A new report says Saanich faces several difficult choices with the introduction of the new Employer Health Tax (EHT), according to a new report from the Union of British Columbia Municipalities (UBCM).
The provincial government plans to eliminate Medical Services Plan (MSP) premiums paid by each British Columbian (unless exempt) and replace them with the EHT paid by employers with 2019 as a transition year during which the provincial government will collect both MSPs and the EHT.
The report predicts Saanich residents and businesses will feel this “significant” impact on municipal finances as the new tax leaves Saanch with a menu of politically unappetizing choices.
Saanich, according to the report, will pay $1.78 million to cover the new EHT plus $209,000 for employee MSP premiums with Saanich planning to split the additional cost between property taxes and user fees. Property taxes would rise 1.3 per cent. “In subsequent years, the tax will rise in step with collective agreement settlements that are currently two per cent to 2.5 per cent,” it reads.
If Saanich were to absorb the increase by reducing its operating budgets, it would have to cut at least 15 positions, leading to a corresponding cut in service levels. Saanich, alternatively, could also reverse past efforts to put aside away funding for future infrastructure replacements.
But comments from chief administrative officer Paul Thorkelsson suggests Saanich would find it difficult to absorb the increase without raising taxes.
“Saanich cannot manage a property tax increase [of 1.3 per cent] from this additional expense through simple ‘belt tightening,’” he said. “We would have to amputate a limb.”
The EHT could also increase levies that Saanich residents pay towards other agencies, such as the Capital Regional District also subject to the EHT and facing the same challenges as Saanich to fund it.
The report issues an especially dire warning for some local entrepreneurs. “The impact on Saanich’s medium to large business property owners is twofold as they face paying the EHT directly on top of any property taxation increases that may be implemented,” the report reads.
While Saanich could place the burden exclusively on residential properties, such a move would “likely”meet strong resistance. [“Ninety-two] per cent of Saanich’s assessment base is residential and due to low non-market revenue in recent years, annual tax increases are trending over [three] per cent,” it reads.
The report notes that the introduction of the EHT also robs Saanich of a bargaining chip in future labour negotiations, as employer-paid MSP premiums represent a negotiated benefit.
“Where property tax currently funds only a small portion of the premiums for some staff, a shift to the health tax confers a considerable benefit without any bargaining and passes the cost on to Saanich property owners,” the report reads.
On balance, it confirms concerns that staff and members of Saanich council have already expressed, and the UBCM report duly notes that may “local governments are questioning a tax policy that results in the funding of a provincial service (healthcare) through property taxation.”
Whether Saanich will be able to do anything remains up in the air.