Greater Victoria, with its 13 municipalities, presents a nearly perfect setting for an unsustainable “destructive interaction” between neighbouring jurisdictions, says a new research paper written by University of Victoria economists.
“Tax competition among jurisdictions erodes the tax base and so [the City of] Victoria struggles to keep its service levels high. All jurisdictions in the capital region are affected by this, but, as the downtown core and primary business and entertainment district, Victoria feels it most dramatically,” says the document prepared by Elisabeth Gugl and David Scoones, of UVic’s Department of Economics.
The paper, A Prosperous Region Needs a Vibrant Core, was funded in part by the City of Victoria and points to “spillovers” — public goods and services paid for by Victoria taxpayers but not consumed solely by Victoria residents.
It cites policing as a prime example. Good policing in the core not only benefits Victoria but the surrounding suburbs as well, the paper says, offering three reasons:
• If crime is suppressed in the downtown, the whole region attracts more firms and residents.
• Crimes committed in the suburbs decrease with good policing downtown as fewer criminals are attracted to the region as a whole.
• As residents from the suburbs commute to downtown for work and entertainment, they benefit directly from core policing.
However, services like policing can become “congested.” As the population grows, the police become overworked and either costs increase or service declines. This congestion can be exacerbated by competition with other municipalities where lower taxes might entice residents and businesses to move — further lessening the core’s ability to pay.
Victoria Mayor Dean Fortin said the paper backed up something his council already knew: Victoria is bearing the cost of all the region’s social burdens.
“The other piece that came out of the study by these economists was a recognition that without a strong downtown core, the whole region will suffer in the long run,” Fortin said.
Other key points identified in the paper include:
• The fate of every jurisdiction in the capital region is inextricably linked.
• The status quo is not sustainable because of the challenges of setting taxes and providing public goods in an inter-jurisdictional, competitive environment.
• As fiscal pressures mount in Victoria, any decline in services will be felt across the entire region.
• Claims that Victoria’s crime rate is overstated appear credible and the costs associated with homelessness are concentrated in the core and Victoria property taxes are an inappropriate source of funding for regional policing and costs of homelessness.
The paper says better research on the use of regional public services is needed. It suggests that while some form of amalgamation may be appropriate, other possibilities should be explored as public debates over economies of scale and cost savings overlook the spillover effect.
“We’d like to offer you solutions; unfortunately, we don’t have any,” Scoones said in presenting the paper to Victoria councillors.
While the Capital Regional District allows jurisdictions to work together and achieve cost savings, it is not capable of addressing spillover or competition between jurisdictions, the report says.
“The first question is whether the jurisdictions in the capital region are approximately fiscally equivalent. If not, then what reforms to governance structures are needed to lay the foundation of sustainable government?” the paper asks.
Several councillors urged Gugl and Scoones to present the paper to CRD directors and to other local municipal councils.
Coun. Shellie Gudgeon said all local elected officials need to hear the presentation.
“I really liked your reference and it’s elemental that the whole region suffers if the core suffers,” she said. “I think we’re only as strong as our weakest link.”
