I Shop; Therefore, I Am

As a follow-up to my previous post on regionalization in the Greater Saint John area, I received a comment from a reader who, among other things, thought that I was:

A. Being biased, and

B. Disregarding that residents from surrounding communities shop everyday in Saint John and provide tax dollars through sales tax

Fair enough – I’m not always right, nor do I cover every angle and I encourage people to express their opinions. My only goal is to stimulate conversation on the subject and not necessarily to be right. With that said, let’s clear up a few things.

First things first: bias.

I've only been a resident of Saint John for less than 10 years and prior to that I spent more than 20 years living in Quispamsis. I’ve long felt the guilt of living outside Saint John while using all of its services. Secondly, in my day job I work directly with municipalities all around the Maritime Provinces and their staff on a daily basis who have each described the pain suffered by a lack of regionalization with suburban communities. Lastly, I work every day with urban planners and on planning projects and we review best practices from communities all around the globe. Regionalization is not a new topic for me or for most cities.

There. I hope that clears that up. Now, on to shopping.

This is a very frequent argument from those in the outlying communities: “I shop in Saint John; therefore, I am contributing tax dollars to Saint John.” This is true. But the rest of the story goes like this: in New Brunswick, moreso than other provinces, municipalities are extremely limited as to how they can generate revenue. Property taxes are by far the largest revenue generator, followed by sales taxes. The trouble is, however, that municipalities only see 8 cents for every dollar of sales tax that is collected. This is far less than the revenue generated by property taxes.

Let’s look at an example of how that works out in the end.

Using the example from my previous post, “Want $265,000 and 4 Months Vacation? Move to Saint John,” let’s assume that a random suburbanite’s household income is $96,587 and the value of their home is $204,027. Assuming that 30% of their income, right off the bat, is allocated to housing costs that cannot be spent elsewhere, that leaves $67,611 in discretionary income. In the absolute best case scenario for Saint John, let’s also assume that every single penny of that discretionary income is spent within the City’s boundaries and is subject to HST; this results in $8,789 in tax revenue collected.

Of that figure, at 8 cents per dollar, Saint John stands to net $703 for each suburban household. Overall, not bad; that adds up pretty quick considering there are thousands of these households!

But, on the other hand, if that suburbanite’s home of equivalent value was located within the City’s boundaries, the amount of property taxes collected at $1.785 per $100 of assessment would net the City $3,642. Add in the sales tax kick back from that resident’s discretionary spending and the City of Saint John stands to collect $4,345 per household.

Ouch. All of a sudden that boasting of contributing tax dollars to the City’s economy by shopping doesn’t look so good.  Especially when you realize that it is a mere 16% (best case) of what a resident of the city contributes to the City’s coffers.  What's worse, considering the truth of the matter, is that the City of Saint John will receive 8 cents per dollar of tax regardless of where you spend those tax dollars since there is no direct tax transfer from the Feds or Province to municipalities (aside from gas tax transfers).  With that said, suburbanites shopping in Saint John effectively provide a net benefit of $0 directly to the City plus all the wear-and-tear on all their services.  The only hope is that by shopping at establishments in Saint John, Saint John reaps the additional corporate property tax dollars rather than one of the surrounding communities.  Unfortunately, that benefit still doesn't appear to balance the books.

Reconsidering the example provided by David Gingras and Daniel Bourgeois in my previous post, “Something for Nothing,” you can plainly see how the lack of regionalization affects and penalizes the City of Saint John. Saint John, in theory, must provide the same level of services for Jim, who lives in a bedroom community just 2 meters past the City boundary, as they must for Joe, who lives within City limits, but with none of the revenue.

You can’t say there is bias there!  Its just plain facts.