As a representative of one of a number of B.C. municipalities that have expressed opposition to the province’s planned new speculation tax, West Kelowna’s mayor has been one of the most vocal. After meeting with B.C. Premier John Horgan earlier this month, Mayor Doug Findlater wrote an open letter to Horgan to “reiterate grave concerns.”
Here’s the letter in full.
Dear Premier Horgan:
Thank you for taking the time to meet with me to hear West Kelowna's concerns regarding your government's proposed Speculation Tax. I believe you have a much better understanding of our point of view, particularly with the potentially devastating effects that this tax could have on the City of West Kelowna.
I am writing this open letter to you today to reiterate our grave concerns and to express our belief that the City of West Kelowna was added to the Speculation Tax using the following incorrect assumptions:
1. Vacancy rate of 0.2%
It is important to note that the 0.2% vacancy rate that is continuously referred to combines all of the Central Okanagan, not just the City of West Kelowna and the City of Kelowna. Using all of the Central Okanagan statistics to establish an up-to-date vacancy rate, CMHC has stated that once in-stream rental units are completed, the vacancy rate for the Central Okanagan should climb to 2.50%. Furthermore, the stats are based on vacancies of purpose-built rental accommodations and do not include single-family house rentals or secondary suites, which the City of West Kelowna has been encouraging through various policy amendments and updates over the past few years.
The staff of the Finance Minister have been informed that the vacancy rate that is being attributed to West Kelowna is, in fact, for the whole Central Okanagan. If Ministry staff conducts their own survey, they will find that the vacancy rate for the City of West Kelowna is much higher than the 0.2% that Ministry staff is using to defend adding West Kelowna to the tax.
If your staff investigate the City of West Kelowna's vacancy rate, they will find that for 2018 alone, there will be 240 rental units available to the market. Of these units, 75 units are not rented out, and the developer is looking for tenants. For this development alone, the City of West Kelowna is projecting a 31.25% vacancy rate.
2. Average cost of residential property
West Kelowna staff can only make an assumption as to what extent average value was used to include West Kelowna, as Ministry staff did not consult with us. It is true that the average value of a house in West Kelowna and Kelowna is extraordinarily high. The average includes a number of beachfront properties that are within the boundaries of the two cities. These properties are valued well above the $1 million mark, and inflate the average cost in West Kelowna to well over $600,000. West Kelowna has close to 2,000 homes that are valued under $400,000, with an average value of $315,983. Homes in West Kelowna valued under $400,000 represent 16.03% of the city's market; and, homes valued under $500,000 represent 36.23% of the market. The question is, what does the Finance Ministry consider affordable?
The City of West Kelowna's neighbour, Westbank First Nation (WEN), which, at some locations, is literally across the street from West Kelowna residences, has a 2018 average house price of $332,516 (number was supplied by the WFN Finance Department). These houses are available not only to First Nation members, but also to anyone who would like to live in the area.
3. Uneven Playing Field
Since the tax applies only to Kelowna and West Kelowna in the Okanagan, the two cities will be put at an economic disadvantage compared to other communities in the region that are not subjected to the tax.
Non-market growth will decrease significantly, as developers avoid areas where the tax is applied. Job opportunities will be impacted.
The City of West Kelowna is further impacted because the tax does not apply to properties within the WEN. WEN is a self-governing First Nation with many shared boundaries with West Kelowna. In the past 10 years, most commercial and residential growth on the west side of Okanagan Lake has happened on WEN land, where often developers have found building expenses and related costs to be lower.
The tax implies West Kelowna is unaffordable. If that were true, growth would be stagnant in comparison to other areas. In fact, West Kelowna's growth has been steady for 10 years, at rates similar to the ones in other Okanagan communities including those not facing the prospect of the Speculation Tax.
There is a suggestion that the proposed Speculation Tax is already having an impact on home sales in the Okanagan. A recent article in local media, discussing the rising home prices in nearby Penticton, where the tax will not be imposed, quotes the South Okanagan Real Estate Board's president saying, that Penticton's exemption from the proposed tax has likely brought in buyers who would otherwise have eyed Kelowna.
We request that the Province undertake an economic impact study prior to implementation of the Speculation Tax.
4. Municipal Revenue
We have already received alarming information that a comprehensive development, which was nearing the final phase of approval, is being shelved directly as a result of the proposed Speculation Tax. This development would have seen 1,000 new homes, a new school site, road upgrades, transit service, frontage improvements and a vast parkland donation for West Kelowna. The much-needed increased tax base and DCC revenue from this project will be lost.
Before the City incorporated, it was governed by several levels of government: Provincial, Regional District and Irrigation Districts. The local infrastructure was constructed at a rural level. Our municipality is only 10 years old and has not had time to build its reserves to a healthy level, yet infrastructure demands are mounting. West Kelowna is now a city of nearly 35,000 people. The City relies on Development Cost Charges and residential growth to keep our yearly property tax increase at an affordable level. These funds are used to upgrade our infrastructure from a rural to an urban level. The Speculation Tax will jeopardize our 10-year plan to urbanize our municipality. With the potential that the Speculation Tax is chasing away investment, like the long-planned comprehensive development aforementioned, the City will feel the loss of vital municipal revenue, revenue that can only be made up by taxing its residents. Instead of development and new growth paying for improvements in our community, its existing taxpayers will bear the brunt. We have carefully planned a 10-year capital plan that will now be impacted. Vital road and pedestrian improvements and improved parks and amenities will be further out of reach than they have ever been.
To summarize, Council and I are is concerned how this tax will affect the City and is asking that West Kelowna be exempt from this tax. The following motion was passed as the April 17th Council Meeting:
It was moved and seconded:
THAT Council direct the Mayor and the CAO to meet with the Premier of the Province of BC and MLA Weaver as soon as possible (within the next two weeks) requesting that the announced Speculation Tax not include the City of West Kelowna; and
THAT this decision be made immediately; and,
THAT if the Province maintains the tax as announced, Council direct the Mayor to request that the Province provide an economic impact report before the tax is implemented; and
THAT the Mayor be authorized to write a letter on behalf of the City of West Kelowna to the Minister of Finance expressing our concerns over this tax and that this report including letter submissions be submitted with the letter.
Premier Horgan, it is best practice that before a government implements a new tax, an economic impact study be completed. If West Kelowna is still to be included in the tax area, then it is imperative that you direct your staff to conduct the study.
The Province has announced that this tax will affect only 1% of British Columbians. An economic impact report will be able to determine the percentage of British Columbians affected and to what degree each area is impacted.
The City of West Kelowna has developed a 24-page booklet outlining in detail our concerns with the Speculation Tax which has been provided to the Finance Ministry. As we have not received any response to our repeated efforts to get in touch with the Ministry or yourself, we have provided this document, to the public. It is available on the City's website.
I respectfully request that you review this information, correct the incorrect assumptions that have been taken into account and take the appropriate action, which is to remove West Kelowna from the Speculation Tax.
Thank you again for your time and consideration.
MAYOR Doug Findlater
City of West Kelowna