Budget Estimates: Finance

Aug 13, 2020 | Blog, Economy, Governance | 1 comment

My work in budget estimates wrapped up with questions to Hon. Carole James (Minister of Finance).

My B.C. Green Caucus colleague Sonia Furstenau canvassed issues relating to COVID-19. In the time I had allotted to me I asked about the decision to delay the 2020 scheduled increase of the carbon tax and if September 30th is still the target date when we will learn whether the province will be going ahead with the planned increase or not.

In addition, I asked Minister James about a couple of issues that we have been discussing over a number of years including how local governments are funded and whether COVID-19 has advanced a long-needed change to the revenue streams that our communities access to fund their operations and capital investments in infrastructure.

Finally, I asked about the PACE BC (Property Assessed Clean Energy) program that we brought to government several months ago as a potential mechanism to incentivize property owners to retrofit their homes. I have written about the program here and you can learn more about it here.

With so much focus on the debt that governments are accumulating due to COVID-19 the PACE program is an excellent way to create jobs, retrofit buildings and decrease greenhouse gas emissions. Needless-to-say I have no idea why this program has not already been rolled out!


[Transcript]

A. Olsen:

Thank you to the minister for the answers to my colleague for her previous questions.
I’d just like to shift gears a little bit with respect to…. And just ask a question about the carbon tax. The carbon tax increase that was scheduled for this year has been postponed until September 30. Around the world there has been strong push for COVID-19 recovery that prioritizes sustainability, equity and a cleaner future. The minister is not going to be surprised we have been pushing for this as well.

By delaying the scheduled increase of the carbon tax, we are signalling that a clean, renewable energy sector is not a priority. Now recognizing, of course, that dramatic action had to be taken across the economy. But similarly, the same kind of prioritization can be set by making sure that the carbon tax which marks a clear price signal that renewable energy sector needs to attract sound investments and build into the future. Delaying the increase of the tax sends a message that polluting industries of the past are still our priority.

So what analysis went into the decision to suspend the increase to the carbon tax? And is there a further delay being considered in addition to the September 30 deadline?

Hon. C. James:

Thank you to the member for the question. I think we’ve had a good discussion with the member’s colleague around the economic recovery process and the commitment that we have around the environment and climate change and addressing and accepting our responsibility in doing that through the economic recovery. So there is no question that the long-term vision of government has not shifted when it comes to both support for the carbon tax, but also support for making sure that we increase it to $50. That is our continued commitment, and the benefits of that and the benefits that will come with that.

[6:05 p.m.]

Why was the decision made in the immediate? It was March, I think that probably says everything. We needed immediate support for people, for businesses. People were hurting, and it was not the time to be looking at that kind of tax increase. We’re now reviewing all of the deferrals and all of the tax measures that were in place, and so we’ll be making decisions on those as we bring out the economic recovery piece. We’ll be, again, taking a look at how the start-up is going. We’ll be taking a look at the impact, we’ll be taking a look at recovery, and we’ll be taking a look, again, at our long-term vision — which, as I said, hasn’t changed — and making a decision.

A. Olsen:

Thank you to the minister for that answer. I really appreciate it.
I’m going to just shift gears a little bit here. There’s an issue that I’ve long raised. A former councillor in the district of Central Saanich, another area that COVID-19 has had a dramatic impact…. Really, I think where the provincial government found a little bit of relief in the short term was with municipalities, perhaps going back to 2011.

Maybe the minister will remember me standing up. I was still a very, very new councillor in the district of Central Saanich at the 2009 AVICC in Nanaimo. The minister was then the Leader of the Official Opposition. I asked both her and the former Premier questions, after their speeches at the event, with respect to the fiscal relationship between the province and municipal governments.

A report came out, Strong Fiscal Futures, done by the Union of B.C. Municipalities back in 2011. The former government of the day — it felt like they did almost everything they could to ignore that report at the time that it came out. Now I think we’re starting to see that while some municipalities, I think, have been able to weather the storm, I’m kind of getting a mixed result in my riding, for example. I think we’re probably seeing that across the province. Some municipalities are weathering it well. Others maybe not so well.

So just maybe an initial question here to the minister with respect to what she and her ministry are seeing as the impact on municipal governments and their ability to weather the global pandemic.

Hon. C. James:

I think a few things have been going on. Obviously, both ourselves in Finance, but through Municipal Affairs as well, have been doing an analysis of the COVID measures that have been put in place for municipalities, the impact of those, whether they’ve been meeting the needs and where there are additional needs.

[6:10 p.m.]

Just to refer to those, to remind folks, we authorized the local governments to be able to borrow, interest-free, from their existing capital reserves, to be able to help with cash flow if they needed operating expenses. They can’t, right now, borrow for operating expenses, so that provided them with some flexibility to be able to get through the most challenging parts of COVID.

We delayed the school tax remittances until the end of the calendar year, which again gives significant cash flow support to municipalities. We provided an ability to carry debt for an additional year. Then we also worked closely with the Municipal Finance Authority, who are a huge help to municipalities, to make sure that there was flexibility there, that they could also provide that kind of support as needed.

Certainly, from our perspective, we’ve been hearing about the challenges — there’s no question — and that varies around the province. But we feel that this support will help. Then, as the member may know, there are some additional resources coming from the federal government, as well, for local governments, mainly in the area of transit and transportation, which, again, are going to be a significant help to municipalities. We’re just looking at how those can be key to supporting those challenges that still remain.

A. Olsen:

One of the impacts that I’ve been quite concerned about…. I raised this in estimates for Transportation, and I raise it now in the context of municipalities as well. I think that it was a solution, certainly, to allow municipalities to and give them the flexibility to borrow from capital reserves. I have some concern about the impact of that over the long term. Now, recognizing that reserves are there for covering situations, I don’t know that they necessarily were there to cover for a pandemic, a global pandemic, a medical or a health issue.

In many respects, thinking back to my days around the table, those reserves were set aside for renewing infrastructure, for example. We’ve also got a pretty dramatic infrastructure deficit in the province and, as well, in the country.

I’m just wondering, with respect to…. Tying this back to the context of the original question that I asked with respect to the strong fiscal futures report, the Union of B.C. Municipalities at the time, and I think they continue to have some need here, wanted a different fiscal relationship with the provincial government. Now we’re looking at municipalities that have maybe expensed all or some of their capital reserves to cover themselves over the last number of months.

Would the provincial government be engaging with the Union of B.C. Municipalities and municipal governments across the province to have a discussion now, in this context, about renewing, taking a look at some of the recommendations that were made in that report, maybe updating that report — it’s now almost a decade old — to find ways to get revenue streams to municipal governments so they don’t have to rely so heavily on property taxes? Recognizing they have other revenue streams, but they’re limited in comparison to their reliance on property taxes.

[6:15 p.m.]

Hon. C. James:

Thank you to the member. It’s an important discussion, one we’ve had previously and, I think, one that needs to continue because it is really critical.

We talked earlier about the pandemic and the fact that it has really shown some of the gaps in our communities, in our society and in our economy. I think it has also really highlighted the critical importance, the value and the benefit we can get when we work together — provincial governments, municipal governments, federal governments, communities, people of this province, not-for-profits and business groups. If we were looking for something positive coming out of this, I think that has been one of the positives to point to: that kind of partnership and energy that that can create, and the positives that that can create.

I don’t want to step on the toes of my colleague the Minister of Municipal Affairs and Housing. This is her responsibility area. She and I have conversations about this, because I know that she’s committed to that work, together. So I’ll have a conversation with her as well. I think it is important to recognize that it will take all parties at the table to be able to really look at the fiscal relationship as well.

Just on the infrastructure piece, to talk for a moment, I think during the pandemic — because of the federal government putting additional dollars in on infrastructure, and the major infrastructure spending that we’ve already built into our three-year plan — we have the opportunity still to support municipalities with their infrastructure work. I know that the member mentioned the worry about reserves being depleted and what that would do to capital. I think there will be many opportunities to be able to look at capital, both with federal infrastructure dollars and provincial infrastructure dollars.

I also know that the Minister of Municipal Affairs is working directly with UBCM as well, in talks about the federal dollars and municipalities, and where the gaps are there. I think there are lots of opportunities for that perhaps short- and medium-term conversation that, hopefully, will lead to long-term change and a stronger connection between all levels of government.

A. Olsen:

Thank you to the minister for that very thoughtful answer. I think she characterized the challenge quite well. One of the aspects from the municipal table…. I’m trying to remember the feeling that I had, sitting at the municipal table. I have to acknowledge that it’s been a while since I’ve been there. So things have changed.

Specifically, the federal-provincial granting programs are quite different than they were at the time that I was in local government, between 2008 and 2012 — where there would be small pots of money that all municipalities would have to apply for, and it would be very much the priority of the provincial government of the day. There was one funding stream that came from the recovery from the 2008 downturn and that was more of a federal-provincial one-third, one-third, one-third program.

Just with respect to the reason why I’m asking about finding ways…. I recognize that there’s a relationship with the Minister of Municipal Affairs and Housing. I certainly don’t want to step on her toes either, but — recognizing that the Minister of Finance does have a lot of the mechanisms directly flowing towards her — I just would, I think, further say that there is an aspect of this where municipalities need to be able to have the flexibility.

[6:20 p.m.]

I’ve got a couple of examples in my riding right now of where critical infrastructure was not able to be done because they didn’t have the resources locally to do it, and they weren’t able to fit within the program. This is where I think finding different and unique ways to get revenue streams to the municipal governments would allow for them to be able to do that.

I’m just going to shift gears, because I think that we’ve covered that fairly well, and I’ve got some limited time here. So I just wanted to talk about one other aspect of the COVID recovery, and this has been going on, again, prior to COVID recovery. This is the property-assessed clean energy program, PACE. It’s a group called PACE B.C. I’ve raised it with both the Minister of Municipal Affairs and Housing and, as well, the Minister of Finance.

There’s a group in the province that is looking at ways to be able to provide capital to homeowners to be able to make clean energy or clean investments in upgrading their homes. Then the cost of those is to be recovered through property taxes rather than the mortgage.

There are other jurisdictions around North America that are doing this. We’ve provided government an outline. It could be both through the Municipal Finance Authority and, as well, through private funds to be able to invest. But it’s creating the mechanism to allow for those funds to be recovered through property taxes and to be passed along at the sale of the house. The capital investment and the expense go along with the house.

Has the minister reviewed this as one way of funding potential energy retrofits and upgrades within the existing housing stock, the existing building stock, as part of the COVID-19 recovery package? Would that be a consideration?

Hon. C. James:

I certainly remember it. I remember the discussion, and the discussion was pre-COVID. So this isn’t an issue that’s specifically related to COVID. In fact, it’s a broader issue for CleanBC and other areas. As the member will know, part of CleanBC, part of looking at CleanBC, is how we expand retrofits and how we expand the opportunities for people to be able to retrofit their home and to do that in an energy-efficient way. So not specifically.

We have had retrofit idea comes forward in economic recovery as well. But again, we haven’t gone through the whole process yet. I expect that this issue, if it doesn’t get dealt with in economic recoveries, again, is another piece that could certainly continue to be looked at with CleanBC. And as I said, I do remember going through the proposal with the member as well.

Noting the hour, I move that the committee rise, report progress and ask leave to sit again.


Image by Narupon Promvichai from Pixabay


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1 Comment

  1. Ian Theaker

    Thanks, Adam – three very good questions! Pity that the Minister didn’t
    – confirm the the planned carbon tax increase will be reinstated in September,
    – commit to a substantial long=term funding stream for local governments, besides property taxes, or
    – commit to PACE lending to finance GHG reduction retrofits by homeowners.

    Please keep up the pressure on these issues! It must be hard to roll that boulder uphill daily; please know that I for one believe you & Sonia are doing an excellent job.

    Reply

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