Small business not a bank machine for municipalities
Opinion: Local governments could learn from entrepreneurs as spending balloons
Originally published in the Vancouver Sun.
The Canadian Federation of Independent Business has released its sixth edition of the B.C. Municipal Spending Watch report. The work of compiling and analyzing the audited financial statements of 153 B.C. municipalities took over 600 person-hours, aided with the input of some of our most seasoned researchers.
The report ranks municipalities from worst to best based on a 50/50 weighting of two key measures: 2000-2011 percentage growth in operating spending over the past decade adjusted for inflation and population growth, and 2011 operating spending per capita, or in other words, how much a resident pays for the operations of their local government in 2011.
The CFIB spending report is greeted by municipal politicians about as well as another group’s annual school rankings report is by the teacher’s union – which is to say they don’t like it much at all. One local politician labelled our effort as “lazy and simplistic” before even reading the report.
One of the strengths of CFIB is that we only receive financial support from our members – 109,000 small business owners across Canada and 10,000 in B.C. alone – which puts us in a better position to give elected leaders the straight goods they may not be getting elsewhere.
What we hope is that our report causes municipal councils to look for answers, not excuses, when their spending increases over three times the rate of population growth.
Over time, municipalities have become more than the stewards of roads, sewers, sidewalks and traffic signs. They have expanded into other areas, taking on responsibility for all manner of programs and a wide range of social services traditionally managed by provincial governments. Attached to each of these projects are ongoing operational costs – mostly wages and benefits for unionized employees.
Stuck paying for most of these costs are both residential and commercial property owners through property taxes and fees. The latter pay a disproportionate amount of the tax load – up to 4½ times the rates of homeowners for properties of similar value. The bulk of commercial property taxes are paid by small businesses, most of which have less than five employees.
Small business owners are not blind to the fact that on top of trying to make their payroll each month, and setting aside money for retirement or their kids’ education, they are paying the salaries of municipal workers who, in some cases, are earning income and early retirement benefits they can only dream of.
It is hard to square how the small business owner working seven days per week for a fivefigure income with no benefits pays taxes to support a $270,000 salary of a city administrator with eight weeks vacation, but it is the contrast we have become accustomed to hearing about.
Small business owners are justifiably unhappy and some are even going public about it.
For example, Ray Zervini, who runs an industrial equipment company in Hope, organized a rally last summer that dozens attended to protest tax increases. Zervini has collected signatures from half the households in town to petition the municipal council. He also intends to promote a fiscally minded slate during next year’s municipal election.
Others are standing up as well.
Peyman Majidi, who runs a bistro and a grocery store in Coquitlam, organized his own rally of local small business owners who are taxed to the max. He pleaded for his city council to listen to the concern of his colleagues, and find ways to rein in spending.
Another small business operator from the Tri-Cities is Cynthia Aasen, who runs a golf services company with her husband. Aasen says if she knew a $10,000 tax increase was coming over two years in operation, they may have never opened their business at all.
In Vancouver, Kyriakos Katsanikakis runs a grocery store that employs 20 people. He too wonders why cities treat small businesses like his as if they were bank machines.
To become more sustainable, municipalities must embrace and seek feedback from local entrepreneurs, and not just regard their small businesses as a source of revenue.
Many local governments may not like the message of CFIB’s report, but those who are heeding it by reining in their spending are going to build communities where their economies will thrive.
Mike Klassen is director of provincial affairs, British Columbia, for the Canadian Federation of Independent Business, and is a member of the B.C. Small Business Roundtable.
