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Infrastructure &
Finance Division
 

Amendments to Municipal Financial Plans

 

Circular No. 08:10
ARCS File#: 195-20

 


 
April 7, 2008
To: All Municipal Financial Administrators
 
Re: Amendments to Municipal Financial Plans
 

This circular deals with changes to the Community Charter in relation to the financial plan (Section 165) and annual property tax bylaw (Section 197)
 

Financial Plan: New Revenue Policy Disclosure Requirements
 

As added by Bill 35 (Miscellaneous Statutes Amendment Act (No.2) 2007), Section 165(3.1) of the Community Charter requires municipal five-year financial plans to include a more explicit form of revenue and tax policy disclosure. This requires municipalities to include in the five-year financial plan, objectives and policies regarding each of the following:

  • the proportion of total revenue that comes from each of the funding sources described in Section 165(7) of the Community Charter;
  • the distribution of property taxes among the property classes; and
  • the use of permissive tax exemptions (such as revitalization tax exemptions).

In addition, before adopting annual property tax rate bylaws, all municipalities must, under Section 197(3.1) of the Community Charter, consider the proposed tax rates for each property class in conjunction with the objectives and policies as set out under Section of 165(3.1)(b)[the distribution of property taxes among property classes] of the Community Charter.
 

Parallel changes to the Vancouver Charter also require the City of Vancouver to undertake a more explicit form of revenue and tax policy disclosure.
 

What will be required for 2008 Financial Plans?
 

For the 2008 fiscal year, a municipality's five-year financial plan must include explicit statements about each of the following:

  • the proportions of revenue proposed to come from various funding sources;
  • the distribution of property taxes among property classes; and
  • the use of permissive tax exemptions.

So, in 2008, municipal financial plans should focus on describing what choices councils have made and why. This includes an assessment of the municipality's existing situation, for example, in relation to the distribution of property taxes among property classes. In carrying out such an assessment, councils could ask themselves questions like:

  • What choices have led us to the current distribution of property tax rates?
  • Why have these choices been made?
  • What impact are our current choices having?
  • Are we happy with the current situation?
  • Is our current situation acceptable or sustainable, or does it require change?
  • How do we want to change?
  • What will this change look like?

These questions may lead a council to conclude that its current business property tax rate does not proportionately correlate with the actual use of services by the business property class, and does, therefore, not promote a business-friendly environment within the municipality. This may cause the municipality to think of better ways of correlating property tax rates with the actual use of services (such as by reducing the business property tax rate).
 

The consideration of the financial plan prior to the adoption of a municipality’s property tax bylaw is met by the council considering the bylaw in light of these explicit statements.
 

What will be required for 2009 Financial Plans?
 

In 2008, financial plans should focus on assessing a municipality's existing situation. Councils are to use the 2008 planning year as an opportunity to reflect upon and assess their existing revenue and taxation policies. This can be accomplished by describing, within the financial plan, the choices that are made by the municipality and the reasons as to why these choices are made (e.g. such as in relation to the distribution of property taxes among property classes, or the proportions of total revenues that come from property taxes).
 

Full revenue and tax policy disclosure will be required for the 2009 fiscal year. In 2009, councils will need to build on the explicit statements that were developed for the 2008 financial plan and develop explicit objectives and policies regarding each of the following:

  • the proportions of revenue proposed to come from various funding sources;
  • the distribution of property taxes among the property classes; and
  • the use of permissive tax exemptions.

For the 2009 fiscal year and beyond, councils will be required to provide more detail about their purposes in making choices on these matters, the direction that they are heading and how they are going to get there.
 

As a result of the 2008 financial planning process, a municipal council may decide to adjust, or perhaps maintain, the current choices it has made about the distribution and sources of revenue for the municipality.
 

In 2009, councils should build on the thinking done in 2008 regarding the current situation of their revenue and tax policies and objectives. Councils should build on their 2008 financial plans by developing a long-term vision of where they are headed and why, and how they are going to get there. The consideration of the financial plan prior to the adoption of a municipality's property tax bylaw, in 2009 and beyond, is met by council considering the bylaw in light of these explicit objectives and policies.
 

The next section contains an example of the decision process that a council may undergo over the 2008-2009 financial planning process and objectives and policies in the 2009 financial plan that may result from this process. Decisions about tax policy are significant in the financial planning process.
 

Original signed by:
 
Talitha Soldera, CGA
A/Director
Local Government Infrastructure and Finance
 

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