Halifax’s budget committee meeting on Wednesday, Feb 5 was spicy. The meeting, which is technically still on-going and will resume Friday, Feb 7 at 9:30am, started this year’s budget debates and officially kicked off budget season.
This year Halifax is expected to have a budget of $1.3 billion, and the revenue gap is $69 million. The revenue gap is the deficit after a year of rising costs and inflation. Thanks to the still-hot real estate market, property value in the HRM is up about 5% on average, so the city could stick with last year’s tax rate and still bring in more tax revenue than last year—but that wouldn’t be enough to close the gap on last year’s deficit. To bring in more money, the city needs to raise the tax rate by 2.7%, an average of $189 a year per property AKA $15.75 a month. The total amount of property tax the average home in the HRM will pay this year is $2,678. If every single one of Halifax’s half million people paid the HRM $2,678 a year, that would be about $1.3 billion, but the city taxes properties, and there aren’t a half million of those.
Fun budget fact: The provincial property tax cap cost the city $181 million in lost revenue this year. If there had been no cap, the city would not have been $69 million short this year.
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Thanks to a policy decision by our last council, commercial property taxes are starting to shoulder more of the property tax burden than in previous years, with the bulk of that increase coming from places like Bayers Lake Business Park and Dartmouth Crossing, followed by places like Burnside and the two downtowns. Rural and suburban commercial properties are largely stagnant. Besides property taxes, which make up the bulk of the city’s revenue, the rest of the city’s money comes from grants, user and permit fees, and random taxes like the Deed Transfer Tax.
The Deed Transfer Tax is the city’s cut of the pie whenever a property changes hands. During COVID, when the real estate market went nuclear, the city was making a lot of money on this tax. Since COVID was also a cost-of-living crisis, the council at the time decided to use the Deed Transfer Tax windfall to cover budget needs in order to keep tax rates low. Coincidentally and hilariously, ever since Jerry Blackwood took over budget season as Chief Financial Officer, the deed transfer tax has dipped significantly, and his staff have started referring to this external market phenomenon as “The Blackwood Effect.”
But ever since Blackwood killed the value of the Deed Transfer Tax, he’s been tasked with explaining the significance of last council’s decision to use it to keep taxes low to councillors who don’t seem to understand how the municipal budget and property taxes work.
There is a tension on council between the those who recognize the connection between property taxes and city spending, and those who do not. This tension flared to life at Wednesday’s meeting because District 4’s Trish Purdy was having a particularly bad debate. During the capital budget part of the meeting, she was vehemently against adding bus lanes to Cole Harbour Road. She said that last summer, when Cole Harbour Road was under construction, the city closed one lane and replaced it with nothing, which resulted in a massive snarl of congestion. She argued that it was more important to keep the two car lanes, because replacing one low-efficiency car transportation lane with a high-efficiency bus transportation lane would be a disaster. She claimed that the congestion generated by shutting down one car lane somehow proved that a bus lane would be a massive failure.
Coming in hot off that argument, she then demanded to know why her district priorities, like aligning Ross Road with Lake Major’s Road, weren’t moving ahead. The city bought the land it needed this spring but will not start working on the design of the new intersection until 2029.
Later in the debate, she also put forward a motion asking staff to find cuts or things that could be “paused” in the budget to keep taxes low—but not, apparently, the pauses the accountants already built into the budget, like saving money by pausing the work until 2029 on Purdy’s priority of the Ross Road realignment.
Councillor Shawn Cleary, who is always entertaining right after saying “no disrespect,” prefaced his comments by saying “no disrespect” and then tore into Purdy(’s amendment). He told Purdy that she can’t come in here demanding low taxes while at the same time saying things she wants should magically be funded. He said it was time for council to put on their “big boy and big girl pants and dig into” what specific projects they want funded, and fund them. He told his peers that the city kept taxes low in previous years, knowing it would make things expensive later, and later is now. He told his peers they needed everything in this budget, and everything in the budget was also things they approved and now needed to pay for.
Purdy, before making her closing arguments, said she wanted to protest Cleary’s “unparliamentary language,” saying, “It would be really nice to come to my work environment and say what I want to say and give my thoughts and make motions and amendments and not be told to put on my big girl panties. I think that is so inappropriate.” Procedurally, her complaints amounted to nothing because Cleary never used unparliamentary language. Although it was an immature way to do it, Cleary did not criticize Purdy; he criticized her policy priorities and outlined why they were self-defeating. When talking about pants, he was arguing to try to sway the votes of his peers against Purdy’s motion. You know, the whole purpose of council’s very public work environment.
It is, however, a bit disrespectful to spend four years on council and seemingly use none of that time to learn about how the relationship between property taxes and the municipal budget works, even though one of the main things councillors do in their work environment is to oversee and approve the municipal budget through public debate.
But taxes are complex and property taxes doubly so, so for anyone who needs it, here’s a TL;DR of how property taxes work.
Property taxes work backwards
Even though this is a deep dive into municipal property taxes, some of the biggest misconceptions about city taxes stem from how taxes work at the federal and provincial levels. Throughout the year, as you buy things with sales taxes and get paid an income with deductions, the companies that control your life collect those taxes and deductions and send them along to the federal and provincial governments. These orders of government have other revenue streams too; the province, for example, sells booze and collects gambling losses. At any rate, money comes in throughout the year and then, during the respective federal and provincial budget seasons, accountants look at how much money was earned and tell the government how much money they have to spend. At those two levels of government, it’s like working a commission job: the better your policies, the better your economy; the better your economy, the more people earn and spend; the more earning and spending, the more tax revenue you have for the budget.
In contrast to the provincial and federal tax systems, a city’s main revenue stream is typically property taxes, as shown in the “Municipal Revenue By Source” graph above. Property taxes account for well over 70% of Halifax’s total revenue. There are minimal other fees and fines, some grants, and things like the Deed Transfer Tax, but the city lives and dies on its property tax revenue.
Because the city can’t easily take on debt due to provincial regulations, the city can’t risk spending more than it collects in taxes, so the budget is a lot more like going grocery shopping. The staples—things like roads, cops, libraries and snow clearing—all go into the cart, and so do the wishlist things like an AAA bike network, a functional Transit system and the 2012 Macdonald Bridge Bike Flyover. Then, at budget time, CFO Jerry Blackwood has to make projections and figure out how much money is available to spend.
Building the budget is essentially council and Blackwood taking the cart to the checkout: They pay for the staples first, and if there’s money left, some of the wishlist things, too. Sometimes, in previous years, we’ve been able to use coupons (e.g. the Deed Transfer Tax) to bring down some costs one time. But otherwise, like groceries, municipal costs never come down, so anything that we paid for last year we have to pay for again this year at a higher cost, unless it is removed from the budget/cart altogether.
Purdy’s motion to cut or “pause” things was defeated because council provided a list of municipal groceries to put in the cart, and told Blackwood to get everything on the list as cheaply as possible. Which his team has done. Her motion was essentially asking the city’s accountants to see if Halifax could get everything it wanted without paying for it. The answer is no, because the city’s accountants are not a self-checkout; they make sure everything we buy is paid for, and if we don’t have the money, it comes out of the cart.
Or, council could raise fees and property taxes, and take fewer things out of the cart.
Property taxes are relative and revenue neutral
The headline from Halifax’s early budget discussions is that property taxes and property assessments are going up this year, by 7.6% on average. But that kind of downplays that it is an average. Because of the provincial Capped Assessment Program, it is often the case that for people in lower-value property-capped homes, their taxes will not go up nearly as much as those in more expensive, newly purchased property. The word average invokes an image of something quite different than reality, where the full dataset for that average looks more like this.
This happens because the city only needs to pay for what’s in its cart; tax assessments mean nothing on their own. It does not matter what your assessed value is; what matters is that the city needs $1.3 billion this year. Whatever money the city needs from property taxes it will get, regardless of your assessed value. All that changes is who pays for it.
That is the root of the inequity of Nova Scotia’s Capped Assessment Program.
While this grocery cart metaphor has been useful to explain how costs to the city stack up, where this metaphor falls down is that unlike a real grocery store, council could, at any time, reach into their pocket and pull out more money to pay for what they’ve put in their cart. Historically, councillors have often ignored their revenue-generating powers in the budgets they oversee, and have chosen the popular short-term “solution” of keeping the tax rate low by ditching things from the cart. So every year, we load up our cart with fresh fruit and veggies of new council priorities, but when we get to the cash, we decide to put the veggies aside for next year and just keep buying the stuff we bought last year—which means a lot of roads, even though it’s getting harder to tell if those roads are a staple or junk food. Every year, we put new fruit and veggies into the cart, and every year at the checkout, we toss them aside as a larger and larger pile of good intentions stack up and rot in the aisle.
This habit has very real consequences for our city. In 2018, the city passed the Integrated Mobility Plan, but hasn’t been able to achieve the plan’s goals in large part because there has been no work on things like the overarching priority transit plan, figure 10 in the IMP. In 2019, Haligonians were promised by our mayor that come hell or high water, we’d be a cycling city. But there has been limited work on Halifax’s AAA bike network, and a seasonal patchwork of a mostly complete network might be done by 2028.
During Wednesday’s meeting, chief operations officer Brad Anguish told council that the reason the city’s been lagging so much on transportation planning is that our city does not have the resources to plan a transportation network in line with the IMP priorities. Most of the city’s transportation resources go toward road maintenance. But maybe, if we’re lucky, by 2028, the city might have been able to scrape together enough resources to create a new department, combine all of council’s transportation plans and finally, at long last, start to stop hemorrhaging money on automotive infrastructure maintenance and claw our way to fiscal sustainability.
That is not acceptable. It is not acceptable for the city to need a decade, and two-and-a-half council terms, just to be ready to start work on the council priorities like “affordable and sustainable transportation.” Councillors have promised us a good city. A good city will cost money and we’ve dug a deep, deep fiscal hole of rotting produce that we need to climb out of to get to our promised city.
If councillors don’t want to raise taxes, they need to get creative with fees and taxes and go on a fresh fruit and veg road diet to cut down on decades of junk road spending. It is time for councillors to put on their big boy and big girl pants and figure out how to pay for what’s been promised to us.
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This article appears in Feb 1-28, 2025.
Your table on inflation is just wrong. As you point out, much of the property tax base is capped. Therefore it automatically goes up by inflation. As a result, even without any change in the tax rate city revenues automatically increase with inflation. City revenues also increase with any new additions to the tax base as a result of new construction. There is no need to adjust the rate if the city lived within its means.
Also, it does bother me when councilors, and reporters, keep referring to the average property tax bill as a number like $2,678. That may be the city’s direct revenue from the tax bill but we also pay supplementary education, fire protection, local transit, climate action, right-of-way charge, and provincial rate fees based on the property assessment. The city rate is less than 60% of what we pay in taxes.
An excellent piece – far better and more detailed/accurate than numerous pieces in the mainstream press. Top marks!