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Nanaimo ranks among the few and the proud, says Canadian Taxpayers Federation B.C. director Jordan Bateman.

The city’s council has all but approved a zero per cent increase in property taxes this year, making it one of the few cities in Canada that will do so.

However, experts in taxation and local government policy say municipalities should have more tools in their taxation and revenue-raising kits beyond adjusting property taxes.

J. Rhys Kesselman is the current Canada Research Chair in public finance and has advocated for progressive, staggered property tax rates at the municipal level as way to address soaring residential property prices in the Lower Mainland.

Under B.C. laws, municipalities have to assign a single property tax rate for each property class — residential, commercial and others — and set the rates based on how much revenue they need to fund projects and services.

Kesselman says freezing property taxes can act as a “straitjacket” on municipalities, since cities and towns have limited other means of raising revenue. For its part, Nanaimo city hall intends to pay for a property tax freeze this year and lower rates in future years with substantial spending cuts in the form of a freeze on current fire and police staff levels, as well as eliminating general manager positions at city hall.

The budgetary move received praise from a majority on city council, while Coun. Diane Brennan voiced concerns about the budget cuts.

But Kesselman said a broader issue are limitations placed on municipalities to raise revenues through policies like payroll taxes or sales taxes, as some U.S. jurisdictions allow.

He said business properties (which tend to pay proportionately more in property taxes than residential parcels) are often assessed at higher rates because of potential ‘best use’ of the land under the property tax system.

“In the broader sense, to restrict municipalities to property taxes, I don’t know that that’s necessarily a good thing,” Kesselman said.

Benjamin Dachis, a senior policy analyst at Canadian think tank C.D. Howe Institute, said property tax increases are “probably not a bad thing” if they coincide with increases in services like police.

But he said property tax freezes are just one part of the equation, adding future spending commitments have to be taken into account as well.

Those costs can be passed on through user fees, parking fees or other non-tax costs to ratepayers and can add up, Dachis said.

“Someone always pays,” he said.

Dachis said exploring other sources of revenue, like municipal sales taxes, should be carefully considered, adding they can lead to “economic distortions.” For example, a sales tax could lead to consumers leaving a municipality on shopping trips to avoid paying more, he said.

But Dachis said there are other changes worth considering, including allowing municipal governments to provide a lower, single tax rate for all businesses, some of which may be classified as ‘industrial’ or ‘light industrial.’

“These sorts of differences have major economic distortions,” he said.

However, Bateman of the Canadian Taxpayers Federation called Nanaimo’s 2016 tax freeze “a big accomplishment” in and of itself.

“I can tell you, Nanaimo’s the first (city) we’ve heard of freezing taxes this year, and we’ve looked at dozens,” Bateman said, adding the move “sets (the city) apart.”

As for whether or not tax freezes are sustainable, Bateman said: “It depends on an individual community, but let’s push it as far as we can and find out.”

Bateman said an emphasis on lower taxes is not just a pocketbook issue for ratepayers.

“The other thing that it does is it forces municipalities to focus on the services they are required to provide by law,” he said.

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