January 29, 2015
CIT stands for the Congestion Improvement tax submitted to a plebiscite
According to the last Mayors plan iteration, it is now like below:
the CIT is expected to raise $250M/year
Is the CIT tax 0.34c a day or 258$/year per household?
In the Transit plebiscite campaign, people quote 2 different numbers:
- 0.34c a day (that is 124$ a year) if one counts only the direct CIT paid by metro Vancouver households
- $258 if one counts the CIT tax burden per household (direct and indirect)
The last number suggests people will support indirectly the businesses tax burden. Many on the “yes” side seem to argue that is wrong. For example, Brad Cavanagh at canspice.org, wants to believe that the gas price witnessed at the region border (Langley and Abbotsford) is proof of it:
- The total tax rate is 32.17c in Langley (including a 17c Translink tax).
- The total tax rate is 21.17c in Abbotsford (no Translink tax but a higher provincial tax).
The 11c  tax difference is fully passed to the consumer ( The Brad Cavanagh’s error is to consider the Translink tax as the only difference between Langley and Abbotsford)
Do businesses pay taxes?
As economists know, businesses don’t pay taxes, people do. Businesses are an abstraction, people, be either the consumer, the shareholder, or the worker, are the ones paying the businesses’ taxes.
If that was not true, we would have transferred all of our tax burden on the businesses abstraction! In the meantime, studies tend to demonstrate more often than not, the workers support the businesses’ taxes burden (in the form of lower wages).
It is possible that the investments allowed by the CIT will allow productivity gains or a greater economic activity, making the real cost per household lower than assessed by the most pessimistic views. In the meantime a $258 CIT cost per household is no more wrong than 0.34c per household.
PS: We plan to write a post “debunking” the various claims done in the plebiscite campaign. As a primer, so far we can see, the CTF has provided mainly valid facts. I don’t discuss their significance and they could need to be replaced in a proper context (what Brad Cavanagh did in a previous post), but usually trying to dispute them is a losing proposition.
January 19, 2015
Jordan Bateman, from The canadian tax payer federation has released an alternative funding plan to fund the Mayor’s plan, let’s have a look at it:
The CTF notes that the aggregated local revenues (all municipalities and the regional district) growth at an average rate of 5.7% annually. It is well above the ~2.5% combined inflation and population growth rate in Metro Vancouver, and also significantly above the GDP growth rate (~3%). So, the CTF suggests that future local spending could be certainly restrained, to earnmark 0.5% of them toward Translink.
Below is the projected local revenues according different hypothesis.
The CTF report  assumes an aggregate regional revenues growth of 4.7% which seems reasonable and below the 5.7% historical trend. Given this assumption, earnmarking 0.5% of these revenues growth to Translink could generate $2Billion on the next 10 years. That is enough to finance the mayors’ plan .
What is kind of baffling, is that the mayors, especially the tax addicted ones, have not only implicitly endorsed the out of control taxation growth, but becomes apoplectic at the mere suggestion to put rein on it. The narrative is worded by Bill Tieleman like it:
- “To suggest that you can make savings out of growth when you need more schools, when you need more roads, when you need more sewer lines, when you need more garbage trucks — that doesn’t make any sense”
It is time to introduce Charles Marohn:
“No More Road”
“no more sewer line, and no more garbage truck…keep the school thought!”
A rarity in the field, Charles Marohn believes in fiscally responsible urban planning. The main theory developed in his blog is that municipalities are generally engaged in a Ponzi scheme:
- Cities invest in new infrastructure disregarding of the return on investment, which generally tend to be bad: Capital cost can be paid by Development charge, but the generated property taxes are not enough to cover the maintenance cost of it.
- Cities then invest in more new infrastructure, to increase their tax base. The new constituents’ taxes pay to maintain the older infrastructure in the city, but then again there is no revenue to maintain the newly built infrastructure…
Thought things here could not be as bad as in US, we still have a financially unsustainable development model as illustrates the graph above.
- A full accounting of all short and long-term financial obligations local governments have assumed for maintaining infrastructure.
- A stop to infrastructure projects that expand a community’s long-term maintenance obligations.
- The adoption of strategies to improve the public’s return on investment and improve the use of existing infrastructure.
How much room we have to make better use of our existing infrastructures?
Most city’s “liabilities” can be correlated to its street network length:
- basic road maintenance, including snow plowing and cleaning
- lampposts and other urban furnitures
- police presence, number of fire stations,…
- sewer and water mains underneath
- garbage truck running on it
The list obviously includes transit. The shorter the road network is, the more efficiently a city can be ran. The meters of road per capita is a good proxy to estimate how efficiently a city can be ran or not. Below some comparisons
As suggests the graph above: We have already more than enough roads! Growth without no new roads, and all the service liabilities they implies, is not only a very reasonnable proposition, but should even be a requirement.
How make that happens?
As witnessed by the cold reception of the CTF plan, many municipalities show no intention to take a more fiscally responsible route for future development. However, using the municipal revenue sources to finance Transit creates an impetuous to control spending (“there is so much water a faucet can deliver”).
Notice that financing transit by municipal revenue sources is also of nature to encourage municipalities to adopt development pattern enabling efficient transit, to effectively maximize revenue sources room for other municipal services .
For those reasons, the CTF plan has significant merits.
How good is the CTF plan?
Some have criticized the form of the message, Many other have critized the messenger . some are eventually trying to spin misinformation, but we still have to see an argumented rebuttal of the plan content. It is that good!
However, it is not what we are asked to plebiscite or not. What we are asked to vote for is a tax, which contours are still not specified. This to finance a plan which so far has not been audited, and has still to allocate $700M of tax revenue . Without Bill of law insight to clarify all that, it effectively sounds like we are asked a blank check. Strangely enough the proponents of the plan don’t seem much concerned about that… That is concerning.
What come somewhat as a surprise: The CTF plan doesn’t question the mayors’ plan, and accept all of it, so they are not framing the debate as a “yes or no to Transit” as “yes” advocate try to do. Do they will be succesfull ? time will tell.
 CTF unveils alternative to Metro Vancouver transit sales tax, Jen St. Denis, Business in Vancouver, Jan 15th 2014.
 Cities, TransLink should scrimp to avoid new transit tax: No campaigner, Jeff Nagel , Surrey North Delta Leader, Jan 15th 2014.
 Number for Hong Kong from “Hong Kong: The facts”, for Vancouver, from 2014 Capital and operating budget, from “Transportation Inventory” for surrey, from Bureau of street service for LA, Greater London authority for London and from wikipedia for Paris
 Jordan Bateman could have many defaults, but it is not an election to put Mr Bateman in an office. In a referendum, at the difference of an office election, the message trumps the messenger whoever he can be. We will have opportunity to explain more about that point in another post
 In that regard the current translink levy on property is a good thing, but because it is not directly correlated to the cost to serve a city, it is not good enough to encourage policies optimizing Transit efficiency: A more direct contribution from the city coffers tied to the Transit subsidies in it, could be an improvment.
 The mayor plan is originally based on $2B revenues of a “new tax” over 10 years, while the “Congestion Improvement tax” will bring ~$2.7B in the Translink coffers. See our December 22nd post for more detail. The hereby discussed CTF plan conclude basically the same.
January 9, 2015
In reaction to the January 7th terrorist attack on CharlieHebdo in Paris, Transit electronic signs displayed their support
Other less urban mode was also using their screen to pay tribute to the victims: