City Taxes Are Growing Out of Control
The revenue from taxation increased by $8.4 million, or 38%, between 2011 and 2020. For comparison the Consumer Price Index (CPI) increased by only 18.3% during this same period. As shown above, the increase in revenue from taxation was fairly linear during these years. This greatly increases the confidence in a linear projection of tax revenue into the future which is shown by the dashed trend lines. This linear projection shows that revenue from taxation has been increasing steadily at an average rate of $914,781.00 per year.
The 2022 tax revenue shown in the approved 2022 budget is $32.5 million. This is shown on the graph above by the yellow star. This represents an increase of slightly over $10.5 million or 47.7% since 2011. It's noteworthy to see that the value for 2022 taxation is nearly right on the trend line which has a projected value in 2022 of $32.2 million. This is an indication of the accuracy of the Trend Line. Therefore we can say with some degree of confidence that if Council continues on the path of increasing taxes at the same rate, the cityís revenue from taxation will reach $37.7 million in the next 6 years. Thatís an increase of $15.7 million or71.4% since 2011. Unfortunately, it gets worse. The impacts of high inflation, that we are now facing, will likely drive future tax increases much higher. So, unless the new Council dramatically changes the past approach to the budget process, you can expect an annual tax increase in 2023 that is much greater than the current annual average of $914,781.
If, in 2011, Council had directed that all future tax increases be limited to inflation, then revenue from taxation in 2020 would have been $26,155.388 or $4.3 million less than what actually occurred as shown by the green line on the above graph. When we project this into the future it gets even more dramatic. If inflation were to continue at the same rate and if tax increases were capped at CPI in 2011, then taxes would reach $29,948,668 by 2028. This is actually $2.5 million less than what they are today. Unfortunately we know that future CPI will be much higher than 2%.
The reason why tax increases climb exponentially, is the compounding impact that successive annual increases have on the end result. For example, a hypothetical council imposes a tax increase of 3% to a $10,000,000 budget, in year one, resulting in a new budget of $10,300,000 or an increase of $300,000. If it again imposes a 3% increase in year 2 the new budget would be $10,609,000 or an increase of $309.000. In other words the dollar value of the budget grows a little bit faster every year even if the percentage increase remains the same at 3%. That is because the percentage increase each year is not only applied to the original budget but also to all of the pervious increases of past years. The net result is that even if the percentage increase is small and remains the same each year, the size of the budget grows exponentially resulting in the size of the budget doubling in 24 years.
The rapid growth of taxes over the past ten years has had a devastating impact
on all of us - residents and businesses alike. The group that is likely most
affected by these property tax increases is, surprisingly, the group that
doesnít actually own property, the renters. Residents that rely on the
availability apartments to rent make up a large portion of our population.
Generally this group does not have the means to buy a house so they are at the
mercy of landlords. You can be sure that those that own apartment buildings pass
on 100% of their property tax increases to their tenants if not restricted by
rent controls. The impact of high rents is only one of many impacts that chronic
annual tax increases have had on Owen Sound residents. I will discuss many of
these in a future article.