By Gerry Barker
June 10, 2019
I learned last week that the 2019 property tax rate in Guelph was 3.14 per cent. Significantly higher than the 2.63 per cent increase that was announced three moths’ ago by Mayor Cam Guthrie. Check your tax bill and you will discover the increase is higher in the final two payments..
The annual April tax rate adjustments were factored including such increases of property assessments. The Mayor’s December announcement turned out not to be true.
In fact it is a 19.33 per cent increase. Budgets are created to guide management to control the unexpected and revenues of the corporation. After years of going through the process of preparing a budget, one would think that there should be accurate information available to report to the public of the activated financial state of their municipality.
The process begins in October as the staff prepares its estimates and recommendations to city council. There are public meetings and proposals, usually involving requests for funding.
Budgets are not cast in stone but the number of fixed and variable costs must be analyzed and hard numbers developed by staff. It is a complicated and highly detailed exercise requiring insights and accountability both by staff and members of council.
Having said all this for some time, 12 years in fact, the process performance has been fraught with demands from special interest groups within and outside the organization responsible to the public who are the ultimate stakeholders.
What other cities are doing to keep costs under control
I received a detailed study of the average cost of homes in 25 Canadian cities and a deeper illustration of the average 2018 home values and property tax rates in the Greater Toronto Area.
The Canadian study by Zoocasa, is a reputable company that analyzed real estate values and property tax rates across the country. I should emphasize that the following data is sourced directly from each municipality’s official websites.
Let’s compare Guelph’s tax data with a number of municipalities in Ontario.
The average 2018 home price in Guelph is $436,600. The property tax rate is 1.17125.
This would qualify the claim often written in guelphspeaks.ca that Guelph‘s property tax rates are among the highest in the study. In fact, there are 19 municipalities in the Canadian sample having lower property tax rates than Guelph.
Here are two loca cities in the Canadian study:
Municipality Cdn home value property tax rate (less than Guelph)
Kitchener 19 $489,607- 1.12975 (.0415%)
Waterloo 16 $489,607 1,10785 (.0634%)
Guelph, Kitchener and Waterloo all have major universities and a community college with campuses in Kitchener, Guelph, Cambridge and Waterloo.
In the GTA portion of the study, closer to home, here are other comparative property tax rates and home values:
Municipality GTA home value property tax rate (less thanGuelph)
Barrie 20 $479,579 .0000 (.1725%)
Caledon 16 $874,690 .84010 (.330115)
Milton 5 $701,595 .69790 (.47335%)
Oakville 9 $1,074230 .75280 (.41845%)
The exodus from Toronto’s high priced housing
Toronto’s housing prices are forcing confronting young families seeking lower cost dwellings with more space, has caused higher home prices in some, but not all, surrounding cities and towns.
Those seeking lower housing costs should understand that not all municipalities are equal when it comes to paying property taxes and user fees. Also to be considered is the track record of potential municipalities in terms of the growth of property tax rates and appreciation of home values over time.
If you choose a municipality that has an average annual property tax rate of three per cent, such as Guelph, as your new home value increases you end up paying more taxes every year that increase your real out-if-pocket costs.
A reality check
However, living in a region with a low tax rate doesn’t necessarily translate to paying less tax if average home prices are higher.
For example, the Toronto tax rate is 0.63551 per cent, which translates into $5,532 of property taxes based on the average June 2018 home value of $870,559. In comparison, the Edmonton tax rate is 0.86869 per cent or about 1.4 times that of Toronto’s.
But the average home value in Edmonton is substantially lower at $381,520, which would result in a lower amount of property taxes overall at $3,314.
This is not the case in Guelph where every new property development increase will drive city property taxes much higher.
This illustrates why property tax rate and user fee increases facing Guelph every year.
In 2018 we had a high tax rate of 1.17125 per cent and an average home price of $436,600, any increase in home prices in Guelph will result in higher taxes for all property owners due to existing high property tax rates plus a one per cent special levy for infrastructure costs.
There is also a large range in property rates for Ontario cities: London’s rate of 1.35082 per cent is more than double Toronto’s rate while Ottawa’s rate of 1.06841 per cent is 1.6 times that of Toronto’s.
Underlying this is the effect of rising assessments of properties by the Municipal Property Assessment Corporation of Ontario, or MPAC. When properties are assessed higher that impacts on the owner’s cost of living in the chosen community.
The last three Guelph administrations have created a property tax rate crisis by demanding annual property tax rate increases of more than three per cent or 2.5 times the rate of inflation in Ontario. In 12 years this practice has exponentially increased property taxes beyond the rate of inflation.
Ignoring the voice of experience
Two years ago, Guelph resident Pat Fung, a chartered accountant who analyzed the financial data as published by the neighbouring municipalities, sounded the alarm.
The result revealed that Guelph’s operating overhead far exceeded that of Cambridge and Kitchener. His detailed 2,700-word report was presented to city council who ignored the details. The local weekly newspaper turned down publishing the report and also a paid advertisement to explain the details.
Mayor Cam Guthrie campaigned in 2014 how he was gong to reduce property taxes to the level of the Consumer Price Index that was 1.11 per cent in 2014.
In his first budget the city council voted to increase the 2015 property tax rate following the annual spring budget adjustments, was 3.96 per cent.
City council since 2007 has increased property taxes annually by, on average, more than three per cent. There are major cities in Ontario that don’t even come close to those rates.
Guelph’s home development consisted mostly of connected strips homes, plus low-rise condos in a planning principle known as Intensification. The effect of this has resulted in higher property tax per acre revenue plus development fees. This is successive administration denying single-family housing development.
While other municipalities were more prudent in delivering economic development, Guelph’s leadership proceeded to blunder into ill planned and mismanagement of projects and assets.
The majority of city councillors have perpetuated these annual property tax rate increases. Now we see the proof of the disastrous decisions that have been made and the lack of responsible financial planning and execution.
Still not convincd?
Think why the former mayor needed capital projects that every year council bypasses to spend capital on acquiring part of the reformatory lands; was spending millions on underground thermal cooling and heating for large buildings; attempting unsuccessfully, to establish the city as being self-sufficient in terms of electric power under the guise of a District Energy program.
On that last point, the Guthrie administration virtually gave the city-owned Guelph Hydro facilities away to a deep-pocketed private power distributor Alectra Utilities. The whole kit and kaboodle for a tiny piece of 60 per cent of Alectra Utilities profit.
Now that’s coordinating capital planning and directing spending. And we are still waiting for a new downtown library and South End Recreation Centre.
Although the city tapped property owners with a special levy of one per cent to spend on “City Buildings,” read that as preliminary planning for the South End Centre. As of 2018 some $3.5 million had been spent planning the site and facilities to eventually cost $63 million.
It is an example of voodoo money management by taking $700,000 budgeted for new parking meter heads on downtown streets. To most people it was another backroom deal to reduce the number of fossil-fueled vehicles on the city. Millions werespent on expanding bike lanes, lane shrinkage to accommodate the bicycles and environmental projects such as the failed roof garden on top of the new city hall.
Speaking of parking. Why did council approve spending $22 million on a multi-storey parking garage next to city hall? Who does it serve? You may ask. With the majority of spaces being assigned to monthly permit holders, it isn’t downtown shoppers.
Here is the formula to remember:
Annual increases of intensification mixed use development;
Plus – annual increased property tax rates;
Plus – increased market values of property;
Plus – increased property assessments;
Equals = increased annual cost of owning propert in Guelph.
The key to stopping this annual bleeding of property taxpayers is to lower operating costs, freeze special interest spending, focus on building capital projects that people need today, not years from now. Conduct a review of all operations by a professional firm.
This last point is the tough one. It will be opposed by the majority of the present councillors who, in all probability, will block any outside study of operations. However, it is the only way that can assess the operational problems and report the solutions.