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City council goes for the tax and spend trifecta

Whitehorse's mayor and city council are going for the tax-and-spend trifecta. They are looking fit and relaxed, and in excellent mid-season form. In Year 1 of their three-year term, they raised taxes.

Whitehorse’s mayor and city council are going for the tax-and-spend trifecta.

They are looking fit and relaxed, and in excellent mid-season form.

In Year 1 of their three-year term, they raised taxes. As page 10 of their 2013 annual report shows, they achieved record tax revenues, record user fees, record net financial assets and record reserves.

This early move marked them out among the field as real tax-and-spend contenders.

In 2014 they raised taxes again. We don’t have the final figures for 2014 yet, but it looks highly likely they will break more records for both taxing and spending.

Hiring eight consulting firms to work on the giant new megaplex civic building project showed confidence. It’s like the “in your face” celebration NBA stars do after a slam-dunk.

Now the mayor has announced another tax hike for 2015, plus a sizeable increase in water and sewer rates.

If their Year 3 tax increase passes to complete the trifecta, then 2015 ought to set another record for city tax revenues and spending.

You have to remember that mayor and council are doing this in the face of some stiff headwinds, or “handicapping” in the language of turf aficionados.

First, it comes after a series of tax hikes by the previous council. Successfully raising taxing and spending after your predecessor already annoyed taxpayers is a political accomplishment of no small order.

Secondly, mayor and council are raising taxes in a recessionary environment. Statistics Canada recently reported that the Yukon economy actually shrank in 2013, the worst economic performance in Canada. And 2014 is not looking like a year to write the Guinness Book of Economic Records about.

Any politician can raise taxes in a booming economy. It takes something special to raise taxes on families and small businesses struggling in a flat economy.

Thirdly, mayor and council are way ahead of the competition with no cover. The federal government has been cutting taxes lately. The Yukon government has left taxes more or less stable for years, with a couple of minor reductions such as a small cut in small business taxes in the last Yukon budget.

It’s a slick move for the city to swoop in and vacuum up those Yukon small business tax savings.

There are a couple of things that highlight how quickly mayor and council have picked up the skills needed for the tax-and-spend trifecta.

I don’t recall any of them saying during the election that they were going to enter the trifecta contest. People voted for them without somehow realizing they would go on a three-year tax-and-spend adventure. This is something every politician dreams of achieving.

On top of that is the huge new $55 million (plus extras) city megaplex project that the mayor announced last month. This has drawn all eyes to the city’s finances, scrutiny that would make lesser politicians blanch as they rushed to the finish line to grab the trifecta trophy.

Also, you have to admire some of the small things. For example, the mayor was pointing out that the Year 3 tax increase was the smallest in years. It’s true, but doesn’t tell the whole story of course.

He’s counting on voters having forgotten the Commutative Principle they learned in Grade 3. Remember, this is the one that says that it doesn’t matter which order you multiply numbers in. For example, 5 x 2 x 1 works out to exactly the same as 1 x 2 x 5.

Making a large percentage tax increase in Year 1 and multiplying it by a smaller percentage increases in Years 2 and 3 results in the same tax take in Year 3 as doing it the other way around.

The mayor did strain credulity by telling the Yukon News last week that the megaplex project doesn’t affect property taxes. How you can hire eight consulting firms, spend $55 million on new buildings, dip into reserves created by previous tax revenues and borrow $29 million and still say it doesn’t affect taxes is a mystery to me.

Perhaps it is just a minor stumble on the way to the trifecta finish line. We’ll know if they make it in the new year.

The good news is that they get to vote on their own property tax increase, so it is quite likely to pass. Unlike Alaska, there’s no requirement here for big projects like the megaplex to get voted on by taxpayers.

The only thing they have to remember is that you have to give the tax-and-spend trifecta trophy back if you get booted out of office in the next election.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s Yukonomist show or Twitter @hallidaykeith