Vancouver municipalities struggle to set 2022 budgets due to ‘school tax’ imposed by province

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As city councils in the Vancouver region struggle with setting their 2022 budgets the next couple of months – teetering between demands for more policing, less policing, more services, lower tax increases, and much else – they have one little-talked-about and uncontrollable factor that plays a part in their decisions.

That’s the “school tax” that B.C. imposed on higher-valued properties in 2019, a tax that brought in $319-million the past two years and will likely generate another near $200-million for 2021.

The so-called school tax – never meant to go to schools – has a huge impact on a select group of cities and homeowners, especially Vancouver, where residents paid an additional $101-million in property taxes in 2019 and $68-million last year through the additional school tax – more than half of the total collected in the province for the past two years.

That was applied to 18,000 homes the first year; 13,000 the second, when assessed values declined and not as many homes hit the $3-million mark.

In West Vancouver, the extra school tax pulled $20-million out of the district in 2020 ($32-million the previous year); Surrey, $12-million; Township of Langley, $6.5-million; Whistler, $5.48-million; Burnaby, $3.7-million.

It’s a huge chunk of money that some mayors say they’d like to be able to use for direct services in their cities – especially since the additional layer of tax makes it hard for councillors in cities where a large number of residents might be affected to think about a tax increase without factoring that in.

Many homeowners don’t have any idea which part of their property taxes goes to which level of government, so city council members often take the blame for the entire bill even when actual city taxes can account for less than half.

“That additional tax is significant,” says West Vancouver Mayor Mary Ann Booth. “A third of our tax bill is the additional school tax. It ends up squeezing our tax that we can collect. There’s a direct consequence. We can’t cover our own costs, because the province is taking all the room.”

Ms. Booth said it’s hard to see at the moment how the money collected is benefiting her city.

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The district is working on a development aimed at “work force” housing meant to help people who have jobs in the district, such as teachers or firefighters with household incomes of between $50,000 and $125,000, to live there. But, in spite of the $53-million in extra school tax West Vancouver residents have paid the past two years, there won’t be any BC Housing money going into it because it doesn’t fit the formula the housing agency requires for subsidized housing, where 20 per cent of the apartments have to be at welfare rates.

“We’re just not seen as a community in need but we do have people living in cars and going to shelters,” said Ms. Booth. “We don’t get much attention from the province.”

(BC Housing has put money into a planned redevelopment of West Van’s Inglewood Care Centre in partnership with Baptist Housing.)

A statement from the province’s Finance Ministry to The Globe and Mail emphasized that B.C. has been putting the money collected for the so-called school tax to good use for housing, with $1.8-billion spent so far on the NDP’s ambitious 10-year housing plan in Metro Vancouver.

It has also gone toward $380-million of housing investment in the Victoria region, $130-million in the Nanaimo region, $212-million in the Fraser Valley region and $179-million in central Okanagan, said the statement.

But that kind of provincial benefit is difficult to explain to local taxpayers as councils are deciding on what to do for 2022.

In Burnaby, Mayor Mike Hurley said the extra tax, while only affecting 200 to 350 houses each year, still weighs on council as it decides on the whole city’s budget.

“It certainly plays into our decisions and has limited some of the things we’d like to bring forward. I can understand what they’re trying to do but it does limit what you can do at the city.”

Township of Langley Mayor Jack Froese said he feels like his area is getting something back for the $6.5-million in the form of new schools, but he acknowledges that there is no easy-to-track accounting system that lays out what the province is doing with that extra school-tax revenue.

And in Vancouver, which will likely see even more than $68-million in school taxes come out of the city in 2021 and more homeowners paying the extra amount because house values rose this year, Mayor Kennedy Stewart is concerned about the long-term implications.

Vancouver, where a budget was passed Tuesday after hours of wrangling over decisions about small increases for various departments or initiatives, has benefited from huge injections of money from the province for housing, everything from new spaces created to house homeless people living in camps to outright hotel purchases to hundreds of millions for new social-housing projects.

“In this case, we’ve done well,” said Mr. Stewart, who routinely lavishes praise on Attorney-General David Eby for how the province has responded to housing problems in Vancouver. “Under this very good minister, it has flowed back into the priorities the city has.”

But he acknowledges that it affects council’s decision-making about taxes to cover city operations, knowing that thousands of residents will be paying the extra amount.

And he worries that the current good return to Vancouver might not be the case with every government. He’d rather see local control over the money to ensure that it doesn’t get siphoned off by some future provincial party that decides to use those hundreds of millions for a new crisis that needs a financial Band-Aid.

As well, he said, if each municipality could set its own rate for the extra tax, they could set the bar differently for what is considered a high-value home in that city instead of having a flat rate for the whole province that is essentially paid by a small group of homeowners in a few areas.

There are 55 cities (along with some First Nations reserves) where not a single homeowner pays the extra tax.

In Vancouver, the extra school-tax levy can range from the $253,312 that Lululemon founder Chip Wilson pays on his Point Grey home – more than half of his total $450,001 property-tax bill for 2021 – to about $3,500 for someone like Councillor Colleen Hardwick, with a $4.25-million home on Kits Point, to $1,024 for a retired couple with a $3.5-million house in Kerrisdale.

The extra school tax comes on top of other property-tax money the province gets that tends to come disproportionately from Lower Mainland homeowners, like the speculation and vacancy tax, which has added $187-million the past two years to provincial coffers, or the general school tax.

A Metro Vancouver report in 2017 noted that the region paid $700-million more in school taxes than all the other regions combined, with taxpayers in the Lower Mainland contributing 71 per cent of total school taxes to the province, even though it had only 54 per cent of the total B.C. population.

But, for now, that combined load is what councils are facing once again this year, to the frustration of many like Vancouver’s Mr. Stewart.

“When you lump all those taxes together – a lot of those decisions are not ours.”

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