is engaged in an independent review of its structure and operations.
Due to time constraints, the Town was unable to provide a response to the report before press time but pledged to comment on the report for the next issue of the Osoyoos Times.
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