B.C. Budget 2017: Government to phase out MSP and PST on power

Provincial budget earmarks $14 billion in capital works spending over three years
Finance Minister Mike de Jong said B.C. is in such strong financial shape the province can afford to scrap the PST on power sales | Shutterstock

The B.C. government will begin phasing out the provincial sales tax on electricity this year and Medical Service Plan (MSP) premiums in 2018 – provided it gets re-elected in May.

It will also cut the small business corporate income tax rate by half a per cent, from 2.5% down to 2%, effective April 2017.

In a pre-election budget that contains record capital spending, Finance Minister Mike de Jong announced Tuesday February 21 that B.C. is in such strong financial shape that he can afford to scrap the MSP and PST on power sales, spend a record $13.7 billion over the next three years on schools, hospital, roads and bridges, and aim to whittle the government's operating debt down to nothing by 2020.

Strong economic growth in B.C. has boosted provincial government revenues. The government posted a $1.5 billion surplus at the end of fiscal 2016-2017 – the fifth consecutive surplus - which gives it the latitude to cut taxes and increase spending and still project an operating surplus of nearly $300 million in fiscal 2017-18.

NDP Leader John Horgan said Tuesday’s budget is an attempt to make up for years of “endless hikes” to MSP premiums and hydro bills, and starving public services. Since Premier Christy Clark was elected, Horgan said the average family in B.C. has paid $1,000 more just for electricity, MSP premiums and ICBC insurance.

“She wants people to forget that she hit them with endless hikes to Medical Services Plan premiums, rising hydro bills, skyrocketing housing costs, a crisis in child care affordability, and the worst wage growth in Canada," Horgan said.

He added the boost to education funding comes after years of under funding.

“Fifteen years of cuts from our kids’ classrooms, and robbed an entire generation of children of opportunity — and Christy Clark says ‘Forget about it.'

“The B.C. Liberals are using their cash surplus to make you forget there’s a deficit in the services people care about. The only thing Christy Clark cares about is winning the next election. After years of neglect why would anyone believe she is going to change now?”

The surplus that the government is ending fiscal 2016-17 with is nearly $800 million less than the $2.2 billion it was projecting at the end of the second quarter of 2016. A big chunk of the expected surplus was eaten up with a $317 million increase in spending for ICBC insurance claims.

For B.C. businesses, the most significant budget item is the phasing out of the PST on electricity, which was one of the recommendations made by the government's Commission on Tax Competitiveness.

The price of power has surged in recent years, putting large industrial power users at risk. Budget 2017-18 will phase out the PST on electricity sales, starting in October 2017, when it plans to reduce the PST on power sales from 7% to 3.5%.

In April 2019, the PST on power will be completely phased out. Phasing out the PST on power will cost the province $164 million in foregone revenue.

It will forgo even more revenue - $1 billion – when it eventually eliminates the MSP, which de Jong stated as an “objective” he can't yet fullfill. Starting in 2018, it will be cut in half.

In the past de Jong has said that the MSP premiums were important reminders to British Columbians that health care isn't free.

Asked about his sudden change of heart, de Jong told reporters in a pre-budget speech presentation that every time he has pointed out that B.C. has the lowest tax personal tax rates in B.C., critics point to B.C.'s hidden tax – health care premiums.

“A significant number of British Columbians remain very, very troubled by the fact that we have this charge, this MSP premium, that doesn't exist elsewhere in the country,” de Jong said.

MSP premiums will be slashed by 50% for families with a net income of $120,000 a year or less.

The reductions won't take place until January 2018.

The 50% cut will mean a person earning between $42,000 and $120,000 will save $450 annually, or $37.50 per month. Two million lower-income British Columbians will pay no MSP at all.

As for capital spending, the government is committing to $13.7 billion in spending over three years for things like transportation infrastructure, new schools and hospitals.

When contributions from the private sector are included, the budget calls for $7 billion in spending on transportation infrastructure alone, including $2.4 billion for the George Massey tunnel replacement.

The government is increasing health care funding by $4.2 billion – a 3.6% increase -- and another $3 billion in other areas such as education.

Health care represents 41% of the total budget, and expenditures will hit $20 billion by the 2019-2020 fiscal year.

The increase to K-12 education is $740 million over three years, which includes the $320 million that the government was forced to pony up after the Supreme Court of Canada ruled against the government's change to class size and composition.

Funding for education in 2017-18 budget is $5.9 billion, up from $5.4 billion in 2013. The budget also includes $2.6 billion in capital spending for colleges over three years.

The Greater Vancouver Board of Trade gave Tuesday's budget top marks for tax competitiveness, fiscal prudence and economic vision.

“There isn’t a government of any political stripe in this country who wouldn’t want to deliver today’s budget,” GVBOT CEO Iain Black said in a press release. “British Columbia continues to lead Canada in terms of financial management and economic strength, giving our business community a stable foundation on which to build."

B.C. leading country in economic growth

B.C. experienced strong economic growth in 2016, leading to higher tax revenues. Employment growth was 3.2%, with 70,000 new jobs created, and new housing starts grew by 33%.

“In terms of how we compare with the rest of Canada, we have been the leaders,” de Jong said.

B.C. also had strong retail sales growth and exports also grew by nearly 13% in 2016 compared with 2015, thanks to recovering copper and metallurgical coal prices (major mining exports for B.C.) and increased demand for lumber in the U.S. and China.

“It has rocketed upwards in levels that we really didn't anticipate that we would see,” de Jong said of B.C. exports in 2016.

The Economic Forecast Council projects the province's GDP growth will be 2.3% in 2017. The government's fiscal plan will use growth rates of 2.1% for its forecasting.

Despite B.C.'s robust economic growth, de Jong cautioned that “a rising tide of protectionism” in the U.S. could negatively affect trade.

“We are still exposed,” de Jong said .”We shouldn't kid ourselves.”

B.C.'s forestry sector continues to diversify its markets, but remains vulnerable to protectionist measures like softwood lumber duties in the U.S.

By the 2019-2020 fiscal period, the province plans to have its operating debt whittled down to $1.1 billion – a 90% decrease from $10.2 billion in 2013-14,which will save the province $500 million in interest costs. De Jong said eliminating the operating debt entirely by 2020 is “within our grasp.”

For the tech sector, the 2017-18 budget includes $40 million to extend broadband in rural areas, and $87 million for an “enhanced technology strategy,” details of which are to be announced at the BC Tech Summit in March.

The government's three-year fiscal plan has the highest ever levels of capital spending -- $13.7 billion for public infrastructure. Capital spending over three years includes $2.7 billion for hospitals and health care, including;

  • $45 million for mental health services;
  • $12 million for 28 additional beds for youth addiction treatment; and
  • $11 million for the BC Centre for Substance Abuse.

On the environment, the budget commits the following funding over three years:

  • $36 million for parks, including new campsites and park rangers;
  • $18 million in increased spending for mine permitting and oversight;
  • $9 million for increased enforcement and compliance under the Ministry of Environment;
  • $27 million for a caribou recovery; and
  • $40 million for the Clean Energy Vehicle program.
nbennett@biv.com


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B.C. Budget 2017: Government plans for a slower housing market

Less property transfer tax, and more tax from foreign buyers in 2017
The provincial government is planning for a slowdown in the housing market over the next year | Photo: Dan Toulgoet

The B.C. government is anticipating double-digit declines in B.C. housing starts and property transfer tax revenue, and increased revenue from its foreign buyers’ tax, over the course of the next year.

A projected slowdown across the B.C. housing market is expected to leave the province with $483 million less revenue from its property transfer tax in 2017/18 – a 23.9% drop year-over-year as market activity for the year ahead is forecast to return to 2015/16 levels.

Over the following two years, the province projects revenue to fall an average of 3.9% annually to reach $1.4 billion in 2019/20, compared with the more than $2 billion generated last year.

The anticipated market slowdown tracks, in part, housing starts, which are expected to drop by 28.4% this year, compared to the 33% increase seen in 2016.

“We don’t expect the real estate market to be percolating along at the level it was last year,” said Minister of Finance Michael de Jong.  

Certain taxes on real estate however are expected to generate greater revenue over the years to come.

Once the current fiscal year ends, B.C. expects it will have earned $100 million in taxes on residential purchases made by foreign buyers in the Metro Vancouver region.

Total revenue from the province’s foreign buyers’ tax – implemented in August of last year – is expected to hit $150 million annually over the next three years: tax generated by $1 billion in residential properties purchased by foreign buyers annually through to 2019/20.

According to Minister de Jong, where foreign activity in Metro Vancouver’s residential real estate once constituted 15-17% of market activity, levels have dropped to between 3-5%, a sign the tax has had the “desired impact.”

B.C. also expects to see property taxes grow by an average of 4.6% per year over the next three years, bringing in an additional $593 million in taxes by 2019/20 over the current fiscal year’s estimates.

To address housing affordability, the B.C. government announced in its budget for 2017 that it will be increasing the threshold of the province’s first-time homebuyer’s program to $500,000 from $475,000, a move it estimates will save first-time buyers up to $8,000 in property transfer taxes.

Budget 2017 also provides an additional $159 million to maintain assistance levels for low-income families and seniors requiring support with their private rental payments.

For the year ahead, the province will continue to administer its $700-million BC HOME Partnership program, which offers up to $37,500 in five-year, interest-free loans to first-time homebuyers seeking financial assistance. Government will also continue administrating its previously announced $920 million in funding dedicated creating additional affordable housing supply.

Continuing to explore partnership opportunities with municipal governments to better address housing capacity, and to enhance the processing, approval and permitting of housing development applications, are also a priority for the coming year.

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Highlights of B.C. Budget 2017

Highlights of Tuesday’s B.C. provincial budget 

Highlights of Tuesday’s B.C. provincial budget, tabled in the legislature by Finance Minister Mike de Jong:

-  A fifth consecutive balanced budget, with surpluses predicted $295 million on $50.8 billion in revenue in 2017-18, $244 million on $51.2 billion in revenue in 2018-19, and $223 million on revenue of $52.0 billion in 2019-20.

-  Cutting by half January 1 the Medical Services Plan (MSP) premiums for those with net family incomes of less than $120,000, with a pledge to eliminate premiums if the province exceeds its economic forecasts.

-  Reducing to 2%, from the existing 2.5%, the small business corporate income tax rate starting April 1.

-  Cutting by half the provincial sales tax for businesses on electricity starting Oct. 1, with an elimination of the seven-per-cent tax in April 2019.

-  $87 million in additional funds for technology sector support, with details to be revealed at next month’s BC Tech summit.

-  If forecasts hold, there would be no provincial operating debt as early as 2020, the first time in 45 years.

For more details on budget 2017, click here.

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Vancouver tech wants in on taxi industry’s fare trade

Ripe Rides rankling incumbent operators as it seeks 150 taxi licences from regulators
Ripe Rides director of business operations Nitesh Mistry says it’s time to bring a B.C. company into the Vancouver transportation market before the province gives Uber or Lyft the green light | Chung Chow

It’s not often a visitor will come to Vancouver, take in all the mountains and glass towers, and then go home only to nitpick about the city’s blemishes.

But Nitesh Mistry says the region’s limited transportation options aren’t looking so pretty to tech executives accustomed to zipping through the Silicon Valley with the help of ride-sharing apps from Lyft or Uber Technologies Inc.

“Vancouver is a tech-savvy city,” said Mistry, director of business operations at Vancouver-based Ripe Rides. “We’ve got major players in the technology field both at the local level and multinational level.

“For us not to have a mass-transportation solution that is digital dispatch is a bit of an eyesore for the city in comparison when you look at cities like San Francisco, Los Angeles, New York, Toronto.”

In December, Ripe Rides applied to the province’s Passenger Transportation Board for 150 multi-city taxi licences. Its service offers many of Uber’s hallmarks: GPS tracking of hired vehicles, driver ratings and digital dispatching through an app.

But acquiring taxi licences means there would be no surge pricing, as Ripe Rides would have to charge the same rates as taxis.

Ripe Rides has been honing its digital dispatch services since the Passenger Transportation Board granted 20 licences in December 2015 for upscale luxury sedans.

The sedans charge less than limousines, while the licences allow drivers to pick up and drop off throughout the Metro Vancouver region (the Passenger Transportation Board still officially refers to it as the Greater Vancouver Regional District, or  GVRD).

Mistry said it’s time to bring a B.C. company into the market before the province gives Uber or Lyft the green light.

“Where we differ versus an Uber or different ride-sharing companies is essentially what we’re applying for is within the current regulations of the government,” he said, adding that all the company’s drivers would have to be properly licensed for transporting passengers, and the vehicles would be commercially insured.

The province is still reviewing ride-sharing services like Uber. Last October Vancouver city council placed a one-year moratorium on issuing new taxi licences.

For now, Vancouver passengers yearning for more options have been left on the curb.

“[What] Ripe Rides is asking is a very tall order,” said Mohan Kang, president of the BC Taxi Association (BCTA).

Because most taxis are permitted to pick up in only one municipality, Kang said, the multi-city taxi licences Ripe Rides is applying for would put the rest of the industry at a competitive disadvantage. A Vancouver taxi driver can pick up in Vancouver and drop off in Coquitlam, but the Vancouver driver would not be able to pick up a passenger in Coquitlam while driving back to his home base.

The multi-city licences would allow Ripe Rides drivers to pick up and drop off anywhere in the GVRD, but the company would first also have to comply with city bylaws. Mistry said Ripe Rides would go through all the necessary steps among municipalities before launching taxi services.

“There’s nothing that prevented any of the other existing operators from applying for this type of authorization. It was something the incumbent operators chose not to do,” he said.

Lawyer Bill McLachlan, who represents the BCTA, said Ripe Rides’ application feels like “the old sheep’s clothing [is] out on the wolf again.”

“It’s also got another feature that’s predatory and an unfair advantage to all the taxi companies,” said McLachlan, who raised concerns with the Passenger Transportation Board in early February over Ripe Rides’ request for fare splitting for taxi-pool trips.

“If you pick up someone in Maple Ridge, pick up someone in Coquitlam and pick up someone in Burnaby, they’re all riding in a taxi to the city of Vancouver at an unfair price point.”

As of November 2016, 1,808 vehicles have taxi licences in the GVRD, according to data provided to Business in Vancouver by the Passenger Transportation Board.

Vancouver-based Yellow Cab Co. Ltd. and Black Top Cabs Ltd. have the most with 292 and 233, respectively. If Ripe Rides were to be granted all 150 licences, it would become the region’s third-largest taxi company, ahead of Burnaby’s Bonny’s Taxi Ltd., which has 141 licences.

“The whole industry is a gong show,” McLachlan said. “But is there an unfair advantage for 150 cars serving the GVRD? Absolutely, it’s ridiculous.”

Nadine Robinson, co-founder of long-distance ride-sharing app Flok, said the taxi industry has been left in a difficult position as tech companies start to move into transportation.

“Given the fact that we don’t have Uber and Lyft here, I think there have been a lot of people who have come out of the tech scene trying to find alternative solutions,” said Robinson, whose Vancouver-based company matches drivers with passengers travelling long distances for music festivals or sports games.

“One of the most attractive things about Uber compared to traditional taxis is the cost, but it’s also the ease. Everyone is so used to tracking everything on their phones, needing to order something with a click on your screen. And I think that’s where even traditional cab companies can keep up a little better – having integrated payment systems, being able to rate your drivers.”

Kang said the B.C. industry is making strides with its Zoro app, which allows customers to hail or pre-book taxis using their smartphones.

And Vancouver’s four main taxi companies launched the eCab app in the fall of 2015.

Yellow Cab general manager Carolyn Bauer, who represents the Vancouver Taxi Association, did not respond to multiple phone calls from BIV.

But Robinson said uncertainty over Uber or Lyft eventually entering the local market is likely making the incumbents reluctant to invest heavily in new technology, not knowing what the landscape will look like in a few years.

“On the flip side, if they want to survive they really have to stay current and stay ahead of the game,” she said.

Meanwhile, Mistry said, it could be weeks or months before Ripe Rides hears back from the Passenger Transportation Board.

The decision on Ripe Rides’ application may land right in the middle of the spring provincial election campaign, thrusting the issue of transportation options into the spotlight.

But McLachlan doubts that the BC Liberals will make any announcements on ride sharing before the election.

“You’re shooting yourself in the shoot for any donations from the taxi industry, which has always given the Liberals some money,” he said. “So if I was going to make an announcement that shot myself in the foot, I would probably do it after the election.”

torton@biv.com

@reporton

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Restaurant closures ring White Rock alarm bells

A string of shutdowns along Marine Drive has residents worried about the area’s future
White Rock city Coun. David Chesney: real estate prices have put pressure on Marine Drive’s restaurant scene | Photo: Rob Kruyt

A string of restaurant closures along Marine Drive in White Rock in the past few months has the city looking to roll out an ambitious plan to revitalize the commercial hub.

City of White Rock Coun. David Chesney said as many as six restaurants, including the Sandpiper Pub and Pearl Bistro & Oyster Bar, have closed down recently. He said there are a number of contributing factors to the closures, but many local residents see land ownership as the main culprit.

Residential real estate has boomed in White Rock for decades as the average price for a detached home has risen to $1.49 million this year from $294,739 at the start of 2000. 

“I’m under the impression from what some people have told me that a lot of the commercial property along the waterfront has been bought by offshore investors,” said Chesney. “So they don’t care if it sits empty or it falls apart.”

White Rock Mayor Wayne Baldwin said the city is looking into why the Marine Drive restaurants have closed. He said an initial investigation was done in the wake of media reports about the first closure, in which the restaurant owner claimed his monthly rent had been increased by $500.

Baldwin said the property tax rate for that parcel of land had actually decreased in 2016 by $1,000.

“[The property owner] obviously is not giving [the restaurant owner] a break or reducing his rent as a reduction in property taxes,” said Baldwin. “So that’s an indicator that what Coun. Chesney is saying is probably true.”

Janet Wait is the owner of Jan’s on the Beach on Marine Drive close to the White Rock Pier. She agreed with Chesney’s assessment and noted that one of the strip’s long-standing restaurants has been vacant for a while.

“There are some overseas landlords that have raised the rents lately, but there are also some local landlords doing it too.”

Farnaz Farrokhi, the City of White Rock’s manager of communications and government relations, said $15 million will be spent this year on infrastructure to make the area more “attractive, inviting and accessible.”

The White Rock Business Improvement Association and the city have also struck a task force to look into the issue. A special meeting with the White Rock Chamber of Commerce has been set for February 28 to allow area businesses to voice their concerns over the closures.

“What White Rock is experiencing is not just a White Rock matter. It’s happening all across Metro Vancouver,” Farrokhi said. “Robson Street in downtown Vancouver is another example.”

The city plans to spend the infrastructure money on three main projects:

•a $4.5 million Memorial Park upgrade;

•a $9 million initiative to add 300 parking stalls close to the waterfront; and

•a plan to reintroduce free trolley service to the waterfront during the summer.

South Surrey-White Rock MP Dianne Watts pointed to a number of reasons for the restaurant closures.

She said the recent cold and snowy weather has exacerbated what is a cyclical issue. Watts added that parking has been an issue during summer months and noted that White Rock’s tax base is very small because the city only has approximately 20,000 people, and virtually all of its restaurants are along Marine Drive.

“It’s a very finite amount of land there,” she said. “And I know mayor and council have been working on balancing that out between residential and commercial.”

Fraser Valley Real Estate Board (FVREB) statistics show January was a return to the white-hot market for most of the region with South Surrey and White Rock leading the way, as sales rose above the 10-year average because of an intake of new inventory. Of the 976 sales processed in January across the region, 212 were townhouses and 276 were apartments, representing half of the market activity. This was coupled with 2,178 new listings in January, a massive 162% increase from December of last year.

Meanwhile commercial and industrial real estate, which the FVREB does not track, appears to be getting lost in the shuffle.

Commercial industrial business licences issued by the City of Surrey appear to have peaked in 2014, when 939 permits were issued. That number dropped in 2015 to 709, the city’s lowest total in five years.

news@biv.com

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