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PUBLIC INQUIRIES ACT (BRITISH COLUMBIA) Provincial-Municipal Relations in British Columbia REPORT OF… British Columbia. Legislative Assembly 1947

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 PUBLIC INQUIRIES ACT (British Columbia)
1
JQlovincial-Municipal Melatlon5
In Etltlin Columbia
REPORT OF THE COMMISSIONER
H. CARL GOLDENBERG
1947
VICTORIA,  B.C. :
Printed by Don McDuemjd, Printer to the King's Most Excellent Majesty.
1947.  To His Honour the Lieutenant-Governor of British Columbia:
Sir,—Pursuant to the powers contained in the " Public Inquiries Act," chapter 131
of the " Revised Statutes of British Columbia, 1936," and in accordance with your
Order in Council dated the 16th day of February, 1946, a Commission issued under the
Great Seal of the Province, appointing me a sole Commissioner to inquire into and
report upon the certain matters therein set out.
The inquiry has been completed and I respectfully submit this report.
I have the honour to be,
Sir,
Your obedient servant,
H. CARL GOLDENBERG,
Commissioner.
January 20th, 1947.  TABLE OF CONTENTS.
Page.
Analytical Table of Contents      7
The Royal Commission     11
Introductory     13
Chapter.
I. Municipal Organization     15
II. Municipal Functions and Expenditures  22
III. Municipal Debts  37
IV. Municipal Revenues  48
V. Municipal Taxation: The Real Property Tax  55
VI. Municipal Taxation: Business and Other Taxes  73
VII. Municipal Taxation: Tax-Exempt Property  78
VIII. Municipal Finances To-day  81
IX. Provincial-Municipal Relations  85
X. Summary of Findings and Recommendations  97
Appendix.
A. Statistical Tables . r  113
B. List of Public Hearings and Briefs  187  ANALYTICAL TABLE OF CONTENTS.
Page.
The Royal Commission  11
Introductory  13
Chapter I. Municipal Organization.
1. The Provincial Background  15
2. Municipal Organization and Development  15
3. Metropolitan Areas .  18
4. Urbanization in Rural Districts  18
5. Regulation of Areas Adjacent to Municipalities  19
6. Municipal Administration .  20
7. Department of Municipal Affairs  21
Chapter II. Municipal Functions and Expenditures.
1. Municipal Functions  22
2. Municipal Expenditures  22
A. Trends in Municipal Expenditures (excluding Vancouver)  23
B. Trends in Municipal Expenditures in Vancouver .  24
3. Education  24
4. Social Services  26
A. Social Welfare  26
B. Hospitalization__t  27
C. Public Health  27
5. Administration of Justice  29
6. General Municipal Services and Expenditures  31
A. General Administration  31
B. Municipal Works and Services  32
C. Streets and Roads  33
D. Protection of River Banks  34
E. Debt Charges  34
Chapter III. Municipal Debts.
1. Municipalities (excluding Vancouver)  37
A. Statutory Limitations under the " Municipal Act"  37
(a.) Appraisal of Debt Limits  37
(b.)  Debt Retirement Period  38
(c.)  Control by Department of Municipal Affairs  39
B. Trends in Municipal Debt since 1926  39
(a.)  Debt Reduction since 1926 :...... 40
(b.) Municipal Defaults  41
(c.)  Sinking Fund Shortages .  42
(d.)  Sinking Fund and Serial Debentures  42
(e.)  Sinking Fund Administration  43
(/.)  Other Municipal Borrowings  43 X 8 ANALYTICAL TABLE OF CONTENTS.
Page.
2. City of Vancouver  44
A. Statutory Limitations under the Vancouver Charter  44
B. Municipal Debt  44
(a.)  Gross Debenture Debt  44
(6.)  Net Debenture Debt____,  45
(c.)  Bank Borrowings  45
(d.)  Sinking Fund  45
3. Conclusions on Municipal Debt  46
Chapter IV. Municipal Revenues.
1. Real Property Tax Receipts _•  48
2. Receipts from Sales of Tax-Sale Properties  49
3. Receipts from Provincial Government Grants ,  50
4. Municipal Utility Operations  51
5. Receipts from Trade Licences '.  53
6. Miscellaneous Taxes and Receipts  53
Chapter V. Municipal Taxation : The Real Property Tax.
1. Economic Considerations  55
2. Assessment of Real Property  56
A. Statutory Provisions  56
B. Trends in Assessed Valuation -  57
(a.)   Statistics and Definitions  57
(&.) Assessments to 1946  58
C. Assessments in Vancouver -  59
(a.)  Assessed Valuation  59
(b.)  Assessment Appeals  60
D. Assessments in Municipalities (excluding Vancouver)  61
(a.)  Assessed Valuation  61
(6.)  Assessment Appeals  63
E. Fixed Assessments  64
3. Taxation of Real Property  64
A. Statutory Provisions  64
(a.)  The "Municipal Act"  64
(b.)  The " Vancouver Incorporation Act"  65
B. Taxable and Taxed Valuation  66
C. Taxation and Exemption of Improvements  68
D. Tax Rates  69
E. Tax Levy, Collections, and Arrears  71
F. Conclusion on Real Property Tax Burden  72
Chapter VI. Municipal Taxation : Business and Other Taxes.
1. The Business Tax .  73
A. The Tax Base .  73
B. Justification of the Business Tax  74
2. Taxation of Public Utilities  75
A. The " Municipal Act"  75
B. The " Vancouver Incorporation Act"    75 ANALYTICAL TABLE OF CONTENTS. X 9
Page.
3. Miscellaneous Taxes  76
A. Minor Taxes  76
B. Taxing of Beer Licensees  76
C. Licensing of Motor Carriers  77
Chapter VII. Municipal Taxation : Tax-Exempt Property.
1. Statutory Provisions  78
2. Trends in Exemptions  78
3. Crown Property  79
Chapter VIII. Municipal Finances To-day.
1. Improvement in Municipal Finances  81
2. Functions and Expenditures  82
3. Revenues and Taxation  83
Chapter IX. Provincial-Municipal Relations.
1. Appraisal of Municipal Grievances  85
2. Considerations on Provincial-Municipal Financial Relations  87
3. Recommendations  89
A. Education  89
B. Social Services  90
(a.)  Social Welfare  90
(b.)  Hospitalization  93
(c.)  Public Health    93
C. Streets and Roads  94
D. Administration of Justice ...  95
4. Conclusion ..  95
Chapter X. Summary of Findings and Recommendations.
Appendix A.
Statistical Tables  113
Appendix B.
List of Public Hearings and Briefs  187  THE ROYAL COMMISSION.
W. C. WOODWARD,
Lieutenant-Governor:
CANADA:
PROVINCE OF BRITISH COLUMBIA.
GEORGE the SIXTH, by the Grace of God, of Great Britain, Ireland, and the. British
Dominions beyond the Seas, King, Defender of the Faith, Emperor of India.
In the Matter of the " Public Inquiries Act."
A COMMISSION.
To H. Carl Goldenberg. Barrister, of the City of Montreal.
R. L. Maitland,   J TyHEREAS it is desirable in the public interest to cause an
Attorney-General. | inquiry to be made into the performance of municipal functions
within the Province and the relations between the municipalities and the Province:
And whereas under section 3 of the " Public Inquiries Act," being chapter 131 of
the " Revised Statutes of British Columbia, 1936," it is provided that whenever the
Lieutenant-Governor in Council thinks it expedient to cause inquiry to be made into
and concerning any matter connected with the good government of the Province or the
conduct of any part of the public business thereof, the Lieutenant-Governor in Council
may by commission intituled in the matter of the said Act and issued under the Great
Seal, appoint a sole Commissioner to inquire into such matter:
And whereas His Honour the Lieutenant-Governor, by and with the advice of his
Executive Council, hath deemed it expedient to appoint a sole Commissioner to inquire
into the following matters, namely:—
The performance of municipal functions within the Province and the relations
between the municipalities and the Province including, but not limiting this reference
to, the following subjects:—
1. The  powers,   functions,   and   responsibilities  of  the  various  classes   of
municipalities;
2. The functions performed and the services rendered by the Province with: n
the municipalities;
3. Municipal expenditures;
4. Municipal debts;
5. Municipal revenues;
6. The system of municipal taxation and the assessment of property;
7. The adequacy of municipal revenues for the performance of municipal
functions; and
8. All matters related and incidental to the foregoing:
Now know ye therefore, that reposing every trust and confidence in your loyalty,
integrity, and ability, We do by these presents, under and by virtue of the powers
contained in the said " Public Inquiries Act" and in accordance with an Order of the
Lieutenant-Governor in Council, dated the 16th day of February, A.D. 1946, appoint
you, H. Carl Goldenberg, Barrister, a sole Commissioner to inquire into the matters
aforesaid.
11 X 12
THE ROYAL COMMISSION.
And We direct you, the said Commissioner, to report in writing your findings and
recommendations to Our Lieutenant-Governor of Our said Province immediately or as
soon as conveniently may be after you have concluded such inquiry.
IN testimony whereof We have caused these Our Letters to be made Patent, and the
Great Seal of the Province to be hereunto affixed.
Witness, the Honourable William Culham Woodward, Lieutenant-Governor of Our
said Province of British Columbia, in Our City of Victoria, in Our said Province,
this 16th day of February, in the year of our Lord one thousand nine hundred and
forty-six, and in the tenth year of Our Reign.
By Command.
GEO. S. PEARSON,
Provincial Secretary. INTRODUCTORY.
By Order of the Lieutenant-Governor in Council of the Province of British
Columbia, dated February 16th, 1946, a Commission was issued appointing me a sole
Commissioner to inquire into and to report on the following matters:—
" The performance of municipal functions within the Province and the relations
between the municipalities and the Province including, but not limiting this reference
to, the following subjects:—
1. The powers, functions, and responsibilities of the various classes of municipalities ;
2. The functions performed and the services rendered by the Province within
the municipalities;
3. Municipal expenditures;
4. Municipal debts;
5. Municipal revenues;
6. The system of municipal taxation and the assessment of property;
7. The adequacy of municipal revenues for the performance of municipal
functions;  and
8. All matters related and incidental to the foregoing."
Public sittings of the Commission opened in Victoria on March 11th, 1946, and
were followed by sittings in Vancouver, New Westminster, Nanaimo, Prince Rupert,
Prince George, Nelson, Trail, Kelowna, and Kamloops. Further sessions were then
held in Victoria, the final session taking place on August 12th, 1946. In addition to
the memoranda submitted by the Provincial Government at a public hearing, the Commission heard representations from seventy-two municipalities and other public bodies.
In all, ninety exhibits were received in evidence. I am filing herewith a complete
transcript of all the evidence and the originals of all the exhibits.
In addition to hearing evidence and receiving written briefs, the Commission read
and analysed a great number of financial statements and reports of and relating to the
municipalities, as well as other data on matters within its terms of reference. Special
questionnaires were submitted to the cities of Vancouver and Victoria, and are filed
herewith, together with the answers thereto.
To Mr. A. C. DesBrisay, K.C., of Vancouver, eounsel to the Commission, I want to
express my appreciation for his services at the public sittings of the Commission and
in the analysis of the voluminous evidence.
I am greatly indebted to Mr. B. C. Bracewell, Deputy Minister of Municipal Affairs,
who has at all times been available for consultation and advice based on his long experience in municipal affairs; to the officers of other departments of the Government of
British Columbia who have supplied me with much information; to Mr. R. R. F. Sewell,
secretary of the Union of British Columbia Municipalities, and to the many municipal
officials whose advice and friendly co-operation have been invaluable; to the Departments of Municipal Affairs in other provinces, the Municipal Finance Officers' Association of the United States and Canada, and the Citizens' Research Institute of Canada,
for forwarding necessary data; to Dr. M. A. Cameron, of the University of British
Columbia, for assistance on educational finance; to the Bureau of Economics and
Statistics of the provincial Department of Trade and Industry, for assistance in providing staff; to Mr. L. W. Wheeldon of the provincial Department of Municipal Affairs;
and to the many others in different parts of the Province who have co-operated.
Finally, I want to thank Mr. J. Everett Brown, secretary to the Commission, and
the staff of the Commission, who have discharged their duties efficiently and loyally,
and whose co-operation has been a great help to me.
13  CHAPTER I.
MUNICIPAL ORGANIZATION.
The " British North America Act" assigns municipal institutions in Canada to
the jurisdiction of the provinces. While the municipalities are instruments of local
self-government and the exercise of their powers lies with the elected representatives
of the local inhabitants, they receive their constitution and powers from the provincial
authority. In some particular fields of governmental activity they are also units or
agents of the provincial government. Within each province the nature of its municipal institutions is in large part the product of its particular history and development.
1. THE PROVINCIAL BACKGROUND.
Municipal organization in British Columbia has been largely conditioned by its
geography and topography. The Province has an area of 366,255 square miles. Its
rugged terrain, marked by a series of high parallel mountain ranges running roughly
north and south, has limited the areas of settlement. Its population is now estimated
at 950,000 or about 2.5 to the square mile, as compared with 3.32 for Canada, exclusive
of the Northwest Territories, and more than 45 to the square mile for the United
States, exclusive of Alaska. The low density of population must, however, be considered with due regard to the vast areas in the northern and central parts of the
Province which are virtually uninhabited, and also to the high concentration of population in the south-western corner of the Province where about 60 per cent, of the
total population lives in the cities of Vancouver and Victoria and adjacent municipalities.
A consequence of its physical features and of the localization of its resources is
that only about one-half of 1 per cent, of the land area of British Columbia is municipally organized. This affords a striking contrast to the other provinces of Canada
which, apart from Prince Edward Island, are highly organized for municipal purposes.
It is estimated that about 78 per cent, of the total population of British Columbia now
resides in organized municipal areas, and 22 per cent., or approximately 206,000 persons, in the unorganized areas. It is, therefore, the responsibility of the Provincial
Government to provide certain minimum local government services to between one-
fifth and one-quarter of the total population living in scattered and sparsely settled
areas which, if organized, would be required to provide those services for themselves.
The necessity of providing services for a large population in the unorganized
areas has had important effects on provincial finances. In estimating these effects,
however, it should be noted that although only one-half of 1 per cent, of the land area
of the Province is organized, the people in the unorganized territory are not necessarily
spread over the remaining 99.5 per cent, of the area, a very large part of which is
uninhabited and uninhabitable. It is also important to note that the local services
provided in the unorganized areas are not extensive, nor are they comparable with the
ordinary services provided in a municipality.
2. MUNICIPAL ORGANIZATION AND DEVELOPMENT.
The first municipal corporation in British Columbia was the city of New Westminster, incorporated in 1860. Victoria followed in 1862. An ordinance of 1865 laid
down the broad lines of later municipal organization, and in 1872 was replaced by an
Act providing for the incorporation of municipalities and setting forth their powers.
In 1873 New Westminster and Victoria were brought under the provisions of the gen-
15 eral Act, and subsequent incorporations, except in the case of the city of Vancouver,
have been under the general Act. In 1896 the " Municipal Clauses Act" (now the
" Municipal Act ") and the " Municipalities Incorporation Act " were passed and, with
later amendments, established municipal government as it exists to-day. Vancouver
was incorporated by a special Act in 1886 and is governed by the " Vancouver Incorporation Act." All other municipalities, except villages, are governed by the " Municipal
Act."*
The " Municipalities Incorporation Act "f provides for two classes of municipalities, the city or town municipality, which requires a population of 100 adult British
males in an area not exceeding 2,000 acres, and the district or township municipality,
which requires 30 adult British males in an area not limited by the Act. These provisions are peculiar to British Columbia, arising in large part from its physical features
and population distribution.
The cities are intended to represent the urban areas, and the districts are in the
main the rural municipalities. The course of urbanization, however, has eliminated
this distinction in some instances and a number of district municipalities now do not
differ from cities, while a number of small city municipalities can scarcely be said to
fit that classification.
There are at present thirty-four cities and twenty-eight districts in British
Columbia. The large majority of them were incorporated within a period of twenty-
five years extending from 1890 to 1915. Since 1915 only one city, Kimberley (1944),
and two districts, Glenmore and Tadanac (1922), came into being, and, of these,
Tadanac, in which the plant of the Consolidated Mining and Smelting Company is
located, cannot be considered a " district municipality " in the ordinary sense of the
term. Table 1, in the appendix to this report, shows the incorporation of cities, districts, and villages by decades in the period 1860-1945.
The small density of population in the settled parts of the unorganized areas of
the Province has prevented a wide extension of local government. In order to encourage the incorporation of smaller units, the " Village Municipalities Act"% was passed
in 1920. The Act originally fixed a maximum population limit of 1,000 residents, but
was subsequently amended and now fixes no limitation as to population or area. The
powers conferred upon village municipalities are more restricted than those of cities
and districts, although a number of villages now have a larger population than some
of the cities. Of the twenty-nine villages in the Province at the end of 1945, ten have
been incorporated since 1941.
While the number of municipalities (apart from villages) is almost the same as
in 1915, the population of the organized areas has increased both absolutely and relatively to that of the unorganized areas. Tables 2 and 3 in the appendix show the
population of British Columbia and the percentage distribution of the population in
organized and unorganized areas in the census years 1921, 1931, and 1941, and as estimated in 1945. These figures indicate that the population of the organized areas was
about doubled in the years between 1921 and 1945. Whereas 71 per cent, of the population lived in organized territory in 1921, the figure is now in the neighbourhood of
78 per cent. The great increase from 1941 to 1945, representing largely the migration
to centres of war industry, occurred in the organized areas of the Province. Since
there has also been an absolute increase in the unorganized areas, the Provincial Government remains responsible for providing certain local services to more than one-fifth
of the population.
* R.S.B.C. 1936, chap. 199.
t R.S.B.C. 1936, chap. 202.
% R.S.B.C. 1936, chap. 203. MUNICIPAL ORGANIZATION. X 17
The changes in population between 1921 and 1945 in the individual cities, districts,
and villages are shown in Tables 4, 5, and 6, respectively. In some cases the population doubled; in others it increased three-fold, four-fold, and even five-fold. The greatest absolute increase in cities occurred in Vancouver, Victoria, and New Westminster,
while large relative increases occurred in North Vancouver, Trail, Kelowna, Vernon,
Chilliwack, Courtenay, Duncan, Alberni, and Port Alberni. The experience is, however, by no means uniform: about twelve cities showed a decrease in the census year
1941 as compared with 1921, while others remained static.
Apart from the city of Vancouver, the largest absolute increases in population
since 1921 have occurred in the districts, particularly in Burnaby, Saanich, Surrey, and
Richmond. A larger population is also shown by Chilliwhack, Coquitlam, Delta, Langley, Maple Ridge, Matsqui, North Cowichan, North Vancouver, Oak Bay, Penticton,
Spallumcheen, and West Vancouver. In contrast to the cities, only two districts
showed a decrease in the census year 1941 as compared with 1921.
The two-fold increase in population in organized territory since 1921 has occurred
without any appreciable increase in the size of the organized areas. The consequence
has been a rise in the density of population in a number of municipalities which facilitates the provision of municipal services at a more reasonable cost. While some of the
cities now claim that they have little room for further expansion within their present
boundaries, it is important to note that, even with the increase in population, there
are as yet only five cities and five districts with more than 10,000 people. Of the
remainder, eighteen cities and eleven districts still have a population of less than
3,000. Small units thus remain an outstanding feature of the municipal system in the
Province.
While the legal provisions governing the incorporation of municipalities were at
the time of their enactment determined by the physical features and population distribution of the Province, they have not kept pace with developments in governmental
organization and functions. Small units fail to correspond with present-day economic
and social realities and are not appropriate for the performance of important governmental functions which require larger units than the average municipality. This fact
has been recognized by the establishment of large school districts and health units
without regard to municipal boundaries. I am of the opinion that larger units are
also required for the provision of social welfare services and may be required for other
services. Where new units are not created, municipalities should consider arrangements for the provision of services on a joint basis, and to this end I recommend that,
where appropriate, they should avail themselves of the authority for the joint exercise
of their powers conferred by section 59 (c) of the " Municipal Act," as enacted in 1946,
which provides that:—
A municipality may join with any other municipality or municipalities for the purpose of exercising any powers conferred by this Act, but no agreement or agreements
necessary shall be valid until ratified by by-laws passed by not less than a three-fifths
majority of the Councils concerned, and no such by-law shall come into effect until it
has received the assent of the Lieutenant-Governor in Council.
I recommend, further, that the Provincial Government consider changes in the
conditions for the incorporation of urban municipalities to meet modern requirements.
It is apparent that a reclassification of existing urban units to conform with realities
is warranted. Whether or not such a reclassification is effected, I recommend that
consideration be given to legislation which would provide that in future no locality be
incorporated as a " city " unless it has a population of at least 4,000, that an urban
area with a population of less than 4,000 but not less than 1,500 be incorporated as a
" town," that where the population is less than 1,500 the area be incorporated as a
" village," and that villages may apply for incorporation as towns and towns for incor- X 18 MUNICIPAL ORGANIZATION.
poration as cities when they have attained the required population; and, further, that
the legislation define the powers and duties of municipalities in each classification with
due regard to their requirements and to the efficient administration of municipal
affairs, and that the various Acts relating to municipalities be reviewed and amended
accordingly.
3. METROPOLITAN AREAS.
The two metropolitan areas of Vancouver and Victoria contain about 60 per cent,
of the total population of the Province. Each of these areas is to a large degree
an integrated urban area divided into a number of separate but economically interdependent municipalities, with consequent duplication of effort and varying standards
of service. Since health services and sanitation facilities, waterworks and other utilities, and police and fire protection, are matters of common concern within each area,
they offer particularly appropriate fields for the joint provision of services with a
view to the establishment of common standards and to more efficient and economical
administration.
In the Vancouver metropolitan area the establishment of the Greater Vancouver
Water District, the Vancouver and Districts Joint Sewerage and Drainage Board,
and the Metropolitan Health Committee has been a forward step in inter-municipal
co-operation. It is suggested in a later part of this report that a further co-ordination
of health services in this area is desirable. I suggest that consideration might also be
given to the provision of other services on a joint basis.
The Victoria metropolitan area, consisting of four separate municipalities, has
thus far made little progress towards the provision of joint services. Although the
area is relatively small and compact and the population is economically interdependent,
there are no common standards of service except in education. The Greater Victoria
School District was created in 1946. I am of the opinion, and recommend that, in order
to provide common standards of basic services and to eliminate unnecessary duplication
in the provision of municipal services, immediate consideration should be given to the
amalgamation of the four municipalities comprising the Victoria metropolitan area, or,
in lieu of such amalgamation, to the negotiation of arrangements for the joint provision
of utility services and of services for health, sanitation, and public safety throughout
the area.
4. URBANIZATION IN RURAL DISTRICTS.
It has been pointed out that there is no distinction now between some district
municipalities and cities. This applies to districts such as Oak Bay and Esquimalt
and to the populated sections of North Vancouver and West Vancouver. Other districts, such as Saanich, Burnaby, Richmond, Surrey, and Penticton, include large urban
sections within their limits. This development has led to a certain amount of friction
within these municipalities: the urban sections contend that the rural areas are
retarding the provision of essential services required by an urban area, while the rural
sections reply that they do not require such services and that the provision thereof
would unduly increase taxes on land. The district of Saanich is a case in point, and
its situation was drawn to the attention of the Commission.
The proximity of Saanich to the city of Victoria appears to warrant the amalgamation of the urban section of Saanich with Victoria. A similar step may be warranted in the case of other district municipalities where the urban area adjoins a city.
It must not be concluded, however, that secession of the urban section of a district
municipality is in all cases essential in order to make possible the provision of municipal
services required by that section. The " Municipal Act " and the " Local Improvement
Act" recognize the existence of this problem and contain special provisions which, in
my opinion, offer a solution. MUNICIPAL ORGANIZATION. X 19
Section 62 of the " Municipal Act "* provides that:—
In case it is deemed expedient to undertake any work or service for the special benefit
of some portion or portions of the municipality, the Council of a district municipality
may, in addition to all other powers conferred by this Act, in the by-law authorizing the
undertaking of the said work or service, define the portion or portions of the municipality
that will be benefited, and the entire cost, or such part of the cost as the Council deems
just, shall be raised by a special rate upon the lands or lands and improvements within
such defined portion or portions of the municipality, and the Council shall not be required
to impose any rate upon improvements under this section by reason of the fact that the
improvements are taxed under any other by-law of the municipality:
Provided, however, that the said by-law shall require the assent of the electors of
the portion or portions of the municipality set out in the said by-law, and only the
electors qualifying pursuant to the requirements of subsection (2) of section 180 on
property situate in such portion or portions of the municipality shall be entitled to vote
thereon. The said by-law shall be voted upon in the manner provided for voting upon
ordinary money by-laws:
Provided also that if the by-law authorizes the issuing of debentures, the whole of
the cost of the work or service shall be borne by the portion or portions of the municipality defined; but nothing herein contained shall prevent the Council from exercising
its discretion as to the manner in which costs for operating and maintaining such work
or service and in which the moneys required for the payment of principal and interest in
respect of such debentures shall be raised.
Section 53 of the " Local Improvement Act "t provides that:—
(1.) The Council of a district municipality may, in addition to all other powers conferred by this Act, undertake as a local improvement:—
(a.)  The purchase, construction, enlargement, or extension of water, sewerage, electric power, electric light, or gas works:
(6.)  The purchase  of fire-engines  and  other appliances  for  the  purpose  of fire-
protection :
(c.)   The laying of mains and other appliances to connect with any existing system
of water or gas works, whether owned by the  corporation or by any other
person.
(2.)  The Council, by the by-law for undertaking the work, may provide that the
owners' portion of the cost, including, if necessary, the cost of managing and maintaining
the work, shall be assessed, levied, and collected in the same manner as municipal taxes
are assessed, levied, and collected upon and from the land and improvements in any
defined area of the municipality by a special rate readjusted and levied from year to
year upon the basis of assessed value of the land and improvements within the defined
area as shown by the last revised assessment roll of the municipality, and such rate may
be fixed by any general rate by-law of the municipality.
I recommend that the foregoing sections of the " Municipal Act " and of the " Local
Improvement Act" be drawn to the special attention of the district municipalities, and
that the municipalities concerned should exercise the powers conferred upon them, as
required, for the provision of special services for specified areas within their limits.
5. REGULATION OF AREAS ADJACENT TO MUNICIPALITIES.
The incorporation and growth of municipal units has encouraged settlement and
development in unorganized areas on the outskirts of municipalities. The settlers
derive benefits from a location adjoining a municipality and are not subject to municipal
controls regulating the construction of buildings, the provision of sanitary facilities,
the supply of water, and generally prescribing minimum standards. In the absence of
such regulations, the uncontrolled development which has taken place and is continuing
on an increasing scale in the unorganized areas contiguous to municipalities constitutes
a health and fire hazard to the municipality as well as a danger to the inhabitants of
the unregulated areas. A survey of these areas points to the potential development of
slum conditions.
* R.S.B.C. 1936, chap. 199, sec. 62, as amended by B.C. Statutes 1941-42, chap. 26.
t R.S.B.C. 1936, chap. 200, sec. 53. X 20 MUNICIPAL ORGANIZATION.
I am advised that the Provincial Government, which is responsible for the administration of unorganized territory, has now taken steps to regulate certain areas adjacent
to municipalities, pursuant to its authority under Part III. of the " Town Planning
Act,"* enacted in 1946, which provides that:—
61. The Lieutenant-Governor in Council may make regulations applicable to unorganized territory for the following purposes: —
(a.) To prescribe principles to be observed and requirements to be met in the subdividing of lands before approval to a plan of subdivision is given by the
approving officer as defined in the " Land Registry Act ":
(b.) To control the use of land with respect to location, design, and construction of
buildings and to prohibit the erection or occupation of any building unless due
provision is made for sanitary facilities, water-supply, drainage, and other
works and facilities in accordance with regulations for the time being in force
under this Act:
(c.)   To prohibit or restrict any occupation or use of any land or buildings where
deemed advisable:
(d.) To require the owner of any land to remove therefrom or destroy any buildings
situate thereon or to do any act or thing deemed necessary in the interests of
health or safety.   .   .   .
64. The Lieutenant-Governor in Council may define the area or areas to which any
such regulations shall apply and may make different regulations applicable to different
areas.
Pursuant to the foregoing authority, unorganized territory adjacent to Kelowna
has now been proclaimed a regulated area. Having regard to the dangers inherent in
the present situation both to the contiguous municipalities and to the people living in
the unregulated areas, I recommend that the Provincial Government exercise its full
authority under the " Town Planning Act" to regulate such areas adjacent to other
municipalities and to prescribe and enforce the necessary regulations with regard to
minimum building and sanitary standards. As these areas may in due course be
annexed to the contiguous municipalities, or may be incorporated as separate municipalities, it is important that the regulations apply to as much territory as is warranted
by the circumstances of each case.
I further recommend that consideration be given to an amendment of the " Municipalities Incorporation Act" which will facilitate the extension of municipal limits by
the annexation of adjoining territory.
6. MUNICIPAL ADMINISTRATION.
The " Municipal Act " (sections 10, 11, and 12) provides that the mayor in a city
municipality and the reeve in a district municipality shall be elected annually, unless
the electors in municipalities where the aldermen or councillors are elected for a two-
year period have by referendum decided that the mayor or reeve shall also be elected
for two years. The term of office of aldermen or councillors is one year in municipalities which are divided into wards and two years in all other municipalities. In practice,
as there are only a few municipalities" which are divided into wards, the term of office
of aldermen and councillors is generally two years, but in a large number of cases the
mayor or reeve is elected annually. Under the " Vancouver Incorporation Act" the
term of office is two years for the mayor and aldermen. Villages are governed by a
board of three commissioners who hold office for three years.
In the course of my inquiry throughout the Province I have received representations on municipal affairs from elected officials of almost all municipalities. I have
been impressed with the fact that these officials are conscientious and anxious to promote the welfare of the citizens who have elected them to office. I am of the opinion,
however, that a one-year term is not necessarily in the best interests of the municipality
* R.S.B.C. 1936, chap. 287, as amended by B.C. Statutes 1946, chap. 75. MUNICIPAL ORGANIZATION. X 21
in that it does not give a newly elected official sufficient time to acquaint himself with
the operations and problems of the municipality, nor does it allow sufficient time to
make plans and to carry them into effect. Accordingly, I recommend that the " Municipal Act" be amended by repealing the existing provisions for annual elections and
enacting that all mayors, reeves, aldermen, and councillors be elected for a term of
two years, the election of aldermen and councillors to be staggered as at present.
I recommend, further, that in the larger cities more discretion in matters of
administration be allowed to the senior administrative officers in order that the mayor
and aldermen be in a position to concentrate on matters of policy rather than on
matters of day-to-day administration.
Representations have been made to the Commission with respect to the superannuation of civic employees. The Commission has not been in a position to inquire
into the actuarial features of the existing superannuation scheme which has been
criticized on the ground of the inadequacy of the pensions provided. I am advised that
the municipalities are now considering the possibility of readjustments in the scheme.
The need for a competent municipal civil service is apparent, and to attract and to
retain the required type of personnel it is, in my opinion, essential to provide the
security which is associated with a satisfactory plan for superannuation. To this end
I recommend that the present superannuation plan be reviewed.
7. DEPARTMENT OF MUNICIPAL AFFAIRS.
The Department of Municipal Affairs was created in 1934 to be " the recognized medium of communication between the municipalities of the Province and the
Lieutenant-Governor in Council."* Accordingly, in exercising its supervisory and
advisory powers the Department maintains close relations with the municipalities, and
these relations are, in my opinion, satisfactory. It appears to me, however, that
the staff of the Department is too small in relation to its growing responsibilities.
Additional staff is required for the proper exercise of control over municipal debt and
for necessary research in municipal affairs. A larger personnel would also enable the
Department to give more attention to promoting a better understanding between the
municipalities and the Province.
* R.S.B.C. 1936, chap. 197. CHAPTER II.
MUNICIPAL FUNCTIONS AND EXPENDITURES.
1. MUNICIPAL FUNCTIONS.
Municipalities perform functions and provide services which are either mandatory
or permissive under Provincial legislation. Their general powers and functions are
defined in the " Municipal Act," the " Vancouver Incorporation Act," and the " Village
Municipalities Act." Additional duties are imposed upon them by such enactments as
the " Public Schools Act," the " Health Act," the " Hospitals Act," the " Juvenile Courts
Act," the " Protection of Children Act," the " Tuberculosis Institutions Act," the
" Provincial Home Act," and by various other Acts. Their expenditures are also
affected by regulations and "conditions governing certain services as prescribed in a
number of statutes, such as the " Social Assistance Act," the " Residence and Responsibility Act," the " Fire Departments Hours of Labour Act," the " Fire Departments
Two-platoon Act," the " Electrical Energy Inspection Act," and others.
The functions which are mandatory upon municipalities relate principally to
matters which are of wider than local concern, which require certain minimum standards, and which are financed both by the Province and the municipalities. These
matters are education, social welfare, health and hospitalization, and the administration
of justice. The permissive functions cover, in the main, the provision of services
which are of peculiarly local concern and which have generally been considered the
proper responsibility of local government, to be exercised as desired by the local
inhabitants and as required by local conditions. These services include the protection
of persons and property, sanitary regulations and supervision, garbage collection,
sewage disposal, public parks, streets and sidewalks, street lighting, the operation of
municipal utilities, the licensing of trades and professions, the abatement of nuisances,
and other services to protect the safety, health, property, and morals of the inhabitants.
The services provided by and the responsibilities imposed upon municipalities in
British Columbia follow the general pattern of municipal functions and responsibilities
in Canada. Municipal expenditures in all provinces are, in part, determined by the
local inhabitants and, in part, the result of mandatory responsibilities imposed by
provincial statutes. The provinces generally share with the municipalities in financing
certain services of more than local interest, but their respective shares vary in different
provinces.
2. MUNICIPAL EXPENDITURES.
The relative burdens imposed by the various municipal services are shown by an
analysis of current municipal expenditures and an examination of trends in such
expenditures over a period of years. To interpret such trends it is necessary not only
to examine expenditures for all services and for individual services, but also to relate
the trends to changes in population, in assessed valuation, and in other economic factors
during the period under consideration. For these purposes a series of statistical tables
are presented in the appendix to this report. It should be noted that as municipal
reports for the Department of Municipal Affairs are prepared on a cash basis, the
figures show " disbursements " and not " expenditures," except for the city of Vancouver. It should also be noted that only deficits and not total disbursements are shown
for municipal utilities.    The relevant tables on expenditures are as follows:—
Table 7.—All Municipalities (excluding Vancouver) : Gross Current Disbursements, 1926-1945.
Table 8.—Selected Municipalities:   Gross Current Disbursements, 1926-1945.
22 MUNICIPAL FUNCTIONS AND EXPENDITURES. X 23
Table 9.—Cities (excluding Vancouver) : Gross Current Disbursements, by
Services, 1936-1945.
Table 10.—Districts:   Gross Current Disbursements, by Services, 1936-1945.
Table 11.—Villages:   Gross Current Disbursements, by Services, 1936-1945.
Table 12.—All Municipalities (excluding Vancouver) : Net Current Disbursements—Gross Current Disbursements less Government Grants, 1926-1945.
Table 13.—All Municipalities (excluding Vancouver): Current Disbursements,
Assessed Valuation, and Population, 1926-1945.
Table 14.—Vancouver:  Gross and Net Current Expenditures, 1930-1945.
Table 15.—Vancouver:   Gross Current Expenditures, by Services, 1936-1945.
Table 16.—Vancouver: Current Expenditures, Assessed Valuation, and Population, 1926-1945.
Table 17.—Vancouver:   Comparative Expenditures, in Detail, 1929-1945.
Table 18.—Education:  Gross and Net Current Disbursements, 1937 and 1944.
Table 19.—Education: Gross and Net Current Disbursements in Selected
Municipalities, 1937 and 1944.
Table 20.—Social Welfare: Gross and Net Current Disbursements, 1937 and
1944.
Table 21.—Social Welfare: Gross Current Disbursements in Selected Municipalities, 1937 and 1944.
Table 22—Social Welfare: Gross and Net Current Expenditures in Vancouver,
1937, 1944 and 1945.
Table 23.—Hospitalization:  Municipal Disbursements, 1937 and 1944.
Table 24.—Hospitalization: Disbursements in Selected Municipalities, 1937
and 1944.
A. Trends in Municipal Expenditures (excluding Vancouver).
An analysis of the statistical tables relating to all municipalities, except Vancouver,
shows that:—
(i.) Municipal disbursements in the period from 1926 to 1945 tended to reflect
general economic conditions. While total current revenue disbursements rose from
about 110,600,000 in 1926 to $16,400,000 in 1945, the increases occurred during the
prosperous years from 1926 to 1930 and, in larger part, since 1942. Disbursements
remained relatively stable during the depression period from 1930 to 1938, and in the
first three years of war, 1940-1942.
(ii.) Per capita gross disbursements for all cities, excluding Vancouver, declined
from a high of $54.57 in 1930 to a low point of $40.71 in 1942, and then rose to $48.92
in 1945 or $5.65 less than in 1930. In Victoria they declined from $67.98 in 1930 to
$46.55 in 1943 and increased to $53.55 in 1945. Per capita gross disbursements in
districts declined from a high of $37.91 in 1930 to a low of $28.68 in 1942, and then
rose to $32.40 in 1945 or $5.50 less than in 1930. In villages, with a large number of
new incorporations, per capita gross disbursements were about the same in 1945 as in
1926. The trend in total and per capita net municipal disbursements, that is, gross
disbursements less Provincial Government grants, is similar to the trend in gross
disbursements.
(iii.) Municipal expenditures increased more rapidly than population between 1926
and 1930 but have since then lagged behind the rate of population increase.
(iv.) Per capita expenditures vary with local conditions and the range of services
provided. Cities have the highest per capita expenditures because they provide more
services than the rural districts, while villages, with their restricted powers, show the
lowest figure. Districts with large urban areas, such as Burnaby, have higher per
capita expenditures than those which are entirely rural.    Table 8 shows per capita X 24 MUNICIPAL FUNCTIONS AND EXPENDITURES.
disbursements in 1945 in selected municipalities: it will be noted that they range from
$45.49 to $67.15 in cities, from $19.33 to $35.81 in districts, and from $8.42 to $22.20
in villages.
(v.) Provincial Government grants to municipalities reduce the proportion of total
expenditures financed by the local inhabitants. In cities, excluding Vancouver, the
ratio of grants to total disbursements in 1944 and 1945 was about 14 per cent., a figure
almost equivalent to the ratio in 1926 and 1930. The ratio in districts was about
19 per cent, in 1944 and 1945, as compared with 20 per cent, in 1926 and 1930. The
ratio in both cities and districts was substantially higher in 1936 because of large
unemployment relief grants. In villages the ratio has declined and is considerably less
than in other municipalities because of the basis on which the grants are now made.
B. Trends in Municipal Expenditures in Vancouver.
Tables 14 to 17 relate to the city of Vancouver and show that:—
(i.) Vancouver contains over 34 per cent, of the total population of British
Columbia and over 43.5 per cent, of the population residing in organized areas. Its
current revenue expenditures are about equal to the combined expenditures of all other
municipalities.
(ii.) On the basis of figures adjusted for comparative purposes, expenditures in
Vancouver have fluctuated within relatively narrow limits since 1933; that is, throughout the period of depression, the beginnings of economic recovery, and the war years.
Expenditures began to increase in 1944 and the rise is continuing.
(iii.) On the basis of the adjusted figures, per capita net expenditures in Vancouver
rose from $51.75 in 1930 to $54.17 in 1933, and then declined to a low point of $42.37
in 1945. The figures prepared for the Commission by the City Comptroller, and
contained in Table 17, show per capita total expenditures declining steadily from a peak
of $65.51 in 1932 to $49.39 in 1945, the lowest point in the entire period since 1929.
(xv.) While gross expenditures in 1945 were still below the figure for 1933,
Table 14 shows that, after deducting Government grants, net current expenditures in
1945 were $500,000 higher than in 1933. It should be noted that in 1945 the ratio of
Provincial Government grants to total gross expenditures was 10.4 per cent., which is
exactly equivalent to the figure for 1930. The percentage rose during the years of
depression when large unemployment relief grants were made, but it is significant that
it is now not less than in 1930.
3. EDUCATION.
Education is one of the services which is generally recognized as being of wider
than local concern. Until 1888 the Province bore the full costs of education and then
began to pass on some of the burden to the growing municipalities. From 1920 to 1945
the provincial contribution represented a little less than one-third of the total annual
expenditure on education in organized and unorganized areas.
School expenditures, including interest and sinking fund on school debts, have for
many years been, and continue to be, the largest single item in municipal budgets.
In 1945 they constituted more than 32 per cent, of gross disbursements and over 25
per cent, of net disbursements in cities, excluding Vancouver, almost 40 per cent, of
gross disbursements and more than 32 per cent, of net disbursements in districts, and
more than 31 per cent, of gross expenditures and almost 29 per cent, of net expenditures
in Vancouver. Total school expenditures have, except in a few cases, been rising
annually. Villages, as such, are not responsible for financing education. School costs
constitute a larger proportion of total municipal expenditures in districts than in cities
because the latter provide a wider range of services to their inhabitants. MUNICIPAL FUNCTIONS AND EXPENDITURES. X 25
The amendments to the " Public Schools Act" in 1946, implementing the recommendations of the Cameron Report,* will substantially increase the provincial share of
the costs of education. The legislation divides the Province into seventy-four large
school districts and introduces a new system under which the cost of a basic educational programme is to be shared by local taxpayers and the Provincial Government.
The local share will be the yield of a tax of five mills on 100 per cent, of the assessed
value of land and on 75 per cent, of the assessed value of improvements. The provincial share will be the difference between the total cost of the basic programme and the
sum raised by the local tax. The aim is to equalize educational opportunities and the
financial burden by instituting a system of grants which will ensure a minimum standard of education in terms of a minimum expenditure for education in each school district. On this new basis it is estimated that the provincial share will be approximately
55 per cent, of the total costs of education, assuming that such costs will remain the
same as they were in 1945. On this assumption, it has been submitted to the Commission that the share of school costs financed by cities in 1946 will be 55.6 per cent.
of the total, as compared with approximately 80 per cent, in 1945, while that of districts will be 38.3 per cent, of the total in 1946 as compared with 65.7 per cent, in 1945.
The provincial Department of Education has submitted that Government grants
to school boards in the fiscal year 1946-47 will be increased by about $2,500,000,
of which it is estimated that $2,000,000 will be for the benefit of municipalities. In
addition, the Province has agreed to make a grant of 50 per cent, of the approved costs
of the erection of school buildings (including the cost of the site), of the costs of
alterations to or the reconstruction of existing buildings, and of the cost of furnishing
or equipping buildings. At the time of the Commission's hearings the municipalities
were, as yet, unable to estimate with accuracy the effect of these changes on their
budgets. In a number of instances it was admitted that the increased grants would
afford considerable relief while in others it was suggested that the relief would not be
material. The city of Vancouver will benefit substantially, as is shown by the following comparative estimates submitted by the City Comptroller to the Commission :■—
Vancouver:  Estimated Provincial School Grants, 1945-1947.
Current. Capital.
$ $
1945    619,240      	
1946   1,100,080      115,000+
1947   1,350,000      500,000
- It has been pointed out that the financial benefits to be derived by municipalities
from the additional school grants have been estimated on the basis that school costs
will remain at the figures of 1945. It now appears that in many cases the costs are
rising considerably above those of 1945 because of the rise in teachers' salaries and
the increase in the costs of materials, and because many school boards are providing
more than the basic minimum programme. An increase in municipal assessments also
increases the municipal share of costs. Where the additional grant is substantial, as
in the case of Vancouver, and in urban municipalities generally, the municipality will
undoubtedly benefit considerably, even if not by the full extent of the increase in the
grant. In some cases, however, school board estimates for 1946 indicate that increased
costs will absorb a large part, if not all, of the additional grants. Since increased
school costs were inevitable, it follows that if the Province had not assumed a larger
share of such costs, the municipal taxpayer would now face an increased levy for school
purposes.
* Report of the Commission of Inquiry into Educational Finance, 1945.
t It appears that shortage of architectural help  and other labour and materials will curtail construction of
schools this year. X 26 .     MUNICIPAL FUNCTIONS AND EXPENDITURES.
4. SOCIAL SERVICES.
A. Social Welfare.
The social services to-day are an expansion of the original municipal function to
care for the poor and destitute. While the law in British Columbia, as in other provinces, still imposes upon all municipalities* the obligation " to make suitable provision "
for the poor and destitute,+ the social services are now in large part recognized to be
matters of provincial and Dominion concern rather than of local concern. The Dominion and the provinces have been assuming an increasing share of social welfare
responsibilities in recent years with an accompanying decline in municipal responsibilities. The municipalities of British Columbia do not contribute towards old age
pensions, pensions for the blind, family allowances, mothers' allowances, mental institutions, the Provincial Home for the Aged, and the Industrial Schools for boys and girls.
In addition to the public health services and hospital grants, which are considered
below, municipal expenditures on social services to-day are mainly for general social
assistance, medical care for such public assistance recipients, child welfare, and municipal cases in provincial tuberculosis institutions and provincial infirmaries. The
Province shares in all these costs except for municipal child welfare cases under the
" Protection of Children Act." For municipal cases the municipalities pay 80 cents
per day in Provincial tuberculosis institutions, $1.10 per day in Provincial infirmaries,
and 75 per cent, of the daily per capita cost in the Provincial Home in Kamloops. The
Province has since 1939 assumed 80 per cent, of the cost, excluding administration, of
general social assistance, except for cases requiring nursing-home or institutional care,
and 50 per cent, of the cost of medical care for the recipients of such assistance. £ It
now also shares in some of the costs of administration.
It is clear from the foregoing that the Province now bears a very substantial share
of the costs of social welfare. In submissions to the Commission, municipalities frequently neglected to deduct Government grants from their total expenditures on such
services and showed only their gross expenditures. The local burden, however, is
measured by net expenditures. Table 20 shows both gross and net social welfare disbursements, excluding general health services and hospitalization, in 1937 and in 1944.
The ratio of net social welfare disbursements to total net municipal disbursements in
cities, excluding Vancouver, was 3.6 per cent, in 1944 as compared with 7.2 per cent,
in 1937, and in districts 4.1 per cent, in 1944 as compared with 7.4 per cent, in 1937.
In Vancouver, as shown in Table 22, the ratio in 1945 was 4 per cent, as compared with
8.5 per cent, in 1937. The figures were substantially higher in 1937 and in the immediately preceding years because of high unemployment and also, in part, because
municipal responsibilities were greater before 1937 than they are now. While the
burden imposed by social welfare costs upon municipalities during the depression years
was onerous, except in certain cases, and contributed directly towards the dislocation
of municipal finances, it cannot be considered onerous to-day.
With employment currently at a high level, social welfare costs no longer constitute as large a proportion of municipal expenditures as formerly, although the
amounts spent are now tending to increase. The experience of the depression years
shows, however, that municipal responsibility for even a relatively small share of
unemployment relief may become onerous and that the burden would be distributed
very unevenly. Table 21, comparing the ratio of social welfare costs to gross municipal disbursements and the per capita cost with per capita assessed valuation in selected
municipalities in 1937 and in 1944, shows the uneven distribution of the burden in
* Except villages where the current revenue from real property taxes is less than $7,500.
t The " Municipal Act," sec. 501 ;   the " Vancouver Incorporation Act," sec. 344 ;   and the " Village Municipalities Act," sec. 26, as amended by B.C. Statutes 1938, chap. 45, sec. 11.
t The " Social Assistance Act," B.C. Statutes 1945,, chap. 62. MUNICIPAL FUNCTIONS AND EXPENDITURES. X 27
relation to taxable wealth and that in some instances it amounted to one-quarter, or
more, of total municipal costs in the depression years. The table shows that the costs
even to-day are distributed unevenly because of varying conditions in different municipalities. I am of the opinion that municipalities should not be required to finance the
costs of large-scale unemployment which cannot be related to local causes. The municipal responsibility for poor relief could not have been intended to cover the widespread
and involuntary unemployment of able-bodied and normally employed persons.
In the event of a recurrence of unemployment the operation of the national unemployment insurance system and payment by the Province of 80 per cent, of the costs
of social assistance should prove of material benefit in reducing the municipal load in
the initial period. Further material relief would ensue both to the Province and to
the municipalities if a system of national unemployment assistance for employable
unemployed persons who have exhausted their benefits or who have no benefits under
the " Unemployment Insurance Act," as proposed by the Dominion to the provinces in
August, 1945, is introduced. Failing such other provision for the employable unemployed, the costs of social welfare and relief might again become onerous to the Province and municipalities.
B. Hospitalization.
The " Hospitals Act "* imposes a liability on municipalities to pay to hospitals
entitled to such aid under the Act the sum of 70 cents per day for patients who reside
in the municipality. A municipality may agree with the board of management of a
hospital to pay a fixed annual amount in lieu of its liability. The Province also makes
hospital grants under the Act at a basic rate of 70 cents per day for days in excess
of ten thousand per year, and at a higher rate, rising to $1.25 per day, to smaller
hospitals.
Tables 23 and 24 show that the ratio of municipal hospital costs to total gross
expenditures is in the neighbourhood of 4 per cent, in Vancouver, almost 3 per cent, in
other cities and in districts, and about 4.5 per cent, in villages, while the ratio to net
expenditures is about 4.5 per cent, in Vancouver, 3.5 per cent, in other cities and in
districts, and 5 per cent, in villages. This ratio has risen only slightly over a period
of years since 1937, although it should be noted that the municipal costs of hospitalization in Vancouver more than doubled between 1929 and 1937. Fluctuations in hospital
costs in villages have created problems in that such costs in some cases absorb 20 per
cent, to 25 per cent, of tax revenue.
Under the present system of hospital grants there is no correlation between the
amount of aid received by the hospitals and the amount of " free service " actually
provided by them. In consequence, some hospitals may receive more aid than they
require while others receive less. This affects the city of Vancouver which, in addition
to paying the per diemgrant of 70 cents per patient and a special annual grant of
$100,000, meets the annual deficit on operations of the Vancouver General Hospital.
To the extent that the hospital is a provincial rather than a municipal general hospital,
it would appear that Vancouver should not be required to meet the annual deficit alone.
C. Public Health.
While public health like the other social services was originally a local responsibility, the health of a community is now recognized as being of much wider than local
concern. The Dominion and the provinces have, therefore, assumed an increasing
responsibility for health services.
The " Health Act "+ imposes obligations upon municipalities with respect to health
services and confers supervisory and controlling powers upon the provincial Board of
* R.S.B.C 1936, chap. 121, sec. 32.
t R.S.B.C. 1936, chap. 114. X 28 MUNICIPAL FUNCTIONS AND EXPENDITURES.
Health. The council of every municipality is constituted a local board of health
charged with enforcing health and sanitary regulations. Cities must appoint a medical
health officer and districts may be ordered to appoint a medical health officer by the
provincial board. The Act authorizes two or more municipalities to unite for the
provision of health services into a union health district under a union board of health,
and further authorizes such municipalities to enter into an agreement with the board
of school trustees of any school district situated wholly or in part within the union
health district for the transfer to the union board of the administration of the health
services which the school board is required to carry out under the " Public Schools Act."
Since few municipalities are in a position to maintain modern full-time health
departments and to provide adequate health services, the Provincial Government makes
grants for public health nursing, school nursing, and school dentistry. It also promotes
the formation of larger health units combining the resources of a number of municipalities and parts of unorganized areas for the provision of health services. School
medical work is consolidated with the generalized public health service in the six health
units which are now in operation. Ten more units are being planned. Under a new
system of financing adopted in 1946, each unit is to be assessed 30 cents per capita and
the balance of the cost is to be borne by the Province. The formation of these health
units is a forward step in providing health services, which most communities could not
otherwise afford, at a low cost to the inhabitants.
An approach towards the consolidation of the local health services in the Vancouver
metropolitan area was made by the establishment of the Metropolitan Health Committee in 1936. While this committee has not effected an amalgamation of the health
services of the constituent municipalities, which would be desirable, it has provided
unified direction of the various full-time public health services in the area.* The
Province contributes $35,000 annually to the work of the committee. The city of Vancouver continues to receive provincial grants of $450 per annum per nurse for public
health nursing and also grants for dental services. While the city of Victoria and the
district of Esquimalt have now formed a union board of health, the health services of
the Victoria metropolitan area have yet to be consolidated.
Disbursements on health and sanitation, including garbage collection and scavenging, in cities other than Vancouver, have risen from $165,000 in 1936 to $315,000
or 3.4 per cent, of total disbursements in 1945. In districts, disbursements on these
services were slightly in excess of 2 per cent, of gross disbursements in 1945, and in
villages they were 4.5 per cent, of such disbursements. Economies necessitated by the
depression account for the low figure in 1936. This is particularly evident in the case
of Vancouver where health and sanitation expenditures amounted to $359,000 or 2.4
per cent, of total expenditures in 1936, as compared with $664,000 or 4.3 per cent,
of total expenditures in 1945. Expenditures in Vancouver on public health services
proper, excluding sanitation, reached a low point of $75,100 in 1933 as compared with
$112,000 in 1929. While these expenditures have risen to $136,000 in 1945, they are
still 5 cents less per capita than in 1929.
Expenditures on health services proper represent only a small fraction of municipal
budgets, ranging in a number of selected municipalities from less than one-half of 1
per cent, to 1 per cent, of total expenditures, and, on a per capita basis, from 15 cents
to 66 cents in cities and from 3 cents to 38 cents in districts. Local health services
require further development. The extension of health units throughout the Province,
as proposed by the provincial Department of Health, is the most effective means of
providing adequate health services in the smaller municipalities. Consolidation of
health services in the Vancouver and Victoria metropolitan areas, respectively, with
* Health Act Amendment Act," B.C. Statutes 1944, chap. 15, sec. 4. MUNICIPAL FUNCTIONS AND EXPENDITURES. X 29
the assistance of expanded provincial grants,  is  necessary for adequate and more
efficient services throughout these areas.
5. ADMINISTRATION OF JUSTICE.
Canadian municipalities generally share in some degree with the provinces in the
administration of justice. In British Columbia the " Municipal Act" (section 426)
provides as follows:—
(1.) It is hereby declared to be the duty of all municipalities to bear the expense of
policing the municipality and enforcing not only the municipal by-laws, but also the
criminal law and the general laws of the Province; and of generally maintaining within
the limits of the municipality law and order; and of administering justice therein,
including the prosecution of offenders triable summarily, and also of offenders triable
upon indictment up to committal for trial and delivery of the accused to the common
gaol of the county.
Police magistrates are appointed by the Lieutenant-Governor in Council who may
fix their salary, but such salary is paid by the municipality. It is the duty of municipalities to provide a police office and a lockup and, further, to " pay at such rate as may
be fixed from time to time by the Lieutenant-Governor in Council for the maintenance
of each prisoner confined in a Provincial gaol who has been summarily convicted within
the municipality, under the ' Summary Convictions Act' or under Part XV. of the
Criminal Code, of an offence committed within the municipality."* This rate is presently $1 per day. Municipalities are also responsible for financing the costs of Juvenile
Courts and probation.
The responsibility for the administration of justice as defined in the legislation
extends to all municipalities except villages. The costs are necessarily higher in the
larger municipalities. In 1945 they amounted to approximately $1,350,000 or almost
9 per cent, of total expenditures in Vancouver, to about 4.5 per cent, of gross disbursements in all other cities, and to about 3.5 per cent, of such disbursements in districts.
The costs of policing represent by far the larger proportion of municipal expenditures on the administration of justice. In the city of Vancouver police costs in 1945
amounted to approximately $1,150,000, while the remaining costs were about $200,000.
Section 427 of the " Municipal Act " provides for agreements between the Province and
any municipality for the policing of the municipality by the Provincial Police on such
terms as to reimbursement of expenses as may be mutually agreed upon. Forty-four
municipalities have now entered into such agreements and in 1945 paid the Province
a basic rate of $1,700 per man plus certain minor charges. The costs to the municipalities so policed are less than the actual cost of such service to the Province which in
effect, therefore, is now subsidizing municipal policing. This is also the practice of
the Dominion Government in agreements with a number of provinces for policing such
provinces and some municipalities by the Royal Canadian Mounted Police, the basic
rate being $1,000 per man as compared with $1,700 in British Columbia. In England,
too, policing is considered to be a matter of more than local concern. The municipalities policed under agreement by the Provincial Police are therefore receiving police
services at a cost which is less than the cost incurred by the Province for providing
such services, and considerably less than would be the cost of policing if provided by
the municipalities themselves.
Offsetting to a large extent the municipal costs for the administration of justice
other than policing are the receipts from fines and penalties to which the municipalities
are entitled. A municipality retains all taxes, fines, and penalties assessed, levied and
collected under or by virtue of its by-laws. The " Municipal Act " (section 435) also
provides that:—
* The " Municipal Act," sec. 429 (1). X 30 MUNICIPAL FUNCTIONS AND EXPENDITURES.
It shall be lawful for every municipality paying an annual salary to a Police Magistrate and maintaining a police force to retain and use as part of the municipal revenues
all Police Court fines, fees, and forfeitures incurred not only for breach of its by-laws,
but for infraction of the laws of the Province made in relation to matters coming within
the classes of subjects over which the Provincial Legislature has exclusive legislative
authority, except where other provision for the disposal of such fines, fees, or forfeitures
is made by Statute.
The "Vancouver Incorporation Act" (section 260) provides that:—
All fines, fees, penalties and forfeitures imposed under this Act, or for the breach
of or for enforcing any law of this Province made in relation to any matter coming
within any of the classes enumerated in section 92 of the " British North America Act,
1867," imposed within the said city, and to which the city is entitled, and all fines, fees,
penalties, and forfeitures for offences against the by-laws of the city, shall be paid into
the city exchequer and shall belong to the city.
The municipalities retain the fines imposed by the police magistrate for breaches
of the criminal law within the municipality, except where the fine is by statute required
to be paid elsewhere. The exceptions are normally cases where the Dominion bears
the costs of investigation through the agency of the Royal Canadian Mounted Police
and the costs of prosecution, as in prosecutions under the revenue laws of Canada and
under the orders and regulations of the Wartime Prices and Trade Board. Fines under
the " Indian Act" are payable to the municipality where the offence takes place.
A number of provincial statutes, such as the " Companies Act," the " Securities
Act," and the " Game Act," provide that the fines imposed thereunder shall be payable
to the provincial treasury. The prosecution for offences under these Acts is usually
conducted by the Attorney-General at the expense of the Provincial Government. On
the other hand, fines under other Acts, such as the " Government Liquor Act," are
retained by the municipalities, except where the proceedings are instituted and the
offender prosecuted by the Provincial Police.
It has been submitted to the Commission that the requirement that municipalities
pay the cost of conveying prisoners to the common gaol of the county is unfair and
inequitable in that county gaols are now practically non-existent and prisoners have to
be conveyed to a central gaol, the Oakalla Prison Farm. This practice, it is argued,
places municipalities in the more distant parts of the Province at a financial disadvantage.    I am of the opinion that this criticism is well founded.
It has also been submitted to the Commission that municipal responsibility for the
administration of justice other than policing is undesirable, in that it interferes with
the even administration of justice. The following is an extract from the submission
of the city of New Westminster:—*
Of lesser importance yet bulking largely in municipal expenditures are such matters
as Police costs amongst which are to be found many items imposed by the Province and
paid for by the Municipality. Such are Magistrate's salaries, the keep of prisoners in
the common gaol at Oakalla Prison Farm, the medical inspection of prisoners before
admittance to Oakalla, the prosecution of Federal offences such as offences against the
Opium and Narcotic Drug Act, infractions of the Wartime regulations, etc.
In explanation of some of these items it might be pointed out that a person found
guilty on summary conviction is imprisoned in Oakalla and his keep is charged to the
City at $1 per day. On the other hand, if he is tried for the same offence but on indictment and convicted the City avoids the cost of his keep. Naturally wherever possible
the charge is laid as an indictment in order to avoid these costs. This is manifestly
unfair to the accused person as the penalty on indictment is heavier, yet who can blame
a police official for endeavoring to save money for his employer?
In reply to this allegation, the Deputy Attorney-General submits, in a memorandum
to the Commission, that:—
I do not think there is anything to this point as it is only in a comparatively few
cases that an offence is triable by one method or the other, i.e., on summary conviction,
* Commission Evidence, New Westminster, Vol. 1, pp. 44 and 45. MUNICIPAL FUNCTIONS AND EXPENDITURES. X 31
or on indictment. In any event, I may say that I never heard of such a suggestion that
a police officer would lay a charge as an indictable offence rather than as a summary
conviction offence merely in order to save money for the municipality. This Department handles all cases which are sent for trial to a higher court, and no complaint of
this kind has ever been received.
It has also been pointed out that where an offence is committed within a municipality and the offender escapes, it is the duty of the municipality to pay the costs of
' returning the offender for trial as well as the expense of bringing witnesses from outside.    It has been suggested that under these circumstances some offenders may be
permitted to escape punishment.    The Deputy Attorney-General submits that:—
Instances of this kind are not frequent, and there would seem to be no basis, in fact,
for the suggestion that the administration of justice suffers by reason of the municipality
having to bear this expense.
In order to ensure the effective investigation of offences punishable with death,
the " Municipal Act" was amended in 1946 by the addition of section 426 (3) which
reads as follows:—
Where it is suspected that an offence has been committed punishable with death in
any city municipality with a population less than twenty-five thousand according to the
then last decennial census, or in any district municipality, the Attorney-General may, on
application by the chief of police of the municipality, or without such application if the
Attorney-General considers it desirable so to do, direct that the police investigation be
carried out by the Commissioner of Provincial Police, and thereupon the investigation
shall be conducted by the Criminal Investigation Branch of the Provincial Police Force
in co-operation with the municipal police force, and it shall be the duty of the municipal
police force to assist in the investigation. In the event of such investigation being
directed as aforesaid the municipality shall be relieved from the expense of the investigation and from the duty and expense of prosecuting any case arising therefrom.
While no specific instance has been submitted to the Commission in proof of
allegations that the municipal responsibility for the administration of justice is not
properly discharged, I am of the opinion that the distribution of responsibilities in
relation to this important function of government should be reviewed. I am of the
further opinion that the municipalities should, in any event, be immediately relieved of
the cost for the maintenance of prisoners confined in a provincial gaol and of the cost
of conveying prisoners to the gaol.
6. GENERAL MUNICIPAL SERVICES AND EXPENDITURES.
Municipal expenditures on education, the social services, and the administration of
justice are mandatory under provincial statutes, whereas expenditures on such general
municipal services as are of peculiarly local concern are permissive and are determined
by local conditions and the desires of the local inhabitants. These general expenditures
include overhead costs such as debt charges which, once voluntarily incurred, become
mandatory. In fact, a proportion of all expenditures becomes mandatory in a sense
because of the necessity at all times of providing certain minimum services in organized
communities.
A. General Administration.
" General administration " is an overhead cost representing administration salaries,
superannuation costs, Council indemnities, and other general expenses not related to
any particular function or service. For all cities, other than Vancouver, these expenses
in 1945 represented approximately 9.5 per cent, of total disbursements, in Vancouver
4.7 per cent, of total expenditures, in districts about 8 per cent, of total disbursements,
and in villages 18.5 per cent, of total disbursements. The ratio to total expenditures
has remained fairly stable over a period of years, although the actual expenditures
have been rising with increases in personnel and in salaries. X 32 MUNICIPAL FUNCTIONS AND EXPENDITURES.
B. Municipal Works and Services.
Municipal expenditures on policing, and on health services and sanitation have
already been discussed. The provision of certain services through municipally owned
utilities is discussed in a later chapter. There remain for consideration such municipal
services as streets and sidewalks, street lighting, parks and recreation, fire protection,
and other purely local services. These are essential services but to a degree the
expenditures thereon are controllable.
In the depression years, faced with unemployment relief costs, with the costs of the
relatively inelastic municipal services, and with a decline in the percentage of tax
collections, municipalities economized on the more controllable municipal services by
deferring expenditures on maintenance and improvements and reducing other services.
Expenditures on ordinary works and services were, therefore, at a low point in the
nineteen-thirties, while the shortage of labour and of materials prevented a full resumption of such expenditures during the war years. They began to rise again in 1941 and
1942 as other burdens declined and municipal finances improved, and the increase is
continuing.
In the city of Vancouver expenditures on general works declined from $1,327,000
or $5.52 per capita in 1929 to $558,000 or $2.26 per capita in 1935, and have since risen
to $1,032,000 or $3.19 per capita in 1945. Expenditures on fire protection in the city
declined from $908,000 or $3.75 per capita in 1930 to $653,000 or $2.68 per capita in
1933, and have since risen to $1,050,000 or $3.24 per capita in 1945. Expenditures on
street lighting have remained fairly stable throughout the period at about $250,000.
Expenditures on parks and recreation declined from $357,000 or $1.49 per capita in
1929 to $156,000 or 64 cents per capita in 1933, and have since risen to $284,000 or
88 cents per capita in 1945.
While expenditures on essential services in Vancouver have risen substantially
from the low point of the depression, it is submitted by the city that the recent increase
is represented in large part by higher wages, the higher cost of materials, and an
increase in the number of civic employees. According to figures submitted to the
Commission, the general municipal pay-roll has risen from approximately $3,300,000
in 1937 to $4,290,000 in 1945. The city submits further that to maintain its works
and to operate its services on a normal basis additional annual expenditures of about
$1,600,000 are required, exclusive of amounts necessary to re-establish the sinking fund
and to implement the recommendations of a commission on salary and wage increases.
In all cities, excluding Vancouver, disbursements on municipal works have risen
from $430,000 or 5.8 per cent, of total disbursements in 1936 to $900,000 or 9.6 per cent,
of total disbursements in 1945. Disbursements on fire protection have risen from
$336,000 or 4.5 per cent, of total disbursements in 1936 to $551,000 or approximately
6 per cent, of total disbursements in 1945. Disbursements on street lighting have
remained fairly steady at a little less than 2 per cent, of total disbursements, while
disbursements on parks and cemeteries have increased from $140,000 in 1936 to
$250,000 in 1945. The district municipalities show that disbursements on municipal
works have increased from $663,000 or 14 per cent, of total disbursements in 1936 to
$1,218,000 or approximately 18 per cent, of disbursements in 1945. Costs of fire-
protection have increased from $56,000 or a little over 1 per cent, of total disbursements
in 1936 to $242,000 or 3.6 per cent, of disbursements in 1945. In villages 41 per cent.
of total disbursements in 1945 were on municipal works. It will be noted from the
statistical tables that in cities, other than Vancouver, and in districts and villages
certain capital expenditures were made from revenues. It has not been possible to
analyse such expenditures but they probably include moneys spent on both maintenance
and replacements. MUNICIPAL FUNCTIONS AND EXPENDITURES. X 33
All municipalities have submitted to the Commission that the recent increase in
expenditures on normal municipal works and services has been in large part absorbed
by higher wages and the rise in the cost of materials. They have submitted further
that these expenditures are inadequate, having regard both to long-deferred maintenance and replacements during the depression and war years and to new requirements
created by rapid development and increasing population. A further increase in
expenditures on municipal works and services is, therefore, to be expected.
C. Streets and Roads.
The general municipal services, as considered above, are provided and financed by
the municipalities, with the exception that the Provincial Government makes a grant
to all municipalities of a share of the revenues from motor-vehicle licence fees and has
assumed certain responsibilities for roads and highways in all municipalities other than
cities with a population of more than two thousand.
With the increasing use of the automobile requiring new types of roads and highways, the provincial governments in Canada have generally assumed a greater share of
both construction and maintenance expenditures on certain highways within municipal
limits, particularly in rural municipalities. The degree and the method of participation
vary in the different provinces, but it is generally recognized that rural areas cannot
be expected to finance modern expensive highways, and further that, to the extent that
rural roads form part of main highways, they constitute more than a local responsibility. Urban municipalities do not generally receive direct assistance for streets and
roads because they derive substantial direct and indirect benefits from the provincial
highways, which bring trade and tourists to the larger centres and are, in fact,
primarily arteries of inter-urban traffic, and also because they are normally expected to
construct and maintain more extensive streets and roads to meet the requirements
of the local inhabitants.
Under the " Municipalities Aid Act "* the Province is required to pay to the
municipalities annually one-third of its revenues from motor-vehicle licence fees, after
deducting costs of administration, to assist in the construction or maintenance of public
roads within the municipality. The maximum payable in any year is fixed at $570,000,
and the payment is distributed among all municipalities in proportion to population.
The city of Vancouver derives a revenue of about $250,000 annually from this grant.
Part III. of the " Highway Act "+ classifies highways as " arterial," " primary,"
and " secondary," and provides as follows:—
41.   (1.)   Subject to the provisions of subsections (2) and (3), the cost of construction
and maintenance of classified highways shall be borne as follows:—
(a.)  In the case of arterial highways, the cost of construction and maintenance shall
be borne entirely by the Department:
(6.)  In the case of primary highways, the cost of construction and of maintenance
shall be borne seventy-five per centum by the Department and twenty-five per
centum by the municipal corporation of the area through or in which the highway runs:
(c.)  In the case of secondary highways, the cost of construction shall be borne
equally by the Department and the municipal corporation of the area through
or in which the highway runs, and the cost of maintenance shall be borne forty
per centum by the Department and sixty per centum by the municipal corporation.
(2.)  Where a secondary highway runs in or through a municipality having a population of less than one thousand, the Department may, in the discretion of the Minister,
contribute not exceeding seventy-five per centum of the cost of construction and maintenance of the highway.
* R.S.B.C. 1936, chap. 201.
t R.S.B.C. 1936, chap. 116. X 34 MUNICIPAL FUNCTIONS AND EXPENDITURES.
(3.) The Department may build, rebuild, repair, or protect a bridge upon any highway, where the cost of the work is provided by a specific vote of the Legislature; and in
case of damage by flood or other accident, or where otherwise deemed necessary in the
public interest, the Department may, with the approval of the Lieutenant-Governor in
Council, replace, repair, rebuild, or protect any highway bridge, whether upon a classified or unclassified highway, and pay the entire cost thereof.
Under section 38 of the Act, the foregoing provision applies only " to such highways and portions of highways as are within the limits of a municipality, and none of
the provisions of this Part shall apply to highways or portions of highways within the
limits of any city or city municipality having a population of more than two thousand."
As at March 31st,  1945, the net total classified mileage was approximately as
follows:— ■ Miles.
Arterial   334.44
Primary     49.61
Secondary  120.99
In the case of arterial highways the practice is for the Province to undertake the
responsibility for construction and maintenance and to bear the total costs. The Province also controls the construction and maintenance of primary highways, the municipality contributing 25 per cent, of the costs. In the case of secondary highways the
municipality is responsible for construction and maintenance and the Province becomes
liable for its share of the costs after the estimates have been approved by the Minister
of Public Works. A small vote known as " Local Highways within Municipal Limits "
is included each year in the estimates of the provincial Department of Public Works to
assist municipalities in maintaining local roads within the municipal boundaries, in
addition to any assistance for classified highways. Provincial expenditures on primary,
secondary, and arterial highways and local roads and bridges within municipalities in
the fiscal year 1944-45 were as follows:— $
Cities     36,822.90
Districts   202,855.67
Villages     14,936.74
Total   254,615.31
D. Protection of River Banks.
It has been submitted to the Commission by the municipalities bordering on the
Fraser River that they have over a period of years lost a considerable acreage of valuable agricultural land because of erosion of the banks of the river, that river bank protection has necessitated municipal expenditures, and that the problem is one which
should not be a municipal responsibility. I am of the opinion that this submission is
well founded. As the Fraser River is navigable and, therefore, under the control of
the Dominion Government, and as the foreshore is owned by the Provincial Government, I recommend that immediate consideration be given to the establishment of a
Fraser River Authority representing the interested governments and municipalities to
deal with the problems of river bank protection and related matters, the costs to be
distributed with due regard to the fact that these matters are not primarily a municipal
responsibility.
E. Debt Charges.
The municipal debt of British Columbia is now largely confined to a few municipalities. At the end of 1945, the debts of Vancouver and Victoria represented 62 per
cent, and 11 per cent, of the total, respectively, and the combined debts of Vancouver,
Victoria, New Westminster, North Vancouver City, Burnaby, and North Vancouver
District represented approximately 85 per cent, of the total. The substantial decline
in debt since 1930 has effected a large reduction in annual interest payments. MUNICIPAL FUNCTIONS AND EXPENDITURES. X 35
Debt charges represent a large proportion of current expenditures in Vancouver,
constituting 20 per cent, of the total in 1945, exclusive of charges on school debt, which
are included in school costs, and waterworks debt, which is self-supporting. Payments
on account of debt interest and principal are shown in the following table:—
Vancouver:  Debt Charges, 1945.
Amount. Percentage of
Total Current
Debenture interest  (exclusive of schools and $ Expenditures.
waterworks)   1,842,904 . 12.0
Serial payments and sinking funds      861,247 5.6
Debt charges—Vancouver and Districts Joint
Sewerage assessment*      387,934 2.5
Total  3,092,085 20.1
* Including principal and interest payments but excluding operating and maintenance charges.
Interest charges on the Vancouver debt? have declined from $2,530,000, or over 17
per cent, of total expenditures in 1936, to $1,842,000 or 12 per cent, of expenditures in
1945. Sinking fund payments show an increase since 1944 because full sinking fund
is now provided whereas sinking fund payments were in part or in whole deferred from
1935 to 1943 inclusive.
In assessing the burden of debt charges in the city of Vancouver, it is important
to note that per capita charges on the city's total debt, including interest and principal
payments on general debt, school debt, waterworks debt, and the Joint Sewerage Board
assessment, on the basis of figures submitted by the City Comptroller and reproduced
in Table 17, have declined from a high of $22.61 in 1933 to $13.47 in 1945.
In cities, excluding Vancouver, debt charges in 1945 constituted 12 per cent, of
total current disbursements, of which $653,000 or 7 per cent, represented interest and
$460,000 or 5 per cent, represented payments on account of principal. Interest payments have declined from $987,000, or over 13 per cent, of total disbursements in 1936,
to $653,000 or 7 per cent, of disbursements in 1945. It should be noted that a number
of cities were in default in 1936. The following table shows current debt charges in
the cities where, apart from Vancouver, the debt is mainly concentrated:—
Cities:   Debt Charges, 1945.
Victoria  Amount. Percentage of
Total Current
Debenture  interest   (exclusive  of  schools  and        $ Disbursements.
public utilities)  282,010 10.5
Serial payments and sinking funds   (exclusive
of schools and public utilities)  156,858 5.9
Total  438,868 16.4
New Westminster—
Debenture interest   (exclusive of schools  and
public utilities)  121,122 8.0
Serial payments and sinking funds  (exclusive
of schools and public utilities)     90,403 5.9
Total  211,525 13.9
t Excluding school and waterworks debts and interest charges in the Vancouver and Districts Joint Sewerage
assessment. X 36 MUNICIPAL FUNCTIONS AND EXPENDITURES.
North Vancouver City— Amount. £ercf'J.taBe °l
* Total Current
Debenture interest   (exclusive of schools  and        $ Disbursements.
public utilities)  60,583 9.0
Serial payments and sinking funds   (exclusive
of schools and public utilities)  29,417 4.4
Total     90,000 13.4
If Vancouver, Victoria, New Westminster, and North Vancouver City are excluded,
the debt charges in the remaining cities represent 8.3 per cent, of total disbursements.
In 1945 debt charges in district municipalities constituted only a little over 4 per
cent, of total current disbursements, of which $162,000 or 2.4 per cent, represented
interest and $122,000 represented principal payments. The two districts principally
affected by debt, Burnaby and North Vancouver, were in default after 1932. North
Vancouver District is still in default. In 1940 interest payments in districts amounted
to $207,000 as compared with $162,000 in 1945. The following table shows current
debt charges in Burnaby:—
Burnaby:  Debt Charges, 1945.
Amount. £er?^tage °!
Total Current
Debenture interest   (exclusive of schools  and $ Disbursements.
public utilities)  60,706                  4.6
Serial payments and sinking funds  (exclusive
of schools and public utilities)  49,000                 3.7
Total.     109,706 8.3
Excluding Burnaby and North Vancouver District, debt charges for all other districts amounted to 3.4 per cent, of total disbursements in 1945.
An analysis of municipal debt charges shows that the burden has been declining
for a number of years on a per capita basis, in terms of the total annual requirements,
and in terms of the ratio of such requirements to total municipal expenditures. The
decreasing burden on a per capita basis is particularly marked as the debt was being
reduced while the population of the municipalities was increasing. The rise in municipal debt which is now occurring will result in an increase in annual charges. To keep
these charges within reasonable limits, it is essential that the increase in debt be
controlled. CHAPTER III.
MUNICIPAL DEBTS.
1. MUNICIPALITIES  (EXCLUDING VANCOUVER).
More than 60 per cent, of the municipal debt of British Columbia is represented
by the debt of Vancouver. It is therefore proposed to consider the city's debt separately from that of the other municipalities.
A. Statutory Limitations under the " Municipal Act."
The " Municipal Act" empowers municipalities to contract debts subject to certain
limitations.    Section 103 of the Act provides that:—
(a.) The aggregate of such debts, except for works of local improvement and school
purposes, shall not exceed twenty per centum of the total of the following:—
(i.) The assessed value of the land and improvements within the municipality according to the last revised assessment roll;  and
(ii.) The value of all water systems, irrigation systems, electric light and
power systems, telephone systems, transportation systems, and gasworks owned
by the municipality and constructed or purchased at the expense of the municipality as a whole, such value to be determined by the cost of the system less
such amounts as are allowed by the auditor from time to time for depreciation:
(c.) The whole of the debt and of the obligations to be issued therefor shall be made
payable on or before fifty years from the date of the debentures or other obligations issued for such debt:   .   .   .
Because of special circumstances arising from a disastrous fire in September,
1898, the Act (section 455) makes an exception in the case of the city of New Westminster by fixing the limit on the aggregate of its debts at 30 per cent, of the assessed
value of land and improvements.
Every borrowing by-law, except for a work payable by local assessment, must first
be submitted for the approval of the Inspector of Municipalities who, under section
179 of the Act:—
may, in his discretion and upon consideration of the economic circumstances involved,
refuse to grant his approval if he considers that the debt proposed to be created by the
by-law should not be so created, in whole or in part, or may, in his discretion and upon
like consideration, withhold his approval until the amount proposed to be borrowed is
reduced in amount and the terms of the by-law as to repayment or otherwise are altered
or amended to his satisfaction and in accordance with his directions.
An appeal lies from the decision of the Inspector of Municipalities to the Lieutenant-
Governor in Council.
Following approval by the Inspector of Municipalities or, on appeal, by the
Lieutenant-Governor in Council, the by-law must be submitted to a vote of the electors
qualified to vote on money by-laws and must receive at least 60 per cent, of the total
of the votes polled.
Villages have no power to incur debts, except for the purchase or construction of
waterworks and sewerage systems.    These loans may be guaranteed by the Province.*
(a.)  Appraisal of Debt Limits.
The legal limitations upon the powers of municipalities to incur debts are, in my
opinion, not sufficiently restrictive. The limit of 20 per cent, of the total of the assessed
value of the land and improvements and the value of all municipally owned utilities is
* " Village Municipalities Assistance Act," B.C. Statutes 1945, chap. 53.
37 X 38 MUNICIPAL DEBTS.
high, particularly as it is based on the total assessed valuation, including non-taxable
and untaxed properties. Furthermore, school debts and local improvement debts are
excluded from the aggregate of debts subject to debt limits, as are also (under section
107 of the " Municipal Act") borrowings on the security of water, gas, sewer, and
electric-light rates, although 20 per cent, of the value of the utilities is included in
the base for determining debt limits.
I am of the opinion that, with a view to more stability, municipal indebtedness
should be related to the average assessed valuation over a number of years rather than
to the valuation of one year alone. Accordingly, I recommend that section 103 of the
" Municipal Act" be amended to provide that the assessed value of land and improvements for determining debt limits shall be the average of the revised assessment rolls
of the three preceding years, and that land and improvements exempt from taxation
under section 221 of the Act be excluded from such assessed value.
For reasons already stated, I recommend that sections 103 and 107 of the " Municipal Act" be amended to provide that if a municipality borrows on the security of
utility rates under section 107, no part of the value of the utility or utilities concerned
shall be included in the base for determining debt limits under section 103.
I also recommend that the Inspector of Municipalities review the municipal debt
situation in the light of the current increase in debt and of proposed further increases,
with a view to such statutory readjustment of the debt limits as may be warranted in
the best interests of the municipalities.
(&.)  Debt Retirement Period.
It is a sound and basic principle of public finance that debts incurred for public
improvements should be retired within the period of useful life of such improvements.
Section 103 of the " Municipal Act" sets a maximum retirement period of fifty years
without regard to the purpose of the debt. This period, which is probably related to
the terms imposed by investors at the beginning of the century, is unduly long and
makes it possible for municipalities to incur debts which extend beyond the useful life
of the asset for which they are paying. The attention of the Commission has been
directed to instances, admittedly now few, where debts are still outstanding against
works no longer in use and which have been replaced. While the exercise of the power
of the Inspector of Municipalities to control the terms of borrowing by-laws now prevents similar situations from developing, I am of the opinion that a change in the Act
is also necessary.
I recommend that section 103 (c) of the " Municipal Act" be amended to provide
that debts incurred by municipalities be made payable within a period not exceeding
thirty years from the date of the debentures or other obligations issued for such debts.
A maximum maturity of thirty years is in accord with the trends in other provinces
of Canada and in the United States, and is already fixed by the " Municipal Act" for
debts incurred on the security of utility rates.
While I am of the opinion that sound municipal management and effective control
by the Inspector of Municipalities, subject to the thirty-year maximum maturity period
which I have recommended, should meet the requirements of the present situation in
British Columbia, I draw attention to the fact that legislation controlling municipal
debts is tending to become more restrictive. In some provinces the maximum retirement period for each type of municipal improvement is fixed by statute. Section 305
(2) of the Ontario " Municipal Act " provides that:—•*
The whole debt and the debentures to be issued therefor shall be made payable within
the respective periods hereinafter mentioned at furthest from the time when the debentures are issued,
* R.S.O. 1937, chap. 266. MUNICIPAL DEBTS. X 39
(a) if the debt is for railways, harbour works or improvements, sewers, gas or waterworks, the purchase or improvement of parks or the erections of high, continuation or public school houses, public hospitals and the acquiring of land therefor,
or for electric light, heat or power works or water privileges or land used in
connection therewith, or for acquiring land for a drillshed or armoury, in thirty
years;
(b) if the debt is for the establishment of a system of public scavenging or for the
collection and disposal of ashes, refuse and garbage, in ten years;
(c) if the debt is for the purchase of road-making machinery and appliances, in five
years;
(d) if the debt is for any other purpose, the whole debt, and the debentures to be
issued therefor, shall be made payable in twenty years.
The Local Finance Law of the State of New York, enacted in 1942, specifies in
much greater detail than the Ontario Act the periods of probable usefulness of municipal improvements and prohibits municipalities from contracting indebtedness for any
object or purpose for a period longer than the period of usefulness set forth in the
law for such object or purpose.*
(c.)   Control by Department of Municipal Affairs.
While the " Municipal Act" fixes debt limits in relation to the assessed value of
land and improvements, as is the practice in other provinces of Canada and in the
United States, it wisely requires the Inspector of Municipalities to act on a borrowing
by-law " in his discretion and upon consideration of the economic circumstances involved." The assessed valuation of real estate, which is the basis of municipal taxation, should be an important factor, but not the only factor in measuring debt-bearing
capacity. It is also essential to consider the general economic and financial position
of the municipality, its population trends, and the type and variety of its resources,
and also the economics of the improvement or undertaking for which the proposed
debt is to be incurred.
The control provided by the requirement that every borrowing by-law must first
be submitted for approval by the Inspector of Municipalities is essential, particularly
since municipalities have already entered a new period of debt expansion. The exercise
of this authority has proved beneficial and has not been abused. It is, however, a
serious responsibility to be imposed upon one person: in Ontario, for example, a board
of full-time members must pass on all municipal borrowing by-laws. Accordingly, I
recommend that consideration be given to the appointment of a Municipal Board of
three persons, under the chairmanship of the Deputy Minister of Municipal Affairs
(who is also the Inspector of Municipalities), to whom borrowing by-laws shall be
submitted for consideration and approval before such by-laws are submitted to the
electors. Having regard to the smaller number of municipalities in British Columbia,
members of the board, other than the chairman, should be appointed to serve on a
part-time basis.
In order that the control over municipal borrowings be exercised properly, it is
essential that the staff of the Department of Municipal Affairs be increased by the
appointment of personnel competent to prepare and to analyse the necessary data on
which major decisions affecting the municipalities must be made.
B. Trends in Municipal Debt since 1926.
Trends in municipal debt in British Columbia and the debt situation in relation
to changes in population and assessed valuation over the past twenty years are shown
in the following tables:—■
Table 25.—All Municipalities:   Gross and Net Debenture Debt, 1926-1945.
» Laws of New York, 1942, chap. 424, sec. 11.00. X 40 MUNICIPAL DEBTS.
Table 26.—Selected Municipalities:   Gross and Net Debenture Debt, 1926-
1945.
Table27.—Selected Municipalities: Analysis of Debt, 1926-1945.
An analysis of the statistics shows that by far the largest part of the municipal
debt is confined to a few municipalities. The following table shows that of a gross
debenture debt of over $104,000,000 in 1945, the city of Vancouver was responsible for
62 per cent.; the cities of Vancouver, Victoria, New Westminster, and North Vancouver, for over 80 per cent.; and these four cities together with the two districts of
Burnaby and North Vancouver, for approximately 85 per cent.
Gross Municipal Debenture Debt, 1945.
$ %
Vancouver   64,564,705 62.0
Victoria   11,747,537 11.3
New Westminster  5,216,506                   5.0
North Vancouver City  2,420,206                    2.3
Burnaby   2,519,849                    2.4
North Vancouver District  1,807,735                   1.8
All other municipalities  15,831,614 15.2
All municipalities   104,108,152 100.0
(a.)  Debt Reduction since 1926.
Municipal debt, which increased substantially in the years of booming land values
and inflated assessments, and particularly after 1910, continued to increase until about
1930. Cities, excluding Vancouver, reached their peak indebtedness of approximately
$40,000,000 in 1930, and thereafter gradually reduced their debt year by year. In 1945
the gross debt of these cities amounted to $28,350,000, a decline of about 39 per cent,
since 1930. The gross debt of Victoria declined from approximately $16,950,000 in
1926 to $11,750,000 in 1945, and the decline in New Westminster was from a peak of
$6,900,000 in 1930 to about $5,200,000 in 1945.
The districts continued to increase their gross indebtedness until 1932 when it
amounted to $13,750,000, but by 1944 it had been reduced to $10,670,000, a decrease of
more than 22 per cent. In 1945 the district debt rose again to $11,130,000. Burnaby's
debt declined from a peak of $3,567,000 in 1933 to $2,520,000 in 1945, while the debt of
North Vancouver District has not yet been refunded.
In 1926 five districts reported no funded debt, while in 1945 four cities and seven
districts were free of funded debt. It is significant also that in 1945 the figures for
the gross and the net per capita debt of both cities and districts were less than one-half
of the corresponding figures for 1926. The per capita net debenture debt of cities
declined from $236.20 in 1926 to $117.57 in 1945, and that of the districts from $77.01
in 1926 to $32.63 in 1945.
Relating debt to assessed valuation, the gross debt per $1,000 of valuation in cities,
other than Vancouver, rose from $254.26 in 1926 to a peak of $280.77 in 1936 and then
declined gradually to $185.30 in 1945. The corresponding figures for net debenture
debt were $203.89 in 1926 and $147.17 in 1945. In districts, excluding Tadanac, gross
debt per $1,000 of assessed valuation rose from $87.20 in 1926 to $102.22 in 1936 and
then declined to $72.95 in 1945, while the net debt was $44.88 in 1945 as compared with
$65.08 in 1926.
The decline in per capita debt and in the ratio of debt to assessed valuation since
1930 has varied greatly in different municipalities, as is shown in Table 26.    To MUNICIPAL DEBTS. X 41
appraise the debt position of individual municipalities it is necessary to have regard to
many factors, such as the income and economic position of the community, the purposes
for which the debts were incurred, and the condition of the assets so created. It is
also necessary to distinguish between " self-supporting " debt, normally represented by
debts incurred for municipally owned utilities, and " tax-supported " debt. Owing to
the consolidation of debts under various refunding operations in recent years, it is not
possible to segregate debts in a number of cases, including the city of Victoria, but
Table 27, containing an analysis of the debt of selected municipalities, shows that a
considerable proportion has been incurred for municipal utilities. To the extent that
the rates charged for a utility service pay for the costs of the service, including interest
on and amortization of the debt during the useful life of the utility, a utility debt is
not a burden on the taxpayers as such. It will be shown below that a substantial
number of municipally owned utilities produce large annual profits.
Considering the municipalities as a group, and relating their debt to such factors
as population and assessed valuation, it appears that the municipal debt to-day is less
burdensome than at any time since the end of the First World War. It must be noted,
however, that in the case of cities both per capita debt and the ratio of debt to assessed
valuation were high in the period between the two wars as compared with many cities
in other Provinces. In one or two instances the figures for individual municipalities
are still relatively high.
The districts of Penticton and Summerland have made special representations to
the Commission with respect to the debt incurred for their irrigation systems, which
are operated as municipal utilities. They submit that their fruit-growers have been
placed at a disadvantage as compared, for example, with producers in irrigation districts
under the " Water Act,"* in that the latter districts borrowed from the Provincial
Government which has cancelled varying proportions of their indebtedness, whereas
the two municipalities borrowed mainly from the public and have been meeting their
obligations in full. The Commission has not been in a position to examine the merits
of this submission since consideration of the relative positions of producers in different
irrigation districts is not within its terms of reference.
(b.)  Municipal Defaults.
Since 1932 fifteen municipalities have refunded their debts under special Acts.
In some cases the refunding involved only an extension of the maturity date and in a
small number of cases a reduction in interest. The cities of North Vancouver, Merritt,
Prince Rupert, and Fernie, and the districts of North Vancouver and Burnaby defaulted
on their debt, and administrative commissioners were appointed by the Lieutenant-
Governor in Council, under Part XXIII. of the " Municipal Act," to administer the
affairs of these municipalities. With improvement in their financial position, local
self-government has now been restored and the administrative commission abolished
in all cases, except in the district of North Vancouver and in the city of Merritt.
It is important to note some factors which, in addition to general economic depression and unemployment, contributed to these municipal defaults. There was over-
expansion during and following the period of rapid development in Western Canada:
debts were incurred on the basis of inflated assessments and new subdivisions were
opened up and local improvements made in anticipation of increases in population
which did not develop.    Municipalities must avoid a repetition of such overexpansion.
The guarantee of the bonds of private business enterprises by certain municipalities also contributed to municipal financial difficulties. Such practices must not be
condoned and should be expressly prohibited by law. I recommend that the " Municipal
Act" be amended by adding thereto a provision that no municipality shall give or loan
* R.S.B.C. 1936, chap. 305, Part VI. X 42
MUNICIPAL DEBTS.
its credit to or in aid of any individual or private business undertaking. The proposed
amendment should not be construed to prevent aid to hospitals, charitable institutions,
and for the relief of the poor.
(c.)  Sinking Fund Shortages.
An amendment to the " Municipal Act" in 1933 authorized the council of any
municipality by by-law and with the approval of the Inspector of Municipalities to
provide " that in the year 1933 it shall not be necessary to levy or raise or provide the
full amount of money required by by-laws of the municipality to be provided for sinking
fund purposes, and determine what amount (if any) shall be levied or raised or provided for those purposes in that year."* This authority was renewed for each of the
years to and including 1941.
In 1933 twenty-five municipalities reported sinking fund shortages, whereas
in 1945 only Vancouver, New Westminster, North Vancouver District, and Merritt
reported such shortages. The position of Vancouver is discussed below. North
Vancouver District is still in default and is administered by a Commissioner. The
shortages, except in Vancouver, are shown in the following table:—
Sinking Fund Shortages
as at December
31st, 19J+5 (excluding Vancouver).
Municipality.
Sinking Fund
on Hand.
Sinking Fund
Required.
Sinking Fund
Shortage.
$
90,428
1,215,349
1,155,627
$
93,641
2,290,493
1,284,494
$
3,213
1,075,144
128,867
In evidence to the Commission, the city of New Westminster submitted that owing
to economic conditions it was necessary to withhold sinking fund payments in the years
from 1935 to 1938, both inclusive. It was further submitted that more than the legal
requirements have been set aside for the past four years so that " if the succeeding
councils will follow out what we have established in the last four years to set up that
amount, at the end of twenty years we will have met all our bonded requirements. In
other words, there will be nothing to worry about."t I am satisfied that New Westminster is in a position or can place itself in a position to continue to pay annually
into its sinking fund more than the minimum legal requirement in order to eliminate
shortages and to retire all its debentures at maturity.
(d.)  Sinking Fund and Serial Debentures.
Borrowing by-laws under the " Municipal Act " may provide for the issuing of
either sinking fund or serial debentures. Part VII. of the Act regulates the administration of sinking funds by the municipal councils. On the advice of the Department
of Municipal Affairs the number of municipalities issuing serial debentures has been
increasing, and a growing proportion of the municipal debenture debt, including the
entire debt of the city of Victoria, is now in serial form. There are still, however, a
large number of municipal sinking funds.
While the Department of Municipal Affairs is to be commended for advising
municipalities to issue serial debentures, I am of the opinion that the law should make
the issue of serial debentures mandatory. Sinking fund administration is complicated
and involves too many elements of danger and risk.    Few municipalities are in a
* B.C. Statutes 1933, chap. 46, sec. 11.
t Commission Evidence, New Westminster, Vol. 1, p. 27. MUNICIPAL DEBTS. X 43
position to provide the required expert administration, as they have neither adequate
buying power nor technical advice. Accordingly, I recommend that the " Municipal
Act " be amended to make it mandatory for all municipalities governed by the Act to
issue serial debentures only.
It has been suggested to the Commission that serial bonds may not be appropriate
for certain types of municipal undertakings. In this connection it is well to point out
that there are different types of serials, the type issued depending on the purposes for
which the loan is being incurred as well as on other circumstances. Straight serials,
which provide for equal annual payments of principal, make for an orderly decline in
debt service. Annuity serials, where the annual redemption requirement increases
gradually to equalize the annual cost of principal and interest over the full period of
the issue, may be more appropriate when investors are seeking long-term loans or when
the purpose of the issue is the construction of a self-liquidating enterprise, the earning
power of which will expand gradually. While problems as to the type of serials to be
issued and the terms thereof will, of course, present themselves, the issue of serial
debentures will eliminate the complicated problems of debt administration involved in
the operation of a sinking fund.
(e.) Sinking Fund Administration.
In the matter of sinking fund administration, I draw attention to section 328 of
the Ontario " Municipal Act," which reads as follows*:—
(1) A council may provide by a money by-law that the annual amount to be levied
on account of the sinking fund shall be paid by the treasurer of the municipality to the
Treasurer of Ontario, and if the by-law does not provide for such payment, the council
may pass a by-law providing therefor.
(2) All money received by the Treasurer of Ontario under the provisions of this
section shall form part of the Consolidated Revenue Fund, and a statement of the amount
at the credit of each municipality shall be set forth annually in the Public Accounts of
Ontario.
(3) The Treasurer of Ontario may invest the amount at the credit of a municipality
or any part thereof in the debentures of such municipality, to redeem which such sinking
funds were paid to the Treasurer.
(4) The amount payable in any year into the sinking fund which under the provisions of the by-law is to be paid to the Treasurer of Ontario shall be deemed a debt due
to him, and in default of payment thereof, he may sue therefor in his own name as for
a debt due to the Crown in any court of competent jurisdiction.
(5) Upon the maturity of the debentures to redeem which a sinking fund has been
paid to the Treasurer of Ontario, the amount to the credit of the sinking fund shall be
payable out of the Consolidated Revenue Fund upon the order of the Treasurer to the
holder of the debentures or to his agent or into a bank or otherwise according to the
tenor of the debentures or as the Treasurer may direct.
The " Town and Village Act " of Alberta also provides for the administration of
municipal sinking funds by the Provincial Treasurer.!
I recommend that the " Municipal Act " of British Columbia be amended by adding
thereto a provision similar to the foregoing provision of the Ontario " Municipal Act,"
in order to enable municipalities to arrange for the administration of their sinking
funds by the provincial Minister of Finance.
(/.) Other Municipal Borrowings.
Municipal borrowings outstanding as at December 31st, 1945, other than funded
debt, were relatively small, as is shown in the following table. They were represented
in the main by bank loans and by Provincial Government loans for unemployment relief.
A large proportion of the relief loans was funded in 1946.
* R.S.O. 1937, chap. 266.
t R.S.A. 1942, chap. 150, sees. 398-400. X 44 MUNICIPAL DEBTS.
Demand Loans as at December 31st, 1945.
Provincial
Government. Bank.
Cities—                                ,                                               $ $
Nanaimo  120,800 	
New Westminster     71,812 367,000
Victoria   300,000 62,537
Others     63,794 61,324
Total  556,406 490,861
Districts—
Burnaby   110,000 	
Others     94,506 61,900
Total  204,506 61,900
2. CITY OF VANCOUVER.
A. Statutory Limitations under the Vancouver Charter.
The " Vancouver Incorporation Act" (section 135) limits the aggregate of the
city's debt to 20 per cent, of the assessed value of its real estate computed on an average
taken from the assessment roll for the two years antecedent to the creation of the debt.
The aggregate is exclusive of such sums as may be required to acquire the assets of any
company operating a public utility in the city of Vancouver or vicinity. It also excludes
debentures issued under local improvement by-laws on the security of special assessments. Debentures may be on the sinking fund or serial basis. Borrowing by-laws
require the approval of three-fifths of the votes polled of electors authorized to vote
on money by-laws.
It will be noted that Vancouver already averages its assessed valuation for debt
purposes over the period of two years antecedent to the creation of the debt. I recommend that the " Vancouver Incorporation Act " be amended to provide that the assessed
value for determining debt limits shall be the average of the revised assessment rolls of
the three preceding years, and that land and improvements exempt from taxation under
section 46 of the charter be excluded from such assessed value.
The charter provides that debentures must be payable in fifty years. The comments already made on the maximum period for debt retirement apply to the city of
Vancouver: it is important that debts be retired before the expiry of the useful life of
the assets for which they were created. The city is, therefore, to be commended for its
recent policy of restricting borrowings to a term of twenty-five years. I recommend
that the " Vancouver Incorporation Act" be amended to provide that debt maturities
shall not exceed thirty years.
B. Municipal Debt.
Trends in the municipal debt of the city of Vancouver in the period 1930-1945 are
shown in the following tables:—■
Table 28.—Vancouver:   Municipal Debt, 1930-1945.
Table 29.—Vancouver:   Analysis of Debenture Debt, 1945.
(a.) Gross Debenture Debt.
The city's gross debenture debt declined gradually from $70,300,000 in 1933 to
$61,500,000 in 1944, rising again to $64,500,000 in 1945. MUNICIPAL DEBTS. X 45
The gross debt per capita declined from $288.44 in 1933 to $197.27 in 1944, and
rose to $199.37 in 1945.
The gross debt per $1,000 of assessed valuation rose from $189.78 in 1933 to
$227.12 in 1938, and then declined to $196.48 in 1944.    It rose to $201.13 in 1945.
It should be noted that the debt for the waterworks utility, which is operated on a
profitable basis, represents over $9,900,000 of the gross debt and that this amount
includes debentures of approximately $3,400,000 on which interest and sinking fund is
payable to the city by the Greater Vancouver Water District.
(b.) Net Debenture Debt.
The net debenture debt declined from $55,200,000 in 1933 to $41,800,000 in 1944,
and rose to $43,000,000 in 1945.
The net debt per capita declined from $226.50 in 1933 to $132.75 in 1945.
The net debt per $1,000 of assessed valuation rose from $149.03 in 1933 to $169.79
in 1937, and then declined to $133.92 in 1945.
The net debenture debt, excluding the waterworks debt, was $36,975,000 or $114.17
per capita at the end of 1945.
(c.) Bank Borrowings.
Bank borrowings for current purposes, which averaged well over $1,500,000
between 1930 and 1938, were reduced to $60,000 in 1939 and were extinguished in
1942.
Bank borrowings for capital purposes, against unissued debentures, which amounted
to approximately $5,000,000 in 1937, were reduced to $60,000 in 1942 and were extinguished by 1944.
The city has incurred no obligations by way of bank borrowings for a number of
years and no such obligations are now outstanding.
(d.) Sinking Fund.
Section 57 of the city charter requires that the annual rate levied on all the rateable property shall provide for all the necessary expenses of the city, " as well as the
payment of every such sum or sums as the city shall have undertaken to be liable for
during the current year, in respect of any debenture or other debt or obligation . . ."
The city's policy for a number of years, according to information submitted to the
Commission by the City Comptroller, " was to pay into Sinking Fund the amount of
cash remaining from tax collections after other current liabilities had been paid, the
tax arrears (and where tax sales result, the tax-sale properties) then becoming an
' asset' against the ' liability to the Sinking Fund.' " This explains the deficiencies
represented by " instalments and interest due," an item which appeared in the sinking
fund accounts long before 1935 but which was offset by assets representing tax arrears
and tax-sale properties.
Owing to unfavourable economic conditions and to the burden of unemployment
relief expenditures, the " Vancouver Enabling Act, 1935,"* authorized the city council
not to levy or provide during the years 1935 and 1936 any or all of the amounts required
for sinking fund purposes, and provided further " that if any such moneys are levied
for and collected, the same or any portion thereof may be used by the said city for its
current expenditures." This authority was renewed annually thereafter until and
including the year 1943. Accordingly, the whole or part of the sinking fund levy and
the accrued interest thereon was annually deferred from 1935 to 1943, both years
inclusive. All amounts so deferred were set up with accrued interest in the city's
books.
* B.C. Statutes 1935, chap. X 46 MUNICIPAL DEBTS.
Following the adoption of the policy of deferring the whole or part of the sinking
fund levy, the city began and has since continued the practice of paying into the fund
the percentage of the sinking fund levy actually collected as well as the proceeds from
the sales of tax-sale properties and a proportion of the collections of tax arrears.
Furthermore, whereas prior to 1935 a portion of the surplus earnings of the sinking
fund was taken into the current budget each year, the practice since 1944 has been to
leave all surplus earnings in the fund and to apply them as a partial offset to the
shortage. In 1944, also, the sinking fund reserve of approximately $3,700,000 against
overdue and deferred instalments was applied in partial liquidation of deferred levies
and interest.    The full amount required for sinking fund has been levied since 1944.
The sinking fund on hand has risen from $15,100,000 in 1933 to approximately
$21,600,000 in 1945. Sinking fund shortages increased from approximately $5,600,000
in 1933 to $16,100,000 in 1941, but have since declined to $9,500,000. A further substantial decline is in prospect for 1946. It should be noted, however, that the assets
consisting of tax arrears and tax-sale properties which formerly offset the shortages
have also declined substantially.
In considering Vancouver's finances, it is important to note that, to its credit and
in contrast to other large cities in Canada, it created no funded debt for unemployment
relief expenditures during the depression years, although it used funds which otherwise would have been paid into sinking fund. While I am of the opinion that it was
not necessary to defer levying the full amount for sinking fund purposes for the whole
period of nine years and as late as 1943, I note that the city has made a real effort to
reduce the shortages and has effected a substantial reduction in such shortages. It is
to be commended for the policy which it has pursued and is pursuing in this regard.
In 1945 the city proposed an amendment to the " Vancouver Enabling Act" to
provide for financing the deferred sinking fund instalments by the issue of debentures
to the sinking fund. These debentures were not to be sold but were to be placed to the
credit of the sinking fund and were to be " levied and provided for, and otherwise dealt
with, in the same manner as if the said debentures had been regularly issued to persons
other than the said City and repurchased by the said City as an investment on behalf
of such sinking fund." I recommend that this plan be approved and that the debentures issued accordingly be of the serial type.
As at the end of 1945 Vancouver's funded debt of $64,564,000 included $10,113,000
issued by the serial method. The present policy of financing by the issue of serial
bonds is to be commended and should be continued. It would be well if the larger part
of the debt were in serial form.
3. CONCLUSIONS ON MUNICIPAL DEBT.
The debt position of British Columbia municipalities has improved substantially
in recent years and is now generally satisfactory. The improvement is indicated by
the extent of the decline in debt since 1930 in total amount and in relation to population and assessed valuation. As has already been stated, the municipal debt appears
less burdensome now than at any time since the end of the First World War.
Interest rates' oh new municipal borrowings have declined with the general downward trend in rates and with the improvement in municipal finances. While Vancouver is now borrowing at record low rates, the average rate of 4.37 per cent, on its outstanding debt, as at the end of 1945, is high, particularly as compared with that of
cities and of private corporations which have been able to refund their debts during
the period of declining interest rates. The city's bonds not being callable, I am advised
that it has not been possible to arrange for a refunding at lower interest rates.
The rapid growth of Vancouver and of other municipalities in recent years, their
accumulation of deferred improvements and replacements, and their improved financial MUNICIPAL DEBTS. X 47
position are now contributory factors towards an increase in municipal debt. It is
important that the new capital expenditures and the borrowing therefor be carefully
planned and controlled with a view to preventing a repetition of past experiences resulting from unplanned and undue expansion. The tendency to expand debt too rapidly
and to provide facilities which are not essential is already apparent. The municipalities and the economy of the Province generally would benefit if in all cases only those
municipal improvements which are required immediately are now proceeded with, while
other improvements, if warranted, are planned and timed for execution when the current high level of construction declines. CHAPTER IV.
MUNICIPAL REVENUES.
The powers of municipalities to raise revenues are defined in the " Municipal Act,"
the " Vancouver Incorporation Act," and the " Village Municipalities Act." The principal sources of municipal revenue are the taxation of land and improvements; trade
licences; miscellaneous taxes such as a road tax, a dog tax, a library tax, a vehicle
tax, and a poll tax; special fees and rentals; and fines and penalties. Provincial Government grants and, in many cases, profits of municipally owned utilities, are additional
sources of revenue.
A number of statistical tables showing current municipal revenues over a period
of years are presented in the appendix to this report. The only statistics on a relatively comparable basis for all municipalities, excluding Vancouver, are, with a few
exceptions, those for the years 1936 to 1945. It should be noted that the figures show
current revenue " receipts " and not " revenues," except in Vancouver, as this is the
basis on which reports are prepared for the Department of Municipal Affairs. It
should also be noted that only surpluses and not total receipts are shown for public
utilities.   The relevant tables are as follows:—
Table 30.—All  Municipalities   (excluding  Vancouver):    Gross   Current  Receipts, 1936-1945.
Table 31.—Selected Municipalities:   Gross Current Receipts, 1945.
Table 32.—All Municipalities (excluding Vancouver) :   Net Current Receipts—•
Gross Current Receipts less Government Grants, 1936-1945.
Table 33.—Selected   Municipalities:    Net   Current   Receipts—Gross   Current
Receipts less Government Grants, 1945.
Table 34.—Vancouver:   Gross Current Revenues, 1930-1945.
Table 35.—Vancouver:   Net Current Revenues—Gross Current Revenues less
Government Grants, 1930-1945.
Table 36.—Vancouver:   Comparative Revenues, in Detail, 1929-1945.
Table 37.—All Municipalities:   Government Grants, 1926-1945.
Table 38.—Selected Municipalities:   Government Grants, 1926-1945.
1. REAL PROPERTY TAX RECEIPTS.
A review of municipal revenues shows that the real property tax is by far the
largest source of such revenues. Including current taxes and arrears but excluding
proceeds from the sale of tax-sale properties, the tax in 1945 contributed over 51 per
cent, of total receipts in cities (excluding Vancouver), 61 per cent, in districts, and
47 per cent, in villages. Excluding Government grants and considering only net
receipts raised within the municipalities, these percentages rise to approximately 60
per cent, in cities (excluding Vancouver), 75 per cent, in districts, and 50 per cent,
in villages.
Total receipts in cities (excluding Vancouver) increased from $7,420,000 in 1936
to $9,500,000 in 1945. Receipts from property taxes, including the current tax and
arrears but excluding proceeds from sales of tax-sale properties, accounted for $635,000
of this increase, and as a result the ratio of property tax receipts to total receipts
declined from 57 per cent, in 1936 to 51 per cent, in 1945. It should be noted, however,
that there was an actual increase of $1,165,000 in receipts from taxes of the current
year but a decline of $465,000 in the yield from collections of arrears.
The ratio of property tax receipts to total receipts varies in different cities largely
because  of the factor  of  utility  surpluses.     The  relatively  large  surpluses  from
48 MUNICIPAL REVENUES. X 49
municipally owned utilities account for a ratio, in 1945, of only 27 per cent, in Fernie,
30.6 per cent, in Prince George, 40 per cent, in Nelson, and 43 per cent, in New Westminster, as compared with 65.4 per cent, in Victoria and 56.5 per cent, in Kamloops.
The increase in utility surpluses and in the proceeds of sales from tax-sale properties
in cities, other than Vancouver, account for a decline of about 11 per cent, in the ratio
of real property tax receipts to total net receipts (gross receipts less Government
grants) between 1936 and 1945.
In the city of Vancouver, net revenue from the real property tax, including local
improvement taxes and interest on tax arrears, amounted in 1945 to $11,300,000
or 74 per cent, of total revenues and to 82.5 per cent, of revenues excluding Government
grants. In 1930 the corresponding figures were over 78.5 per cent, and approximately
88 per cent., respectively. It is important to note that the figure for net real property
tax revenues in 1945 was only slightly higher than the corresponding figure of
$11,100,000 for 1930. As shown in the data prepared by the City Comptroller (Table
36), per capita real property tax revenues in 1945 amounted to $34.95 as compared
with $45.74 in 1930. The per capita figure for 1945 was the lowest in the fifteen-year
period.
The districts show a constant rise in real property tax receipts, including the
current tax and arrears but excluding proceeds of sales of tax-sale properties, in each
of the years from 1936 to 1945. These amounted to $2,850,000 or 59 per cent, of total
receipts in 1936 and to $4,300,000 or 61 per cent, in 1945. Without the relatively large
receipts from utility profits enjoyed by cities, the districts have had to rely to a greater
extent on real property taxation. Receipts from taxes of the current year have, therefore, increased from 43 per cent, of total receipts in 1936 to over 55.5 per cent, in 1945.
Considering net receipts only, that is, gross receipts less Government grants, which is
the amount actually raised in the municipality, it appears that sales of tax-sale properties and the yield from a few other items are responsible for a decline of 10 per cent,
in the ratio of real property tax receipts to net receipts between 1936 and 1945.
In villages, receipts from real property taxes have more than doubled between 1936
and 1945, but regard must be had to the fact that a large number of the villages have
been incorporated only since 1940.
The foregoing analysis of current municipal revenues since 1936 shows that the
real property tax continues to be by far the principal source of funds for financing
municipal expenditures but that the share of expenditures financed by this tax has
tended to decline with the increase in the surpluses of municipally owned utilities in
the cities and the large proceeds from the sales of tax-sale properties in cities and in
districts. Since, however, receipts from the sale of tax-sale properties will decrease as
the number of available properties declines, and as utility surpluses may also decline,
the ratio of real property tax receipts to total receipts is likely to rise.
2. RECEIPTS FROM SALES OF TAX-SALE PROPERTIES.
Improved economic conditions, industrial and commercial expansion, and the shortage of housing accommodation account for the marked decline in municipal holdings of
tax-sale properties. Proceeds from the sale of tax-sale properties in cities, other than
Vancouver, have increased from about $100,000 in 1936 to over $580,000 in 1945, and in
districts from $130,000 in 1936 to approximately $600,000 in 1945. Tax-sale properties
held by the city of Vancouver have declined from about $5,630,000 in 1938 to $3,630,000
in 1945.
Receipts from the sale of tax-sale properties have been an important factor in
municipal finances in the past few years. The city of Vancouver applies these receipts
against overdue sinking fund instalments. In the case of other municipalities, however,
the proceeds have generally been used for current municipal purposes.    Burnaby, which X 50 MUNICIPAL REVENUES.
in 1945 derived more than 18 per cent, of its receipts from this source, submitted to
the Commission that without these revenues it could not perform its ordinary municipal
functions. The city of North Vancouver submitted that only the sale of tax-sale lands
has made it possible to pay the costs of ordinary municipal services. Similar submissions were made by other municipalities.
I am of the opinion that municipalities would have been well advised to set aside
the whole, or at least a part, of the proceeds from the sales of tax-sale properties as
reserves for capital purposes or for special expenditures, particularly in the past two
or three years when economic conditions and municipal finances improved very
considerably. Some municipalities had the foresight to set aside such reserves, but
it is clear from the evidence submitted to the Commission that others preferred to take
advantage of these special receipts to maintain or to lower tax rates. The following,
for example, is an extract from the evidence of the Clerk of Maple Ridge:—*
Q. What did you do with the proceeds of tax-sale property?
A. They didn't increase the tax and used that for revenue.
While proceeds from the sale of tax-sale properties are still high and may continue
relatively high for a time, municipalities submitted that they have already disposed of
a substantial proportion of their holdings and, in some cases, that not much now
remains for sale. For example, a representative of Kelowna admitted that " we have
about 10 per cent, of what we had three years ago left for sale. Some of those properties we don't wish to sell at present for internal reasons, but for residential purposes
we have only a very, very few lots left."f
The Comptroller of the city of Victoria stated in evidence that:—X
The cream of those properties have gone, and we have next to no improved property
left; it is nearly all vacant property. The best of them have gone. While we are
selling a pretty fair number of them now, I don't think that can continue indefinitely.
We adopt a policy of not selling those lands which are not serviced with sewer and water,
but eventually we will come to the point where we will have to, or spend money to service
them.
The disposal of tax-sale properties returns such properties to the active assessment
roll and broadens the base of the real property tax. It is clear, however, that receipts
from sales of such properties cannot continue indefinitely as an increasing source of
municipal revenue, and that as this source contracts, revenues from other sources will
have to increase. It is important that municipalities recognize this fact now and that
they plan accordingly.
I recommend that municipalities adopt a policy of using receipts from the sale of
tax-sale properties for debt reduction or of setting them aside as reserves for capital
purposes or for expenditures of a special nature.
3. RECEIPTS FROM PROVINCIAL GOVERNMENT GRANTS.
The municipalities have for many years received certain grants-in-aid from the
Province. Originally such grants were mainly in aid of education, but from 1920 to
1933 the municipalities also received a share of the provincial liquor profits and of
the revenue from motor-vehicle licences, as well as the net proceeds of the pari-mutuel
tax. They still receive up to $570,000 annually as a share of motor-vehicle licence
revenues but no longer share in liquor profits or in pari-mutuel tax receipts. While the
Province ceased to make these general grants it has continued grants for specific purposes such as education and social services, and such grants have increased considerably.
* Commission Evidence, New Westminster, Vol. 2, p.  12.
t Commission Evidence, Kelowna, p. 25.
X Commission Evidence, Victoria, p. 36. MUNICIPAL REVENUES. X 51
In 1945 Provincial Government grants constituted the second largest item in
the receipts of cities and districts, amounting to approximately 10.5 per cent, of total
revenues in Vancouver, 14 per cent, of total receipts in other cities, and 18.3 per cent,
in districts. While these percentages reached a peak with large unemployment relief
grants in the years from 1936 to 1939, it is of interest to note that the ratio of receipts
from Government grants to total municipal revenues in Vancouver was almost exactly
the same in 1945 as in 1930; that the ratio in other cities in 1945 was slightly higher
than in 1926 and 2 per cent, less than in 1930; and that in districts the ratio in 1945
was only 1 per cent, less than in 1926 and 3 per cent, less than in 1930.
The basis on which Government grants are made leads to considerable variation in
the proportions which the grants bear to total receipts in different municipalities.
Grants to municipalities in which education and social assistance costs account for
most of the current outlay represent a larger proportion of total receipts than in
municipalities where the current outlay is mainly for other services. This explains
the higher ratio of grants to total receipts in districts and in smaller cities and the
relatively lower ratio in the larger cities.
Grants constituted 30 per cent, of total receipts in villages in 1930, but, as villages
incur no expenditures on education and relatively little expenditure for social
assistance, the ratio on the present basis of Government grants has declined to 7 per
cent, in 1945.
4. MUNICIPAL UTILITY OPERATIONS.
The annual municipal statements and the reports prepared by the Department
of Municipal Affairs show that in 1945 the surpluses of municipally owned utilities
were the third largest source of receipts in cities (excluding Vancouver), amounting
to $1,315,000 or almost 14 per cent, of total receipts as compared with $455,000 or
6 per cent, of the total in 1936. In a number of cities the ratio was particularly high:
the surpluses represented 34 per cent, of gross receipts in Nelson, 30 per cent, in
Prince George, 25 per cent, in Fernie, 21 per cent, in New Westminster, and 17 per
cent, in Kelowna. In terms of net current receipts in 1945, that is, gross receipts less
Government grants, being the revenues actually raised within the municipality, utility
surpluses represented approximately 40 per cent, of the total in Nelson, approximately
36 per cent, in Fernie, 35 per cent, in Prince George, 24 per cent, in New Westminster,
20 per cent, in Kelowna, and 19 per cent, in Prince Rupert.
In Vancouver, profits on the waterworks utility in 1945 accounted for a little less
than 3 per cent, of total revenues. In the districts, utility surpluses provided less than
1.5 per cent, of total receipts in that year, as compared with losses over a period of
years.
I am of the opinion that the reports on utility operations as published must be
accepted with certain reservations, particularly in the case of smaller municipal units.
There is no uniform or consistent policy with respect to maintenance and replacements,
with the result that profits may in some instances have been attained at the expense
of adequate maintenance or of full provision for depreciation or for amortization of
debt within the useful life of the utility. On the other hand, operating losses may be
the result of capital expenditures out of current revenues. As no uniform accounting
practices for utilities are prescribed or followed, each municipality pursues its own
policy in this regard. In evidence to the Commission, a number of municipalities
admitted that their utilities were not adequately maintained, while others stated that
they were making full annual provision for maintenance and depreciation.
Since the utilities represent in many instances a large municipal investment and
provide essential services such as water and electricity, I recommend that consideration be given to the introduction of a system of uniform accounting practices with X 52
MUNICIPAL REVENUES.
separate accounts for each utility, and further that the Provincial Government make
available personnel and facilities for advising municipalities as required on the operation and maintenance of utilities.
The following table shows the number of municipally owned utilities in cities,
districts, and villages, respectively, in 1945:—
Municipal Utilities, 1945.
Cities.       Districts.     Villages.
Waterworks   28 15 6
Electric light   11 3 1
Water and light     1
Gas      1
Irrigation   2
Ferry      1 1
Street-railway      1
Telephone      1
Table 39 shows the operating results, as reported, of all municipal utilities since
1936. It will be noted that the cities show increasingly high annual profits in the
operation of both waterworks and electric light utilities. The districts show profits
on their electric light utilities and, except in three of the ten years, losses on their
waterworks. While a number of municipalities show fairly large profits on their
waterworks, it is of particular interest to examine the profits shown by some municipally owned electric light utilities. The following table shows the ratio of profits to
the depreciated value of the plant in a number of municipalities, as reported by the
Department of Municipal Affairs:—
Electric Light Utilities: Ratio of Profits to Depreciated Value of Plant, 1945.
A.
Depreciated
Value of
Plant.
B.
Profits.
Ratio of
Column B to
Column A.
$
70,608
25,570
15,399
84,000
32,664
85,337
34,115
491,600
606,068
59,590
212,000
117,452
$
33,892
21,279
18,702
— 1,037
4,787
52,284
8,285
133,359
294,823
43,925
24,761
66,358
Per Cent.
48.0
83.2*
121.4*
— 1.2
14.7
61.3
24.3*
27.1
11 7
* Debt completely retired.
It is apparent that in a number of municipalities the rates charged to consumers
of electric light are very considerably in excess of the cost of such service, including
depreciation and debt amortization. Electric light utilities, therefore, operate to
relieve taxpayers by shifting some of the burden of municipal costs to the consumers
of electric light. This applies also in some degree to waterworks utilities. I quote
in this connection the following excerpts from evidence submitted to the Commission:— New Westminster.*
Mr. Commissioner: Am I right in saying, Mr. Lidster, that, in effect the City of
New Westminster has been able to avoid the necessity of taxing improvements because
of the profits earned on public utilities?
A.  (Mr. Lidster) :  To a large extent, yes sir.    I think that would be a fair deduction.
Q. And do you think—mind you this is a question to which I would like an answer,
it isn't an expression of opinion on my part, because we were discussing equity in taxation a little while ago—do you think it is more equitable to tax the consumption of water
and electricity rather than to tax the improvements which are built in order to earn a
profit?
■   A. Yes, sir, we feel that in the City of New Westminster.
Q. Would it be correct to say, Mr. Mayor, that to the extent that your rates may be
higher than elsewhere, you consider the excess equivalent to a tax on occupiers who you
think should be paying something to the City?
A. Yes, very definitely.
Prince George.f
Mr. Commissioner: How will you raise your revenues when the surpluses from water
and electricity decrease?
A. Well, we will have to raise our tax on land or resort to improvements.
Nelson.%
Mr. Commissioner: You make your rates high—it's really a matter of taxation—
general tax?
A. Yes. I wouldn't say it is high. It is a rate that has been in force for quite a
a number of years.
Mr. Commissioner: The fact is that you prefer to keep your electric light rates
higher rather than to increase the mill rate on real property?
A. I would say that is a policy because I think if we raise our rates high enough we
will simply begin to depreciate the value for land and improvements.
It follows from the foregoing that rates for utility services in a number of
municipalities include in effect an indirect tax on the consumers of such services for
general municipal purposes. While such a tax may provide an expedient method for
raising municipal revenues from sources other than the normal municipal taxes, it
cannot be considered equitable. It becomes particularly inequitable where, because
of the exemption of improvements in whole or in large part, it serves to relieve persons
from taxation which they should properly bear.
5. RECEIPTS FROM TRADE LICENCES.
All municipalities impose trade licences both for revenue and for regulatory purposes. In Vancouver, receipts from trade licences and professional taxes have increased
from $470,000 in 1930 to $760,000 or approximately 5 per cent, of total revenues in
1945. For all other cities these receipts have remained constant at about 3 per cent,
of total receipts over a period of years, yielding less than $300,000 in 1945. In districts
the yield is a little over 1.5 per cent, of total receipts. In villages trade licences are an
important source of revenue and provided 13 per cent, of total receipts in 1945.
6. MISCELLANEOUS TAXES AND RECEIPTS.
Receipts from minor taxes, including the poll tax, the road tax, and others, have
remained fairly constant in all municipalities over the past ten years. Except in the
case of villages, they contribute a relatively small proportion of total municipal receipts.
* Commission Evidence, New Westminster, Vol. 1, pp. 24 and 66.
f Commission Evidence, Prince George, p. 17.
X Commission Evidence, Nelson, pp. 16 and 17. X 54
MUNICIPAL REVENUES.
Other miscellaneous receipts, including fees, fines, and rentals, have varied in
different years because of special and non-recurring items. At times municipal statements have included as " other receipts " items which are not properly revenue receipts.
While adjustments have been made where possible in the statistical tables in this
report, the figures on miscellaneous receipts are unsatisfactory. It should therefore
not be concluded, as the statistics might indicate, that municipalities have succeeded
in increasing total revenues by expanding miscellaneous sources of revenue. CHAPTER V.
MUNICIPAL TAXATION:   THE  REAL PROPERTY TAX.
The real property tax is the mainstay of municipal finance in Canada. It is common to all municipalities as a levy on the whole or on some proportion of the capital
value of real estate. It has been estimated that in 1945 the tax contributed $260,000,000
out of an estimated total of $294,000,000 of municipal tax revenues in Canada, or approximately 75 per cent, of total current municipal revenues estimated at $350,000,000.*
1. ECONOMIC CONSIDERATIONS.
Various factors have contributed to make the taxation of real property the principal source of municipal revenue in Canada and in the United States, and a major
source of such revenue elsewhere. Real estate forms a large portion of the assets of
a community and is an important source of income; it derives its value in large part
from the general growth and development and the status of the community; it is
located within, and is not removable from, a single locality; and it benefits very
materially, particularly in urban areas, from the principal municipal services and
expenditures. Under normal conditions and in times of stable or increasing income
the real estate tax is the only tax of which the yield can be predicted with accuracy
for budgetary purposes, and, having regard to the legal and natural restrictions on
the municipal tax base, it is one of the few taxes that can be successfully imposed and
administered by local governments. Other taxes, such as income and sales taxes,
require much larger areas than the average municipality for successful administration
if wide disparities in rates in adjoining areas and wholesale evasion are to be avoided.
It has been submitted to the Commission that the tax on real property should
finance only such services as are directly beneficial to property. While the imposition
of taxes solely on the basis of direct benefits received by the individual taxpayer would
not be sound, even if it were possible, the fact remains that municipal expenditures
confer special benefits on owners and occupiers of real estate. The direct benefits
conferred by local improvements, by an adequate water-supply, and by fire and police
protection, are generally admitted, but these are not the only services beneficial to
property. Property values will also be affected by the adequacy of the school system and
the efficiency of the health and sanitation services provided by the municipality, since
people will not settle in communities without schools or with inadequate health services.
Good schools are a community asset and a large part of the expenditures on education
is reflected in an increase in the capital value and earning power of property. Having
regard to the benefits thus conferred by municipal services on owners and occupiers of
real estate, it is reasonable to expect that they provide the revenues necessary to pay
the costs of such services.
The fact of the diffusion of the real property tax was generally disregarded in
briefs submitted to the Commission. Many municipalities and other bodies have submitted that persons who do not own real property make little or no contribution towards
financing municipal services, but this argument disregards the tendency to shift the
tax on buildings and improvements to the occupier. The tax then appears in the rent
paid by tenants and also in consumers' prices, since businessmen will tend to pass on
the whole or part of the tax in the prices charged to their customers. A person who
owns no real estate may, in fact, through the shifting of the tax, pay more property
taxes through his rent and the prices he pays for goods than does an owner of real
* Bank of Canada:    Statistical Summary, October-November, 1945, p.
55 property. Where the owner is also the occupier he must remember that he is potentially both a landlord and a tenant, and must consider his position in relation to other
landlords or tenants. The widespread belief that the owners of real estate alone finance
municipal services is wrong.
If a tax, such as that on land, cannot be shifted, it tends to be capitalized. " If,
as the result of taxation, the net return from a piece of land is reduced by 10 per cent,
the selling value of the land will be proportionately decreased, and the full burden of
the capitalized tax will fall on the sellers. Future buyers will be responsible for the
annual payment of the tax, but it represents no real burden to them as it has been
allowed for in the purchase price. To remit a tax of this kind after a period of years
amounts to giving a bonus to the owners of all property which has changed hands since
its imposition."*
It is admitted that it may be difficult or impossible to shift the tax on improvements
in a period of declining income, when rents, wages, profits, and prices are falling, and
that it may then become onerous. But all fixed charges tend to become onerous when
income declines. A period of depression does not affect owners of real property alone;
it also affects the owners of other forms of property and the suppliers of goods and
services. If property values decline considerably while the tax remains fixed, or even
rises, the owner of real property may for a time be placed at a disadvantage as compared with the owners of other forms of property. It must be admitted, however, that
the municipal services which are valuable to real estate in times of prosperity are also
valuable to it in times of depression, and property must therefore pay for such services
as long as they are provided.
Apart from the fact that it is regressive, it is admitted that the taxation of real
estate may also produce other inequitable situations. I am of the opinion that many
of these inequities are largely the result of poor assessment practices and inefficient tax
administration. More frequent and more careful assessments on a scientific basis by
trained personnel, with due regard to rental value as a factor but not the sole factor
in determining actual value, would keep individual properties more closely in line with
changing values, and would tend to eliminate arbitrary and inequitable valuations.
It has been suggested to the Commission that the tax on real estate be reduced
and that the revenues thereby lost might be replaced by the proceeds of a retail sales
tax. Apart from the fact that a sales tax is not a suitable municipal tax, except in
large metropolitan areas, I am of the opinion that the imposition of a retail sales tax
in order to reduce the burden on real estate would benefit only persons with large real
estate holdings: the small-home owner, the wage-earner, the farmer, and the small-
business man would lose considerably more than they could gain.
The real estate tax has been subject to widespread and organized criticism over
a period of many years. It is by no means a perfect tax, but having regard to the
fact that it is one of the few taxes that can be successfully imposed and administered
by municipalities, that it is a very productive tax and is widely diffused, and that
municipal services definitely confer special benefits on real estate, it is inevitable that
the taxation of real estate will continue to be the mainstay of municipal finance.
2. ASSESSMENT OF REAL PROPERTY.
A. Statutory Provisions.
The " Municipal Act" (section 215) requires that " in every municipality there
shall be appointed an assessor and a collector," who may be one and the same person.
The office of assessor and collector may be held by any other officer of the municipality.
* M. E. Robinson:   Public Finance (Cambridge University Press, 1933), p. 90. Section 223 (1) of the Act provides that:—
For the purposes of taxation, land, except as hereinafter provided, shall be assessed
at its actual value, and improvements shall be assessed for the amount of the difference
between the actual value of the whole property and the actual value of the land if there
were no improvements: Provided, however, that land and improvements shall be assessed
separately.
Land held in blocks of five or more acres and used solely for agricultural, horticultural, poultry-raising, or stock-raising purposes is assessed at the value which it
has for these purposes without regard to its value for any other purpose, but this provision is not to reduce the assessment which would otherwise be placed upon the land
to less than $250 per acre (except in Saanich).
The provisions with respect to assessment in the " Village Municipalities Act"
are generally similar to those in the " Municipal Act."
The city charter of Vancouver (section 35) provides for the appointment of an
assessment commissioner, who is also called the assessor, and such assistants as are
required. Section 37 imposes upon the assessor the duty " annually to make a valuation of all rateable property in the city." The council may appoint a board of assessment commissioners, under the chairmanship of the assessor, to make the valuation and
assessment of property.
Section 39 of the charter provides that:—
All rateable property, or any interest therein, shall be estimated at its actual cash
value as it would be appraised in payment of a just debt from a solvent debtor, the value
of the improvements (if any) being estimated separately from the value of the land on
which they are situate.
B. Trends in Assessed Valuation.
(a.)  Statistics and Definitions.
The course of assessment and taxation of real property since 1926 is shown in the
following statistical tables which are included in the appendix to this report:—
Table 40.—All Municipalities:  Assessed Valuation, 1926-1946.
Table41.—All Municipalities:   Taxable and Taxed Valuation, 1936-1946.
Table 42.—Selected Municipalities:   Taxable and Taxed Valuation, 1936-1946.
Table 43.—All Municipalities:   Non-taxable Properties, 1937-1946.
Table 44.—Selected Municipalities:   Non-taxable Properties, 1937-1945.
Table 45.—Cities and Districts:   Percentage of Improvements Taxed, 1926-
1946.
Table 46.—Cities and Districts:   Percentage of Improvements Taxed, 1946.
The following are definitions of terms in relation to assessment as used in the text
and in the statistical tables of this report:—
" Assessed valuation " is the total valuation of lands and improvements excluding only non-taxable properties.
" Taxable valuation " is the maximum valuation of land and improvements
which is taxable under the Acts governing the respective municipalities.
•   " Taxed valuation " is the assessed valuation which is actually taxed in a
municipality.
" Non-taxable properties"  are  defined properties which are exempt from
municipal taxation by statute, including churches in Vancouver which are
exempted by decision of the council.    The term does not include the percentage of the assessed value of improvements which is not subject to
taxation in the different municipalities. (b.) Assessments to 1946.
An analysis of recent trends in the assessment and taxation of real estate in British
Columbia must have regard to the inflation in land values in the years of the land
boom before the First World War and to the " single tax " principles which were then
applied. The appreciation in land values within a few years was so great that the
taxation of these values alone yielded all the revenue required by municipalities. In
these circumstances, improvements were gradually exempted and the burden of taxation was intended to be borne by the land speculator and absentee owner. Land assessments in Vancouver rose from $14,441,000 in 1904 to $150,465,000 in 1914, and in
Victoria from $15,386,000 in 1908 to $89,152,000 in 1914. Accordingly, Vancouver, in
1910, and Victoria, in 1911, exempted improvements entirely from taxation.
The land boom collapsed in 1914 and real estate prices declined very rapidly.
Assessments did not decline as rapidly since land values were almost the only source
of municipal revenues and the inflated valuations had become the basis of expanded
indebtedness. The effect of the collapse of the boom on municipal finances was shown
by the great increase in tax arrears which followed. In Vancouver, for example,
arrears increased from $728,000 at the end of 1913 to $5,456,000 at the end of 1918.
In due course large amounts of unimproved land reverted to the municipalities at tax
sales.    The taxation of improvements was resumed.
The deflation in land assessments which began in 1913-14 continued to 1940-41,
and later in some municipalities. In all cities, excluding Vancouver, the assessed
valuation of land, less non-taxable properties, declined from $72,432,000 in 1926 to
$46,740,000 in 1939, and has since risen gradually to $51,245,000 in 1946, of which
$19,170,000 is the valuation in the city of Victoria and approximately $8,500,000 in
New Westminster. In Vancouver the assessment of land, less non-taxable properties,
declined from a peak of $170,968,000 in 1931 to a low point of $110,762,000 in 1944,
and has since risen to $112,802,000 in 1946. In districts, land valuation declined from
$71,851,000 in 1926 to $51,260,000 in 1939, and has since risen to $57,424,000 in 1946.
The assessed valuation of improvements continued to rise after the collapse of the
land boom until 1932, declined in the depression years from 1932—33 to 1936—37, and
then resumed its rise. In cities, excluding Vancouver, the valuation of improvements,
less non-taxable properties, declined from approximately $94,500,000 in 1932 to
$82,646,000 in 1936, and has since risen to $106,500,000 in 1946. In Vancouver the
assessed valuation of improvements, less non-taxable properties, declined from a peak
of $204,000,000 in 1932 to $176,000,000 in 1937, and has since risen to $227,000,000
in 1946. In districts the assessed valuation of improvements declined from $83,127,000
in 1932 to $76,834,000 in 1937, and has since risen to $125,226,000 in 1946. It should
be noted, as is shown in Table 40, that, excluding the district of Tadanac, in which is
located the plant of the Consolidated Mining and Smelting Company, the valuation of
improvements in districts was $109,827,000 in 1946.
The following table shows the increase in total assessed valuation between 1940
and 1946 in the different types of municipalities:—
All Municipalities: Assessed Valuation, 1940 and 1946
(excluding Non-taxable Properties).
1940. 1946.
$ $
Vancouver    300,683,000 339,871,000
Other cities  134,158,000 157,746,000
Districts    __ 151,603,000 182,650,000
Villages        5,675,000 13,281,000
Total  592,119,000        693,548,000 It will be noted that assessments at $693,548,000 in 1946 have increased by more
than $101,000,000 since 1940, and that improvements account for over $92,000,000 of
this increase. It will be noted further that the assessed valuation of Vancouver
represents approximately one-half of the total assessed valuation of all municipalities.
C. Assessments in Vancouver.
(a.)  Assessed Valuation.
The assessed valuation of land and improvements, excluding non-taxable properties, in Vancouver at its peak in 1932, and in 1946, were as follows:—■
1932. 1946.
$ $
Land   170,504,000        112,802,000
Improvements  .  204,020,000        227,068,000
Total  374,524,000        339,870,000
Accordingly, while the city's assessment showed an increase of $39,000,000 since
1940, it was in 1946 still $35,000,000 below the peak of 1932. The valuation of
improvements increased by $23,000,000 between 1932 and 1946, but the land assessment was still $58,000,000 below the figure for 1932. The small increase in land
assessments before 1947 was due, in the main, to a return of tax-sale lands to the
assessment roll rather than to an increase in the valuation of land.
While land assessments were highly inflated in the period of the land boom and
a deflation was undoubtedly essential, the assessment roll has surely been purged of
the inflated values added in the years before 1914. A substantial increase in land
assessments is now warranted, and, in fact, is required by the charter which provides
that land shall be assessed at its " actual cash value." In raising assessments for
1947 the assessor has only discharged his responsibility under the charter.
The increase in the valuation of improvements to 1946 reflects new construction
and not the rising market price for real estate. It has been suggested to the Commission that the increase does not, in fact, even reflect the total value of building
permits issued in the city over a period of years. In answer, the city assessor, at the
request of the Commission, has submitted the following estimated reconciliation of
building permits and the increase in assessments in the period 1930—1945:—
Vancouver: Building Permits and Assessments, 1930-1945.
$
Total value of building permits  117,698,095
Less value of non-taxable building permits     19,846,760
Balance      97,851,335
Less Court of Revision reductions       7,868,069
Net taxable building permits     89,983,266
Less depreciation (estimated)      38,500,000
Balance      51,483,266
Gain in assessment 1930-1946     48,353,101
Net difference between value of building permits and
assessment        3,130,165 X 60 THE REAL PROPERTY TAX.
It is clear that the assessments of improved properties are lagging considerably
behind the market price. The trend in sales of residential property in Vancouver in
1945-46 showed that over 80 per cent, of such sales were made above the assessed
valuation, and that over one-half of the sales exceeded the assessed valuation by more
than 50 per cent. About 62 per cent, of the sales of business properties in the downtown section of the city were made above the assessed valuation.
In evidence to the Commission the city assessor submitted that because of the
disequilibrium between supply and demand, the prices currently paid for real estate are
highly inflated and include a premium for occupancy; that he is following the accepted
policy of assessors in America to keep assessments two years behind the market; and
that assessments in Vancouver are now following the market on " actual value " with
the necessary lag. He submitted further that the rise in the market price of residential property began about 1942; that, accordingly, he increased the assessment of
such property in 1944 by about 10 per cent.; and that, the rise in commercial and
industrial property having begun later, he will only now be in a position to increase
their assessment.
While there is justification for a lag in assessments behind the current market
price, particularly in a rapidly rising market, I am of the opinion that efforts to
maintain assessments on the basis of low pre-war values are not warranted by existing
facts. It is admitted that real estate prices are now inflated but it does not follow that
they must inevitably return to the pre-war level. The current situation does not point
to an immediate decline, but if a decline occurs, it is not likely to restore the low prices
of pre-war years. I quote, in support of this opinion, the evidence of the representative
of the Vancouver Real Estate Exchange:—*
Mr. Commissioner: There is some justification for believing that the situation, if
it is abnormal, will continue to be that way for some period of time?
A. (Mr. Reeve) : In the mortgage business we expect that high prices will continue
for another two or three years. Some people even say as much as five years, and
I don't think the costs of building will go down to as low a level as they were in 1936,
'37, '38, and '39 because the prices in those years were very, very low and I don't think
any of the builders made any money. In those years the cost of building was much
too low.
Having regard to the increase in population, to the continued high level of economic activity, and to the continuing high price of real estate, I am of the opinion
that the city of Vancouver is in a position to and should increase the assessment of
improved properties, particularly larger and more valuable properties which tend to be
assessed on a lower real base than smaller properties.
The city assessor is now introducing practices and procedures based on scientific
methods. Assessment in the city is becoming a continuous process, which is in accord
with sound assessment principles. With the full support of the council, and with
more adequate staff and facilities for research, the assessor will be in a position to
relate assessments more closely to market value.
(b.) Assessment Appeals.
The city charter requires that the annual assessment roll must be returned to
the city clerk not later than December 31st, to be revised, equalized, and corrected by
the city council sitting as a Court of Revision with power to hear complaints against
assessments. An appeal from the Court of Revision may be made to the Vancouver
Board of Assessment Appeals, which consists of three persons, of whom the chairman
is a lawyer and the other two members " shall be experienced valuators." The members
of the Board are appointed for a term of three years by a Judge of the Supreme Court
from a list of names submitted by the council.
* Commission Evidence, Vancouver, pp. 26-27. THE REAL PROPERTY TAX. X 61
The Board of Assessment Appeals may confirm or may raise or lower the assessment on any property, but no appeal lies to the Board from the Court of Revision if
the assessment of the property in question is less by 10 per cent, than its assessment
in the preceding year; and further, in any appeal so taken the assessment as revised
and confirmed by the Court of Revision, or varied, modified, or confirmed by the Board,
is not to be reduced in an amount greater than 10 per cent, from its assessment as
revised and confirmed by the Court of Revision, or varied or confirmed by the Board in
the preceding year.
Section 56 (15) of the charter provides for an appeal from the decision of the
Board of Assessment Appeals to the Court of Appeal, which may " vary, modify, or
confirm the decision of such Board, or may raise or lower or otherwise correct the
assessment on any property in respect of which such appeal is taken," but an assessment is not to be reduced as a result of such appeal by more than 10 per cent, of the
assessment of the preceding year.
The city charter thus provides for an appeal first to the Court of Revision, consisting of the city council, then to the Vancouver Board of Assessment Appeals, and finally
to the Court of Appeal. Appeals to the Court of Appeal may now be made on questions
of law and of fact. Since assessments are, in the main, matters of fact and of opinion
concerning property values, I am of the view that appeals from the Vancouver Board
of Assessment Appeals, whose members are presumably specialists in matters of
assessment, to the Court of Appeal should be restricted to questions of law only.
My view is best expressed in the words of the present Chief Justice of British Columbia
in his report on the Workmen's Compensation Board:—*
The questions which fall to be decided in the great majority of cases are of fact and are
more suited for examination and determination by a group of men of long and continuous
experience in that kind of task than by Courts.
Accordingly, I recommend that section 56 of the " Vancouver Incorporation Act"
be amended to provide that the right of appeal from the Board of Assessment Appeals
to the Court of Appeal shall be restricted to questions of law only on a stated case from
the Board to the Court of Appeal.
D. Assessments in Municipalities (excluding Vancouver) .
(a.)  Assessed Valuation.
As in Vancouver, the recent rise in assessments in other municipalities (shown
in Table 42) reflects generally new construction rather than an increase in valuation.
In almost all cases it was submitted to the Commission that assessors cannot recognize
current market prices as " actual value " for assessment purposes, and, accordingly,
that assessments should not reflect the present situation in the real estate market.
It was further submitted that the control of rentals introduced during the war years
was a deterrent to an increase in valuation.
With reference to rent control, I draw attention to the Rental Regulations of the
Wartime Prices and Trade Board, which specifically make allowance for an increase
in municipal taxes.    Order No. 294 provides that:—
7. (1) An application may be made by the landlord of any housing accommodation to the Rentals Appraiser for a variation of the fixed maximum rental for the
accommodation by reason of any of the following special circumstances affecting such
accommodation:
(a) an increase in the taxes or water rates payable by the landlord since the date
on which the maximum rental was last fixed and resulting otherwise than
from  a  structural  alteration,  addition  or improvement;    in  which  case,  the
* Report of the Commissioner in re the Workmen's Compensation Board, 1942, p. 188. X 62 THE REAL PROPERTY TAX.
Rentals Appraiser may increase the maximum rental by an amount which is
commensurate with the amount of such increase in taxes or water rates.
Order No. 315 makes a similar provision with respect to commercial accommodation.
In my remarks on assessments in Vancouver, I have expressed the view that there
is justification for a lag in assessments behind the current price in a rapidly rising
real estate market. It does not follow, however, that assessors should disregard current trends entirely and continue assessments on the basis of pre-war prices, as is
the case in many municipalities. Having regard to the evidence submitted to the
Commission, I am of the opinion that assessments of land and of improvements should
be reviewed in relation to actual values.
There is a great need for improvement in municipal assessment practices. While
all municipalities are subject to similar statutory provisions, there 'is no uniformity of
practices or principles in valuation, and there are only a few cases where attempts are
made to assess real property on a scientific basis. Although the law requires that
assessment be based on " actual value," it has been admitted to the Commission by
a number of municipalities that they have not reassessed real estate for periods of
more than ten, twenty, or even thirty years! In effect, in many cases the assessor
merely copies the figures from the preceding assessment roll year after year. In other
instances, where the assessor attempts to approximate " actual value," he is subject
to restraint by the council when the result of his efforts would be an increase in
assessments.
Assessment is the basis of the municipal revenue structure and it is essential,
therefore, that property be valued as equitably and as uniformly as possible. Furthermore, since provincial school grants are now related to the product of a uniform rate
applied to the local assessed valuation, it is necessary that as far as possible there be
uniformity of assessment, not only within a municipality, but between municipalities.
Equalized assessments are essential to a fair distribution of the grants. To attain the
required equity and uniformity, it is necessary that scientific methods be applied to
property valuation. This cannot be expected under the present system in British
Columbia where each municipality is, in fact, a law unto itself as far as assessment is
concerned, and where the majority of municipalities are not sufficiently large units to
permit the employment of a full-time assessor with the necessary staff, records, and
equipment. This fact was admitted in evidence to the Commission by representatives
of a number of municipalities who, in fact, requested that the Provincial Government
assist in training and providing assessors for municipal purposes.
An analysis of the existing situation points clearly to the fact that an improvement
in assessment practices in the smaller municipalities particularly, but also in the larger
municipalities, is dependent upon trained and competent personnel, and that such personnel is presently not available and cannot be provided by the municipalities on their
own account. In order to overcome this difficulty, there has been a trend in the
United States towards supervision of local assessments by State Tax Commissions.
" The central administrative bodies have exercised control in various ways, of which
the following are the most important: first, by supervising, instructing, and directing
the local assessor; second, by ordering the local assessors to reassess property or by
undertaking such reassessment themselves; and third, by assuming complete responsibility for the assessment of certain classes of property which experience has shown
to be peculiarly unsuited for local assessment."*
Provincial Assessment Commissions with varying powers have been functioning
for some time in a number of provinces in Canada. The authority of the Assessment
Commissions in Manitoba, Saskatchewan, and Alberta extends to supervision with
* J. P. Jensen:   Property Taxation in the United States  (University of Chicago Press, 1931), p. 392. THE REAL PROPERTY TAX. X 63
a view to improving assessment methods and establishing uniformity in assessment,
and to the equalization of assessments. In Saskatchewan and Alberta the Commissions
also hear assessment appeals, and their decisions thereon are final. There is no
supervisory authority of this kind in British Columbia.
In drawing attention to the existing situation with respect to municipal assessments and to the Commissions now functioning in certain provinces, it is my intention
to point to the need for improvement and for new machinery. The need for improved
assessment methods exists not only in municipalities but also in unorganized areas, and
more particularly where such areas adjoin municipal territory. I make no specific
recommendations since, under an amendment to the " Public Schools Act" in 1946,
a Commission is soon to be appointed " to inquire into and report on the assessed value
of land and improvements in all parts of the Province and to recommend such ways
and means as are deemed equitable for the establishment of an equalized assessment."*
(b.) Assessment Appeals.
Under the " Municipal Act " appeals from the assessor may be made to a Court of
Revision, which consists of the municipal council or five members thereof, and which
must complete its roll not later than February 28th. An appeal from the Court on
questions of law and of fact lies to a Judge of the Supreme Court or to a County Court
Judge. A further appeal " upon any point of law raised upon the hearing of the appeal
by such Judge " may be made to the Court of Appeal.
Section 234 (4) of the Act provides that no complaint to the Court of Revision
and no appeal to a Judge of the Supreme Court or to a County Court Judge shall be
allowed on the ground that any land has been assessed too highly, if the assessment is
less by 10 per cent, or more than the assessed value of the same land in the preceding
year, or, in the case of improvements, if the assessment is less by 5 per cent, or more
than the assessment of the same improvements in the previous year. The Act provides further (sections 239 and 243) that an assessment is not to be varied by the Court
of Revision or by a Judge if it bears " a fair and just relation to the value at which
similar or neighbouring land or improvements in the municipality are assessed."
No assessment is, in any event, to be reduced to an amount less than 90 per cent, of
such assessment in the preceding year.
The Act thus provides for an appeal to the Court of Revision, then to a Judge of
the Supreme Court or to a County Court Judge, and, finally, to the Court of Appeal.
The appeal to the Supreme Court or County Court Judge may be on questions of law
and of fact. The opinion which I have already expressed in the case of Vancouver
as to assessment appeals to the Courts on questions of fact applies equally to assessment appeals in other municipalities. I am not of the opinion, however, that the
decision of the Court of Revision, which is the municipal council, should be final, and
the " Municipal Act" does not provide for a body corresponding to the Vancouver
Board of Assessment Appeals, which, in my opinion, should make the final decision on
the facts. While, in view of the forthcoming appointment of a Commission to inquire
into assessments, I refrain from specific recommendations in this regard, I suggest that
if as a result of this inquiry a Provincial Assessment Commission is appointed to
exercise supervisory powers over assessments, consideration should also be given to
empowering such a Commission to hear assessment appeals and to make a final
decision on the facts. A further appeal from the Commission to the Court of Appeal
should be restricted to questions of law only.
* " Public Schools  Act Amendment Act,  1946," sec.  10. X 64 THE REAL PROPERTY TAX.
E. Fixed Assessments.
Under section 231 of the " Municipal Act " a council has power to enter into
an agreement fixing the annual assessment of any land and existing improvements for
a period not exceeding ten years, such assessment to be not less than the assessment
shown in the last revised assessment roll, and the value of all improvements made subsequent to the agreement to be added to the fixed assessment. Such an agreement must
be embodied in a by-law and submitted for the approval of the electors. If, during the
term of such agreement, the total assessed value of the other lands in the municipality
decreases below the amount of such assessed value at the date of the agreement, the
council may without the consent of the electors amend the former agreement by fixing
a lower assessment for the remainder of the period, provided such assessment in any
year is not a lower sum per acre than 75 per cent, of the average assessment per acre
of the other assessed lands in the municipality.
Under section 46A of the Vancouver charter, the city council may enter into
an agreement which provides that the improvements, machinery and plant situate on
any property used for terminal elevator or other purposes by an owner or occupant
thereof engaged in the export of grain or grain products, shall not be taxed in any
year in excess of 25 per cent, of their assessed value. The council may also (section
46b) fix the annual assessment for a period not exceeding fifteen years on land or
improvements, or both, including machinery and plant, used for terminal elevators or
other purposes by a person engaged in the export of grain or grain products " or any
other commodities not in competition with any established business or industry carried
on within the Province."
I am of the opinion that fixed assessments are undesirable and inequitable in that
they involve the partial exemption from taxation of one taxpayer at the expense of
the remaining taxpayers. To fix an assessment below the valuation which would
otherwise apply is also contrary to sound assessment practices. While the existing
provisions of the " Municipal Act" impose certain limits, I note a practice to fix
assessments by special Acts without regard to the provisions of the " Municipal Act,"
and far beyond the limits therein prescribed. Special legislation of this nature, apart
from its other undesirable features, promotes unfair competition for industries between
municipalities.
I recommend that fixed assessments be discouraged and restricted to a minimum,
and, in any event, that fixed assessments beyond the limits prescribed by the "Municipal
Act " be not allowed by special legislation.
I recommend further that municipalities be not allowed to benefit from fixed assessments by using such assessments as part of the base for determining provincial grants.
3. TAXATION OF REAL PROPERTY.
A. Statutory Provisions.
(a.) The " Municipal Act."
Section 246 of the " Municipal Act " provides for the levying of a rate on the
assessed value of land and improvements as follows:—
(1.) The Council shall, on or before the fifteenth day of May in every year, subject
to the provisions and restrictions in this Act contained, pass a by-law or by-laws for
imposing upon all land and improvements, according to the assessed value thereof,
a rate or rates as follows: —
(a.)  To provide for the amounts required under by-laws of the municipality to meet
payments of interest and principal of debts incurred by the municipality other
than debts incurred for school purposes:
(6.)   To provide for moneys required for school purposes for the year, being the
total of the following amounts:— (i.)   For  expenditures  of  the   School   Board  according  to  the  estimates
submitted to the Council:
(ii.)  For interest and principal of debts incurred by the municipality for
school purposes:
(c.)   To provide for all other lawful purposes of the municipality a rate not exceeding thirty-five mills on the dollar:   Provided that in any municipality for which
there is at the time a  Commissioner appointed under Part XXIII. the said
maximum rate of thirty-five mills on the dollar may, with the consent of the
Lieutenant-Governor  in  Council, be increased by  such  amount  as  may  be
considered necessary.
(2.)  Notwithstanding  the  restrictions   contained  in  subsection   (1),   the  total  of
the taxes imposed in any year upon wild land may be any amount not exceeding five
per centum of the assessed value thereof.
(3.) The rates authorized by this section to be imposed upon improvements shall
not be upon more and may, in the discretion of the Council, be upon less than seventy-five
per centum of the assessed value thereof, or improvements may be entirely exempted
from taxation.
Unless otherwise expressly provided by the rate by-law, the taxes or rates imposed
or levied for any year are considered to have been imposed on and from the 1st day
of January. Taxes are deemed to be in arrear on December 31st in each year and
become delinquent if unpaid on December 31st in the year following that in which they
were imposed. Tax sales of property upon which taxes are delinquent must be held
on September 30th in each year.
Under the " Village Municipalities Act" villages are restricted to a rate not
exceeding 20 mills on the dollar of the assessed value of land and improvements, the
rate imposed on improvements not to be upon more, and may be upon less, than 50 per
cent, of the assessed value thereof, or improvements may be entirely exempted from
taxation.
It has been submitted to the Commission that in order to measure the tax burden
on real property in rural areas, account should be taken not only of municipal taxes
but also of special charges or taxes for irrigation, drainage, dyking, and similar
purposes. While these charges are imposed by irrigation and dyking districts as a tax
on land, they are not taxes in fact but payments on account of the capital and operating
costs of utility services required by the land. Accordingly, irrigation and similar
charges cannot be considered as taxes in this report.
It has also been submitted that various taxing authorities, including the Provincial
Government, the municipalities, and special districts, hold tax sales on different dates
and covering different periods, and that, since the same property may be affected, this
results in unsatisfactory tax administration. This submission is well founded, and
I recommend that immediate consideration be given to amending the provisions of the
various Acts dealing with tax sales with a view to co-ordination and uniformity.
The different taxing bodies should, in any event, be empowered to enter into agreements fixing the dates of tax sales and the periods to be covered by the sales.
I recommend further, with a view to simplification of tax collection in villages and
to eliminate the necessity for two tax rolls, that the " Public Schools Act " be amended
to provide for the collection of school taxes within the village by the village municipality
instead of the Provincial Government.
(b.) The " Vancouver Incorporation Act."
The city charter provides for the levying of rates as follows:—•
57. The Council of the city shall, in each and every year after the final revision of
the assessment roll, pass a by-law for levying a rate or rates on all the rateable property
on the said roll, to provide for all the necessary expenses of the city, as well as the payment of every such sum or sums as the city shall have undertaken to be liable for during
the current year, in respect of any debenture or other debt or obligation, and also such
other sum or sums of money as may be found expedient:   provided always that the rate X 66
THE REAL PROPERTY TAX.
to be levied in any year, in addition to what is required for payment of interest on
outstanding debentures, and the amount required for a sinking fund therefor, and for
school purposes (if any), shall not exceed the sum of two and one-half cents on the dollar.
It is further provided that:—
58. The rate or rates referred to in section 57 shall, in respect of improvements, be
levied upon not more than fifty per cent, of the assessed value thereof.
Unless otherwise expressly provided, taxes levied for any one year are considered
to have been imposed and to be due on or from the 1st day of January, and all taxes
on real property remaining unpaid on December 31st in the year in which they have
been levied are deemed to be delinquent on that day. Delinquent taxes bear interest
at the rate of 6 per cent., calculated from the 1st day of January following the date
on which they were levied. The council must each year between October 1st and
November 1st pass a by-law to provide for the sale of lands and improvements upon
which taxes have been delinquent for a period of two years prior to the passing of
such by-law, and the tax sale must take place not later than forty days after such
by-law is passed.
B. Taxable and Taxed Valuation.
While the assessed valuation of land and improvements constitutes the base of the
tax on real estate, it will be noted that this base is subject to legal limitations, as
follows:—
(i.) The law exempts certain properties in all municipalities from taxation.
The non-taxable properties, which are discussed below, include churches, burial
grounds, hospitals, orphanages, Crown property, property belonging to the municipality, and certain other properties.
(ii.) The law exempts from taxation a minimum percentage of the assessed valuation of improvements in all municipalities. While land must in all cases be taxed on
100 per cent, of its valuation, the " Municipal Act " provides that the tax rate on
improvements must not be levied upon more and may be levied upon less than 75 per
cent, of their assessed value, or improvements may be entirely exempt; the Vancouver
charter provides that the rate shall not be levied upon more than 50 per cent, of the
assessed value of improvements; and the " Village Municipalities Act" provides that
villages may tax improvements up to 50 per cent, of their assessed value, or may exempt
them entirely.
In consequence of these limitations the taxable valuation, as is shown in Tables
47 and 48, is substantially less than the total assessed valuation and than the assessed
valuation less the value of non-taxable properties. The following table compares the
total assessed valuation, the assessed valuation less non-taxable properties, and the
taxable valuation, in 1946:—
Assessed and Taxable Valuation, 1946.
Total
Assessed
Valuation.
Assessed
Valuation less
Non-taxable
Properties.
Taxable
Valuation*
$
408,767,384
219,795,907
235,805,287
14,961,517
$
339,871,829
157,745,346
182,650,671
13,281,546
$
226,337,343
131,120 317
151,344,155
8,257,096
Total	
879,330,095
693,549,392
517,058,911
* Total assessed valuation less non-taxable properties and less portion of assessed value of improvements exempt
from taxation. THE REAL PROPERTY TAX.
X 67
These figures show that in 1946 non-taxable properties reduced the total taxable
valuation of municipalities by more than $185,000,000, and that this valuation was
further reduced by more than $176,000,000 by the legal limitations on the proportion
of the assessed value of improvements which is taxable.
The effects of the legal limitations on the tax base are further shown in the following table, which compares the assessed and the taxable valuation in 1940 and 1946:-—
Assessed and Taxable Valuation, 1940 and 1946.
Assessed Valuation less
Non-taxable Properties.
Taxable Valuation.
1940.
1946.
1940.
1946.
$
300,683,738
134,158,677
151,603,430
5,675,762
$
339,871,829
157,745,346
182,650,671
13,281,546
$
208,063,554
112,322,828
126,574,625
3,648,008
$
226,337,343
Other cities    ■	
131,120,317
151,344,155
8,257,096
Total	
592,121,607
693,549,392
450,609,015
517,058,911
It will be noted that while assessments, excluding non-taxable properties, rose by
more than $101,000,000 between 1940 and 1946, the taxable valuation increased by only
$66,450,000. This is explained by~the fact that improvements accounted for $92,000,000
of the increase in assessments, while land, which is taxed on 100 per cent, of its valuation, accounted for only $9,000,000.
While the law restricts the tax base, it is apparent from Tables 47 and 48 that,
with the exception of Vancouver and the villages, the municipalities do not make full
use of even the restricted base. The following table compares the taxable valuation
and the taxed valuation in 1946:—
Taxable and Taxed Valuation, 1946.
Taxable
Valuation.
Taxed
Valuation.
Vancouver   226,337,343
Other cities  131,120,317
Districts   151,344,155
Villages   8,257,096
226,337,343
95,015,395
118,747,442
8,257,096
Total  517,058,911        448,357,276
It follows that the valuation actually taxed in 1946 in the cities (excluding Vancouver) and in the districts is $68,700,000 less than the taxable valuation. This is
a consequence of the policy of exempting a larger percentage of the value of improvements than the minimum exemption required by law. In cities (excluding Vancouver)
the taxed valuation is 72.5 per cent, of the taxable valuation and in the districts it is
78.5 per cent. The percentage varies widely, as is shown in the following table covering a number of municipalities:—
Ratio of Taxed Valuation to Taxable Valuation, 1946.
Per Cent.
Richmond   96.6
Victoria   93.0
Summerland   80.2
Burnaby  79.4
Duncan   59.2
Per Cent.
Kelowna r  58.8
West Vancouver  53.5
Nanaimo  45.1
Prince George  42.0
New Westminster  39.7 X 68 THE REAL PROPERTY TAX.
It is clear that, even on the basis of existing assessments and of the limitations
imposed by law, a large number of municipalities are in a position to enlarge their
tax base substantially by a change in policy with respect to the taxation of
improvements.
C. Taxation and Exemption of Improvements.
Whereas in the Maritime Provinces and in Quebec and Ontario the law requires
that both land and buildings be assessed and taxed at full value, the law in the Prairie
Provinces and in British Columbia has for many years embodied the " single tax "
principle, discriminating between the taxation of land and of improvements. In 1874
the city of Nanaimo was permitted to exempt improvements entirely, and in 1891 this
option was extended to all municipalities. By 1914, with the inflation in land values
during the real estate boom, thirty-nine municipalities, out of a total of sixty-one,
exempted improvements entirely. When the boom collapsed, the decline in land assessments and the rapid growth in tax arrears necessitated a wider tax base, with the result
that enthusiasm for the " single tax " began to wane as more and more municipalities
found it necessary to tax an increasing percentage of the assessed value of
improvements.
Trends in the taxation of improvements over the past twenty years are shown in
Table 45. It will be noted that, whereas ten cities and twelve districts exempted
improvements completely in 1926, only two cities, New Westminster and Prince George,
and one district, Spallumcheen, wholly exempted improvements in 1946, while the
district of Kent exempted them for other than school purposes. It should also be
noted, however, that, apart from the municipalities which exempt them completely,
thirteen cities and seven districts still tax improvements on less than 50 per cent, of
their assessed valuation. The varying percentages taxed in 1946 in individual cities
and districts are shown in Table 46. All villages tax improvements on 50 per cent, of
their valuation.
The experience of British Columbia and of the other western provinces has shown
that on fiscal grounds alone the exemption of improvements is unsatisfactory. Land
has proved to be an unstable basis for taxation since it is subject to a high degree of
inflation when the demand for real estate is great and to a rapid deflation when the
demand falls. It is well to note in this connection that of the six municipalities which
defaulted on their debts in the nineteen-thirties, Prince Rupert, Burnaby, and Merritt
had continued to exempt improvements until 1932, the district of North Vancouver
until 1931, and the city of North Vancouver until 1930.
The argument that the exemption of improvements stimulates building and penalizes the land speculator may have merit in the period of early development of a community, but is not as applicable to the later period when the community has been substantially developed. Some of the effects of exempting improvements in developed
communities are:—
(i.) To restrict the tax base to the narrow and unstable base which may have
satisfied the requirements of the community in its early stages, but which cannot satisfy
it in its more developed stage. Municipalities which wholly or largely exempt improvements now recoup themselves out of utility profits resulting from higher rates
charged to consumers of the utility service.
(ii.) To subsidize the holders of large improved properties, commercial, industrial,
and residential, who in most instances have greater tax-paying capacity than the owners
of smaller properties or of unimproved lands, and whose properties require more municipal services than do other properties. For example, with the complete exemption of
buildings and improvements in New Westminster, large commercial and industrial
properties are not paying a fair share of municipal taxation. THE REAL PROPERTY TAX. X 69
(iii.) To make the distribution of the tax burden more uneven as between municipalities because of variations in the percentage of improvements taxed in different
municipalities. Furthermore, variations in assessment practices and policies, and in
the ratios of assessed valuation to actual value, create serious problems when provincial grants, such as school grants, are related to the yield of a tax on the local
valuation.
For the foregoing reasons, I am of the opinion that the policy of exempting
improvements, wholly or in larger part, should be changed, and, further, that a uniform
policy with respect to the taxation of improvements be made mandatory for all
municipalities. The uniform taxation of improvements in all municipalities on 75 per
cent, of their assessed value would broaden the municipal tax base and give it more
stability and would tend towards a greater degree of equity in real property taxation.
In making a recommendation to this effect, I note that nineteen out of thirty-four
cities and twenty out of twenty-eight districts taxed improvements on 50 per
cent, or more of their assessed valuation in 1946; that in unorganized territory,
improvements (except farm improvements, which are exempt) are taxed on 100 per
cent, of their assessed valuation; and that, under the amendments to the " Public
Schools Act" in 1946, implementing the recommendations of the Cameron Report,
100 per cent, of the assessed value of land and 75 per cent, of the assessed value of
improvements are now the base for local school taxes in all municipalities.
Accordingly, I recommend that the " Municipal Act" (section 246), the " Vancouver Incorporation Act" (section 58), and the " Village Municipalities Act"
(schedule, section 50), be amended by repealing the present provisions with respect to
the rate on improvements, and substituting therefor a provision that the tax on
improvements shall be levied upon 75 per cent, of the assessed value thereof.
I note that the definition of " improvements " in the " Municipal Act," the " Pub-
lie Schools Act," and the " Taxation Act" varies. In my opinion, the definition of
" land " and " improvements " as a basis for taxation should be uniform under the
" Municipal Act" and the " Public Schools Act" in any event, if not also under other
tax legislation. Apart from other considerations, the variations in definitions create
confusion, since school taxes are levied and collected by municipalities which also levy
and collect the remaining municipal taxes. Accordingly, I recommend that the Commission on Assessments, which is to be appointed, consider and prepare a uniform
definition of " land " and " improvements" for purposes of municipal and school
taxation.
D. Tax Rates.
The tax rates on real property necessarily vary as between municipalities, since
they are determined by local requirements and local assessment policies and practices
in each municipality. The rates, therefore, do not measure relative tax burdens.
Of two municipalities equally dependent on real estate taxation and requiring equal
revenues, the one in which property is under-assessed will have to levy a higher rate
than the other in which property is assessed more closely to actual value or is over-
assessed. Similarly, if one of these municipalities exempts improvements wholly, or
taxes only a small percentage of the value thereof, it will have to levy a higher rate
than the other which taxes a higher percentage of the value of improvements.
It follows that a high mill rate does not necessarily mean heavy taxation, since the rate
must be related to assessment practices and policies and the assessed valuation which
is taxed.
With a large percentage of the value of improvements exempt from taxation in all
municipalities, mill rates in British Columbia must be higher than in municipalities in
other provinces where both land and improvements are taxed on 100 per cent, of their
valuation.    The following table shows, for a number of municipalities, the actual mill X 70
THE REAL PROPERTY TAX.
rate for 1945 and the rate which would have been required to yield the same revenue
if the tax were on 100 per cent, of the assessed valuation of land and improvements,
less the value of non-taxable properties:—
Actual and Relative Mill Rates, 1945.
Actual
Rate.
Vancouver 52.5 (gross)
Victoria 42.0
New Westminster  70.0
Kelowna  46.0
Nanaimo  60.0
Prince George  65.0
Prince Rupert  50.0
Burnaby  49.0
Oak Bay  30.0
Saanich  31.0
Surrey  48.0
West Vancouver  60.0
Rate on 100 per
Cent, of Assessed
Valuation.*
36.42
35.85
25.92
23.45
26.67
22.49
34.89
37.79
18.99
23.32
36.76
26.59
* Less assessed value of non-taxable properties.
The foregoing table, as would be expected, shows that the mill rate is highest in
municipalities which exempt improvements wholly, or in larger part, such as New
Westminster, Prince George, Nanaimo, and West Vancouver. If applied to 100 per
cent, of the valuation of land and improvements, however, New Westminster's rate of
70 mills declines to less than 26 mills and the rate in Prince George declines from 65
mills to approximately 22.5 mills. The taxation of 75 per cent, of the value of improvements and an increase in the ratio of assessed value to real value would, therefore,
result in a very substantial decrease in present mill rates.
While mill rates in different municipalities do not offer a satisfactory basis for
comparison, since assessment practices and the ratio of assessed value to real value
vary so greatly, it is, nevertheless, of interest to note the rates in a number of cities
in Eastern Canada, where the tax is levied on 100 per cent, of the total assessed valuation, as shown in the following table:—
Canadian Cities:  Mill Rates, 1945.
Montreal  27.87
Toronto (1946)   34.15
Ottawa  31.50
London  32.00
Windsor, Ont.   41.00
Halifax   41.30
Saint John, N.B  42.20
Hamilton   33.25
If it were to be assumed that the ratio of assessed value to actual value is approximately the same, which, of course, is not necessarily the case, it would follow that the
rates in British Columbia are frequently lower than and, in any event, not out of line
with rates in Canadian cities where the tax is levied on 100 per cent, of assessed values.
It should also be noted that, in addition to the real estate tax, each of these cities in
Eastern Canada levies a business tax and, in some cases, other taxes as well.
The tax rate for general purposes, excluding the provision for debt charges and
school costs, is now limited to 35 mills on the dollar under the " Municipal Act," 25
mills under the Vancouver charter, and 20 mills under the " Village Municipalities
Act." Tax limits of this kind imposed by statute are necessarily arbitrary and take
no account of the differences in the requirements of different municipalities and of the
changing requirements of municipalities over a period of time. They also tend to
make assessments and tax rates inflexible.    Of immediate importance is the fact that THE REAL PROPERTY TAX. X 71
the tax limits may in some cases prevent the savings represented by the reduction in
the municipal share of school costs from being available for general purposes. Having
regard to these considerations and to the demands of the municipalities for more
revenues, I am of the opinion that the tax limits under the various statutes should be
raised as required.
E. Tax Levy, Collections, and Arrears.
The following tables in Appendix A present data on tax levies, tax collections, tax
arrears, and tax-sale properties, over a period of years:—
Table 47.—All Municipalities:   Tax Levy and Tax Collections, 1930-1945.
Table 48.—Selected Municipalities: Tax Levy and Tax Collections, 1936-1945.
Table 49.—All Municipalities:   Tax Arrears, 1926-1945.
Table 50.—Selected Municipalities:   Tax Arrears, 1926-1945.
Table 51.—All Municipalities:   Tax-sale Properties, 1926-1945.
Table 52.—Selected Municipalities:   Tax-sale Properties, 1926-1945.
The figures on tax levies and collections show that:—
(i.) In cities (excluding Vancouver), with an increase in the levy from a little
under $4,200,000 in 1936 to approximately $4,800,000 in 1945, the percentage of the
current levy collected has risen from 79.5 per cent, in 1936 to 94 per cent, in 1945.
(ii.) In Vancouver the levy declined from $12,635,000 in 1933 to $10,130,000 in
1936, and rose to approximately $11,700,000 in 1945. The percentage of the current
levy collected increased from 71 per cent, in 1933 to 81.5 per cent, in 1936 and to more
than 95.5 per cent, in 1945.
(iii.) In districts the tax levy increased from approximately $2,750,000 in 1936
to approximately $4,250,000 in 1945, and the percentage of the current levy collected
rose from 75 per cent, in 1936 to 92 per cent, in 1945.
(iv.) In villages the percentage of the current levy collected in 1945 was almost
92 per cent.
(v.) The tax levy in all municipalities has increased from $17,100,000 in 1936 to
$20,820,000 in 1945, and the percentage of the current levy collected has risen from
80 per cent, in 1936 to 94.5 per cent, in 1945.
(vi.) Whereas in 1936 the percentage of the current levy collected in many municipalities was less than 80 per cent, and in some cases well under 70 per cent., since
1943 there have been few cases where the percentage has been less than 90 per cent.
In answers to questions by the Commission, it has been submitted that it is not
the general practice of municipalities to make provision in the annual levy for uncollectible and uncollected taxes. I am of the opinion that such provision should be made.
Accordingly, I recommend that the " Municipal Act," the " Vancouver Incorporation
Act," and the " Village Municipalities Act" be amended to provide that the annual
levy shall include a provision for uncollectible taxes and for taxes which it is estimated
will not be collected during the year. In this connection I draw attention to the following provision in the Ontario " Municipal Act ":—*
In preparing the estimates the council shall make due allowance for a surplus of
any previous year which will be available during the current year and shall provide for
any operating deficit of any previous year and for the cost of collection, abatement of
and discount on taxes and uncollectible taxes and may provide for taxes which it is estimated will not be collected during the year.
The " Town and Village Act " of Alberta also provides that the annual estimate of
expenditures " shall include ... an allowance for the amount of taxes which may
reasonably be expected to be unpaid in the year."f
* R.S.O. 1937, chap. 266, sec. 316  (2), as amended by Ontario Statutes 1944, chap. 39, sec. 25.
t R.S.A. 1942, chap. 150, sec. 296. X 72
THE REAL PROPERTY TAX.
An analysis of the statistics on tax arrears since 1926 shows that:—
(i.) In cities (excluding Vancouver) tax arrears declined from $1,660,000 in 1926
to approximately $1,270,000 in 1930 and then increased to a peak of $2,590,000 in 1934.
Since 1934, tax arrears have declined annually to a low point of $415,000 in 1945.
(ii.) In the city of Vancouver tax arrears rose from approximately $2,300,000 in
1930 to a peak of $8,327,000 in 1935 and have since declined to a low point of $835,000
in 1945.
(iii.) In districts tax arrears increased from $760,000 in 1926 to a peak of
$1,870,000 in 1933 and have since declined to $465,000 in 1945.
(iv.) Tax arrears for all municipalities have declined from a peak of $12,200,000
in 1934 to a low point of $1,730,000 in 1945. Total tax arrears in 1926 amounted to
almost $4,000,000.
The figures for tax-sale properties held by municipalities show that:—
(i.) In cities (excluding Vancouver) the amount of tax-sale property rose from
$3,880,000 in 1926 to a peak of $6,275,000 in 1937 and has since declined to $3,900,000
in 1945.
(ii.) Tax-sale property held by the city of Vancouver rose from $2,000,000 in
1930 to $5,630,000 in 1938 and has since declined to $3,630,000 in 1945. The city's
reserves against arrears of taxes, tax-sale and other properties and agreements for
sale, amounted to $800,000 in 1945. It should be noted that tax sales were not held in
certain years during the depression.
(iii.) In districts tax-sale property rose from $1,870,000 in 1926 to $4,393,000 in
1937 and has since declined to $3,150,000 in 1945.
F. Conclusion on Real Property Tax Burden.
An analysis of the tax situation in the twenty years since 1926 shows that low
income in the period of depression resulted in a low percentage of tax collection and,
consequently, an accumulation of large arrears and of large holdings of tax-sale properties by municipalities, although it should be noted that such properties consisted almost
entirely of unimproved land. Considering, however, the high percentage of the levy
which is now collected and which has been collected for a number of years, the great
decline in tax arrears, the very considerable decline in tax-sale lands, and the current
high level of construction, the facts do not establish that the real property tax is now
onerous. CHAPTER VI.
MUNICIPAL TAXATION:   BUSINESS AND OTHER TAXES.
1. THE BUSINESS TAX.
The most common form of taxation in Canadian municipalities, apart from the tax
on real estate, is the business tax. It is a tax on the occupier of premises used for
carrying on any business, trade, profession or other occupation, except agriculture, and
is imposed in all the provinces, except British Columbia and Prince Edward Island.
The tax is productive in urban areas, and in some cities provides 10 per cent, or more
of the total current revenue.
A. The Tax Base.
The basis of the municipal business tax, as distinct from business licences, varies
in different provinces: —
(i.) Where the personal property tax is still in effect, as in the Maritime Provinces
(except the cities of Halifax and Saint John), the business tax takes the form of a tax
on stock-in-trade and fixtures.
(ii.) In Saskatchewan the valuation for the business tax is determined by a rate
per square foot of space occupied, such rate, as fixed by the assessor, varying for
different classes of business. The tax is the product of the general tax rate applied to
this valuation.
(iii.) In Ontario and in the cities of Halifax, N.S., and Saint John, N.B., the
business tax is levied on a percentage of the assessed value of the premises occupied,
to which the general rate on real property is applied. The " Ontario Assessment Act" *
makes a " business assessment" mandatory in every municipality on every person
occupying real estate for the purpose of any defined business or occupation. The
percentage of the assessed value on which the tax is levied varies between 25 per cent.
and 75 per cent, (except in the case of a distiller who is taxed on 150 per cent.),
depending upon the classification of the business or occupation under the Act. For
example, wholesale merchants, insurance companies, loan companies, trust companies,
banks, and chain stores, are taxed on 75 per cent, of the assessed value; manufacturers
on 60 per cent.; departmental stores on 50 per cent.; professional men on 50 per cent.;
and retail merchants on 25 to 35 per cent., depending upon the population of the
municipality.
(iv.) In the cities of Montreal, Winnipeg, Edmonton, and Calgary, and in other
municipalities, the business tax is levied as a rate on the annual rental value of the
premises occupied.
In Montreal the tax is a flat rate of 10 per cent, (plus a surcharge of 8 per cent, of
the tax) on the annual rental value of the premises, while an additional special tax may
be levied on persons operating departmental stores. Where business premises are
occupied by a tenant, the rate is levied on the rental actually paid or on the rental value
as fixed by the assessor. In the case of business premises occupied by the owner, a
rental value is calculated on the basis of the assessed value of the land and building.
The business tax under the Winnipeg charter is based upon annual rental value and
combines the principles of classification of businesses and graduation of rates. The
rates vary for different classes of business and in some cases are graduated within
classes according to assessment. For purposes of assessing annual rental value the
assessment commissioner is instructed to take all factors into account so that, as far as
possible, similar premises will be equally assessed.
* R.S.O. 1937, chap. 272, sec. 8.
73 X 74 BUSINESS AND OTHER TAXES.
In Edmonton the business tax is also based upon annual rental value with varying
rates applicable to different business classifications.
Having considered the foregoing methods of levying a business tax, I am of the
opinion that a tax based on annual rental value is the most satisfactory. While it
cannot be described as an accurate measure of ability to pay, the rental value is
indirectly related to such ability. As compared with the assessed valuation, which
tends to be rigid, the rental paid fluctuates with economic conditions and is, therefore,
a more satisfactory measure of changes in ability to pay. I am of the further opinion
that a business tax based on rental value with varying rates for different classes of
business will approximate ability to pay to a greater degree than a flat rate applicable
to all businesses.
B. Justification of the Business Tax.
The justification of the business tax is that business enterprises occasion many
governmental costs and enjoy many benefits and privileges which should reasonably be
met by taxes upon them; that local businesses benefit from the existence of the community which the local services make possible and from the facilities for doing business
which are thus provided; and that, on the basis of many years of experience, a business
tax broadens the tax base, is productive and assures municipal governments of larger
and more certain revenues, and is easy to administer. The tax is, of course, a deductible
cost in determining income for income tax purposes.
In the absence of a municipal business tax in British Columbia, I find that:—
(i.) The municipal tax base is more restricted than the tax base of municipalities
in other provinces where a business tax is levied.
(ii.) The real property tax, although not out of line with the same tax in other
provinces, accounts for a larger proportion of municipal revenues than in some other
provinces, since it is the only major tax imposed.
(iii.) Business licences, which are theoretically fees measuring the costs of services
or benefits rendered to the licensee or the cost of regulation by the municipality, have
in fact no relation to such costs: they are actually taxes imposed on businesses and
occupations, are fixed purely on a basis of expediency and without regard to any
principles of equity as between licensees, and are not administered efficiently.
In the light of the foregoing considerations, and having particular regard to the
fact that a business tax will broaden the municipal tax base and that long experience
has shown it to be a productive tax which can be successfully administered by municipalities, I am of the opinion that all municipalities, and the larger cities, in any event,
should be empowered to levy, and should levy, a business tax. The imposition of a
business tax would result in a substantial increase in municipal revenues, particularly
in the larger urban areas, and would at the same time compel municipalities to reform
the existing system of business licences by restricting the requirement for such licences
to cases where specific services are rendered to the licensee, or where special supervision
or regulation by the municipality is necessary, for example, theatres, dance-halls, and
bowling alleys. Furthermore, the business tax would be payable by persons engaged in
businesses which are now not subject to municipal licensing.
Accordingly, I recommend that the " Municipal Act," the " Vancouver Incorporation
Act," and the " Village Municipalities Act," be amended to empower all municipalities
governed by these Acts to levy a business tax on all occupiers of premises used for
carrying on any business, trade, profession, or other occupation, except agriculture,
and that the tax be a rate on the annual rental value of such premises, which rate may
vary as between different classes of business; and, further, that in municipalities
levying a business tax, only such trades and businesses as require regulation or control
by or receive special services from the municipality shall be required to hold a trade
or business licence. BUSINESS and OTHER TAXES. X 75
I also recommend that, in regulating unorganized areas on the outskirts of
municipalities, the Provincial Government give consideration to the imposition of a
business tax or to adjustment of the fees for trade licences, under the " Trade Licences
Act," * in such unorganized areas, in order to prevent unfair competition to businesses
subject to a business tax in the adjoining municipality.
2. TAXATION OF PUBLIC UTILITIES.
A. The " Municipal Act."
Under the " Municipal Act" (section 223) the pole-lines, cables, and wires of any
telephone, telegraph, electric light or power company within the limits of any municipality are deemed to be land for the purpose of assessment and taxation, and the amount
of the assessment thereon is fixed at $800 per mile of pole-lines, cables, and wires, in
the case of municipalities with a population of 10,000 or more, and at $500 per mile
in the case of all other municipalities. The mains of any gas company on a public
highway are deemed to be land and are assessed as such at the rate of 40 cents per
running foot.
The miles of single track of any tramway company are also deemed to be land,
under the " Municipal Act," and the assessment is fixed at the rate of $5,280 per mile
or fraction thereof. The main line and branch-line track of any railway company is
subject to a fixed assessment in a similar amount, while the mileage of other track is
assessed at $3,250 per mile. Any privately owned right-of-way is assessed in addition
and separately at its actual value as land.
In contrast to the " Municipal Act," which deems them to be " land," the " Public
Schools Act Amendment Act, 1946," includes " the poles, cables, and wires of any telephone, telegraph, electric light, or electric power company, and the track in place used
in the operation of a railway " in the definition of " improvements." I have already
recommended that a uniform definition of " land " and " improvements " for purposes
of municipal and school taxation be enacted.
It has been submitted to the Commission that the fixed assessment per mile of
pole-lines, cables, and wires, under the " Municipal Act," is substantially below actual
value. While the assessment of utility property on such a basis is not unusual, it is
necessarily arbitrary and not intended to represent actual value in the sense of taking
into account all factors affecting such value, nor does it take into account the value of
the privilege of using public streets and highways.
The " Electric Power Act," 1945,-f- provides that the British Columbia Power Commission shall pay municipal and school taxes on land and that, in lieu of taxes on
" buildings, structures, poles, towers, conductors, and other plant and improvements
and personal property," the Commission shall pay to a municipality in which it distributes and sells power a sum equal to 3 per cent, of the annual gross cash revenues
received from the sale of power to persons within the boundaries of such municipality.
I recommend that consideration be given to the adoption of a similar basis for the
taxation of utilities in lieu of the present basis under the " Municipal Act" of a fixed
assessment per mile of pole-lines, cables, and wires.
B. The " Vancouver Incorporation Act."
Under the Vancouver charter the poles, conduits, cables, and wires of any telephone, electric light or electric power company; the mains of any gas company; the
rails, poles, and wires of any street-railway or tramway company; and the plant and
machinery used in connection therewith when situated on any street or public place are
* R.S.B.C 1936, chap. 158.
t B.C. Statutes 1945, chap. 27, Part VI. X 76 BUSINESS AND OTHER TAXES.
deemed to be rateable property, and are liable to taxation, under section 39a (2), as
follows:—
The several companies aforesaid shall be taxed annually at the rate of one and one-
half per cent, per annum (a) in the case of every telephone company on the gross
rentals actually annually received from its subscribers for telephones situate within the
city, including inter-exchange tolls for calls between exchanges within the city, (6) in
the case of every gas company, electric lighting company and electric power company
on the amount annually received by such company for gas, electric light, or electric power
consumed within the city, (c) in the case of every street-railway company on the amount
of fares annually received upon its street-cars within the city.
The foregoing taxes are in lieu of all taxes otherwise payable upon the said property. For the purposes of recording this property on the assessment roll, the assessor,
under section 39a (4), sets out in respect of each company " an amount which as a
capital sum would yield on the basis of the taxation of improvements for rateable
property within the city for the previous year an amount equivalent to the taxes payable under this section based on the revenues of the said companies as herein prescribed at the rate of one and one-half per cent, per annum."
In addition to the foregoing taxes, the public utilities concerned, namely, the
British Columbia Electric Railway Company and the British Columbia Telephone Company, pay the regular tax on real estate, their total payments to the city during 1946
being approximately $530,000 and $90,000, respectively. I note that, under the proposed new transportation franchise of the British Columbia Electric Railway Company,
the city estimates that, on the basis of present gross receipts, the company will increase
its annual payments by approximately $100,000.
I am advised that it is the intention of the city to propose an amendment to the
charter which will increase the present rate of 1% per cent, of gross receipts as the
tax payable by the utilities under section 39a (2). I am of the opinion that the city
should receive larger revenues from these sources.
3. MISCELLANEOUS TAXES.
A. Minor Taxes.
Municipal taxation, apart from the tax on real estate and business licences, is
limited to a poll tax, a road tax, a dog tax, a library tax, and a vehicle tax. The proceeds of these taxes represent only a small fraction of total revenues. While these
taxes do not offer a basis for expanding municipal revenues, I am of the opinion that
they can be better administered with an improvement in tax collection methods.
B. Taxing of Beer Licensees.
It has been submitted that municipalities should be empowered to tax beer
licensees. The " Government Liquor Act" authorizes the Liquor Control Board to
grant licences for the sale of beer and suspends municipal licensing powers in respect
of the business carried on by the licensee.* An exception to the law, by way of an
amendment to the " Vancouver Incorporation Act," permits Vancouver to tax every
person carrying on business in the city pursuant to a beer licence at a rate varying
from $30, if the licence fee is less than $350, to $85 per annum, if the licence fee is
$600 or more.t
I am of the opinion that municipalities should have the power to license persons
operating premises for the sale of beer. If a business tax based on rental value is
levied, as recommended in this report, such a tax would, and certainly should, be
applicable to beer licensees as to all other businesses.    In the city of Vancouver the
* R.S.B.C. 1936, chap. 160, sec. 28.
t B.C. Statutes 1937, chap. 82, sec. 163. BUSINESS AND OTHER TAXES. X 77
business tax would replace the present tax based on the licence fee paid to the Liquor
Control Board.
If a municipal business tax is not levied, I recommend that the municipalities be
empowered to tax beer licensees, such tax to be fixed with due regard to the scale of
business licence fees in the different classes of municipalities.
C. Licensing of Motor Carriers.
Municipalities are empowered to license motor carriers in respect of commercial
vehicles operating on local roads. It has been submitted that such licensing by individual municipalities results in a restriction of service to the public and in discrimination as between operators, and, therefore, that all licensing of motor carriers should
be centralized in the hands of the Provincial Government. I am of the opinion that if
the operators choose to become local carriers within municipal limits, they should contribute to municipal revenues, and, further, that the municipalities are entitled to
prescribe regulations governing traffic on local roads. If the existing system interferes with efficiency of service, the matter should be referred to the Public Utilities
Commission, which is charged with the duty " to regulate motor carriers with the
objects of promoting adequate and efficient service and reasonable and just charges
therefor, and of promoting safety on the public highways, and of fostering sound
economic conditions in the transportation business in the Province . . ."* Any
changes in the existing system should not have the effect of reducing municipal
revenues.
* " Motor Carrier Act," B.C. Statutes 1939, chap. 36, sec. 38 (1). CHAPTER VII.
MUNICIPAL TAXATION:   TAX-EXEMPT PROPERTY.
In British Columbia, as in all the provinces of Canada, certain properties are
by statute exempt from municipal taxation.
1. STATUTORY PROVISIONS.
The " Municipal Act" (section 221) exempts from taxation certain lands and
improvements, including the land and building used for the public worship of God;
cemeteries; hospitals; orphanages; the buildings of certain horticultural or agricultural societies; the property of the municipality; property vested in or held by
His Majesty; and property specially exempt from municipal taxation by any other
enactment of the Legislature. The council of any municipality may also exempt fruit-
trees from taxation. Lands, the fee of which is in the Crown, and the improvements
thereon, when held or occupied otherwise than by or on behalf of the Crown, are subject to assessment and taxation in the name of the holder or occupier thereof, without
in any way affecting the rights of the Crown.
The exemptions under the " Village Municipalities Act " (schedule, section 30)
are similar to the foregoing.
The Vancouver charter (section 46) states that, unless otherwise provided, " all
land, real property, improvements thereon, machinery and plant, being fixtures therein
and thereon, in the city shall be liable to taxation," subject to certain exemptions. The
exemptions include all property " vested in or held by His Majesty or for the public
use of the Province." If such property is occupied by a person other than in an official
capacity, the occupant is assessed in respect of his interest therein. Similarly, any
lessee or sub-lessee of the Crown or of a Board of Harbour Commissioners is assessed
in respect of his right or interest in the property on the basis of the actual cash value
of the lands and improvements occupied or used or possessed by him. Property belonging to the city is exempt unless leased on terms requiring the lessee to pay taxes
thereon. Also exempt are the buildings and grounds of every university, college,
school, free public library, public hospital, incorporated charitable institution, poor-
house, orphanage, and lunatic asylum. Signs, signboards or billboards are exempt if
their assessed value is less than $250.
In addition to the foregoing, the council may exempt any building used for public
worship, including the land upon which it stands, and, wholly or in part, " any improvements, erections, and buildings erected on any land within the city." It may also,
as an aid to industrial development, grant an exemption from water rates and municipal taxation for a period not exceeding ten years to any industry to be established in
the city.
2. TRENDS IN EXEMPTIONS.
Tables 40, 43, and 44 in the appendix to this report show the assessed value of
non-taxable properties in relation to the total assessed valuation for all municipalities
and in selected municipalities over a period of years.    It will be seen that:—
(i.) In Vancouver the value of non-taxable properties has increased from
$58,100,000 in 1936 to approximately $68,900,000 in 1946. The total assessed valuation in 1946, including non-taxable properties, was approximately $408,770,000.
(ii.) In cities (excluding Vancouver) the value of non-taxable properties has
increased from approximately $52,340,000 in 1936 to $62,050,000 in 1946. The total
assessed valuation in 1946 was approximately $219,800,000.
78 (iii.) In districts the value of non-taxable properties has increased from approximately $35,480,000 in 1936 to more than $53,150,000 in 1946. The total assessed valuation in 1946 was $235,800,000.
(iv.) In villages the value of non-taxable properties has increased from $1,000,000
in 1936 to $1,680,000 in 1946.    The total assessed valuation in 1946 was $14,960,000.
(v.) The total value of non-taxable properties in 1945 was approximately
$179,600,000, of which over $92,000,000 represented Dominion and Provincial Government properties, $66,100,000 represented municipal properties, and $21,500,000 represented other properties.
(vi.) The increase in tax-exempt properties between 1936 and 1940 represented in
the main tax-sale properties, principally vacant land, which reverted to the municipalities. With improved economic conditions municipalities have since 1940 disposed
of a large proportion of such properties, and these have, in consequence, returned to
the tax rolls.
(vii.) The increase in tax-exempt properties since 1940 represents almost entirely
Dominion Government properties in the form of war plants and war housing. These
properties are now returning to the tax rolls as the Crown disposes of them to private
owners.
Tax-exempt properties represent in British Columbia, as in the other provinces,
a considerable proportion of the total assessed valuation. Since the effect of exemptions is to impose a proportionately greater tax burden on non-exempt properties, and,
further, since all properties benefit from municipal services, such exemptions should be
carefully restricted with a view to spreading the tax burden over a wider area.
3. CROWN PROPERTY.
Crown property accounts for a large proportion of the total of tax-exempt properties, and all municipalities have submitted that it be made subject to taxation. It is
important to note that the basis of this exemption is section 125 of the " British North
America Act," which reads as follows: " No lands or property belonging to Canada or
any Province shall be liable to taxation." To authorize municipalities to levy a tax on
Crown property would, therefore, require an amendment to the "British North America
Act." As the law now stands, contributions by the Crown to local revenues can only
take the form of ex gratia payments.
In considering Crown properties it is important to distinguish between two types:
first, Crown property used for ordinary governmental purposes, including legislative
buildings, post-offices, court-houses, experimental farms, and military properties; and,
secondly, Crown property used for commercial purposes, such as electric power distribution, and any profit-making commercial enterprises, such as government liquor stores.
With respect to government commercial enterprises, I am of the opinion that the
Crown should make payments in lieu of municipal taxes on the property used by such
enterprises equivalent to the taxes which would be paid if such property were in the
hands of private enterprise. This principle has already been adopted by the Provincial
Government with respect to the operations of the British Columbia Power Commission
under the " Electric Power Act."* I recommend that with respect to other Crown
property used for commercial purposes, including the warehouses and stores of the
Liquor Control Board, the Provincial Government make payments to the municipalities
in which such property is located equivalent to the taxes which would ordinarily be paid
thereon, including real property taxes and business taxes or licences. If a business tax,
as recommended in this report, is not imposed, I recommend that the Crown make an
* B.C. Statutes 1945, chap. 27, Part VI. X 80
TAX-EXEMPT PROPERTY.
annual payment in lieu of an ordinary business licence for each Government liquor
warehouse and store located in municipalities.
Different considerations are applicable to Crown property used for ordinary governmental purposes as distinct from commercial purposes. While all properties benefit
from municipal services, it is important to note that the municipalities in turn benefit
from the location of certain government properties within their boundaries, for
example, a legislative building, a court-house, a post-office, or an experimental farm.
It is not unreasonable, therefore, to expect the local taxpayers to provide some services
for such Government properties. Where, however, there is an undue concentration of
Crown property making wide use of municipal services in a single municipality, it
would be unfair to expect the local inhabitants to bear the cost of the benefits thus
provided for national or provincial services. Furthermore, a municipality may be
adversely affected through the acquisition by the Crown of large properties which had
been yielding substantial revenues and had constituted a large part of the security
for the municipal debt: the acquisition by the Dominion Government of the waterfront
of the city of North Vancouver has been submitted as a case in point.
With the continued expansion in governmental activities, I am of the opinion that
the Dominion and Provincial Governments should review the application of the principle
of exempting Crown property from municipal taxation. I have already recommended
that Crown property used for commercial purposes should pay the equivalent of ordinary municipal taxes. With respect to Crown property used for ordinary governmental
purposes, I recommend that where there is an undue concentration of such property in
a municipality, or where the exemption of such property is discriminatory in its effects
on local taxation, or where a municipality can establish other reasons which warrant
special consideration, the Government should make a grant in aid of local taxes to
such municipality. CHAPTER VIII.
MUNICIPAL FINANCES TO-DAY.
The municipalities in all parts of the Province have submitted to the Commission
that they are not in a position to discharge their responsibilities adequately because of
their restricted tax base and because of the costs of such services as education and
social welfare which they do not consider proper municipal functions. They have further submitted that the tax on real estate is onerous, and have recommended that the
Provincial Government afford them relief either by assuming the whole cost of the
" non-municipal " responsibilities or by making additional grants to, or sharing certain
provincial revenues with, the municipalities.
1. IMPROVEMENT IN MUNICIPAL FINANCES.
Consequent upon the foregoing representations, I have reviewed municipal finances
and taxation in detail, and must conclude that the representations made reflect the difficult financial position of many municipalities during the depression years rather than
their present position, and that the relief which is requested is for the main purpose of
preventing the recurrence of a similar situation. This was, in fact, admitted by the
representatives of some municipalities. The review of municipal revenues, taxation,
expenditures, and debts shows that municipalities have for a number of years, including
a period of rapid growth in population, financed current expenditures out of current
revenues and have at the same time considerably improved their debt position. Their
tax situation is very satisfactory, as is indicated by the high percentage of taxes collected and by the great decline in tax arrears and in holdings of tax-sale lands. The tax
on real property is not onerous now, while the municipal debt appears less burdensome
than at any time since the end of the First World War. The financial situation of
municipalities has thus shown great improvement in the past few years, although this
statement must be qualified by the fact that retrenchment during the depression and
the war years prevented adequate maintenance of some capital assets and, therefore,
contributed towards a more rapid deterioration of such assets.
While municipalities, with few exceptions, admit the improvement in their financial
position, they contend that their present situation should not be considered normal but
rather a consequence of the abnormal economic activity of the war years, which
increased tax collections and utility surpluses, and of the continuing boom in real estate,
which has produced a large temporary source of revenue from the sale of tax-sale
properties. They also point to a backlog of deferred expenditures on maintenance and
improvements.
The evidence supports the contention that the improved financial position is in part
the result of the deferment of expenditures on maintenance and replacements over a
period of years. It is important to remember, however, that while the deferment of
such expenditures during the depression years was due to financial stringency, such
deferment during the war years was the result of the shortage of labour and of
materials. Maintenance expenditures began to rise again in 1941 and, had the labour
and materials been available, the municipalities would have been able to finance substantially higher expenditures out of available revenues. The municipal tax situation
shows that the tax on real property has not proved onerous in the past few years.
I am also satisfied that the municipalities could have placed themselves in a better
position to finance deferred expenditures after the termination of the war by setting up
reserves during the war years, when the income of their citizens was rising and
economic activity was at a high level.    And yet I note that in the case of the city of
81 X 82 MUNICIPAL FINANCES TO-DAY.
Vancouver, while the yield from the sale of tax-sale properties was wisely applied
towards the reduction in the sinking fund shortage, the revenues from the real property
tax in 1945 were only slightly higher than in 1930 and the current tax levy in 1945 was
still approximately $1,000,000 less than the levy in 1933. In the case of other municipalities, some did set aside reserves, but many applied the proceeds from the sale of
tax-sale properties to current purposes, and in some instances even reduced tax rates
during this period. I note, for example, the following extract from the evidence of the
Comptroller of the city of Victoria:—*
The Commissioner: I would estimate, from"what you said about the present financial
position of Victoria, that Victoria is today in a position to perform its functions because
of general economic conditions and so on?
Mr. MacDonald: Yes, and no, Mr. Commissioner. Up to about a year ago, the City
Council pursued a policy, for a number of years, of strict retrenchment. Had it not
been for that, we might be in a fair position to carry along, but that accumulation is
very heavy. Our tax rate for the year 1936 was forty-five mills. It was reduced, year
after year, till in about 1942 when it was thirty-seven mills. It remained at thirty-seven
mills during 1943 and 1944. Last year, 1945, the Council was forced to increase the
rate to forty-two mills, an increase of five mills last year alone. This year, the budget is
not complete, and I would not like to predict it.
If municipalities had generally pursued a policy of building up reserves out of
taxes in the period of high incomes during the war years, as was done in a number
of cases, they could have diminished their post-war problems of financing deferred
expenditures and increased requirements. Some problems have now arisen but are not
as serious as is submitted when regard is had to the current level of economic activity,
to the present municipal financial situation, and to the fact that a large part of the
increasing expenditures is due to the economic growth and development of municipalities, and that such growth and development in themselves increase land values and tax-
paying capacity.
While the situation to-day shows marked improvement, there is merit in the argument of the municipalities that the state of municipal finances over a short period is
not an adequate basis for general conclusions on municipal problems. Consideration
must be given to past experience which shows that the income of British Columbia is
subject to wide fluctuations, and that the overhead costs of government, which may be
borne easily in periods of prosperity, may become onerous when the economy suffers a
setback. It has, therefore, been necessary to examine municipal functions and expenditures and the system of municipal taxation against this background.
2. FUNCTIONS AND EXPENDITURES.
An analysis of municipal functions and expenditures points to a high degree of
inflexibility in such expenditures, the inflexibility varying in different municipalities
with the services provided, the nature of the local economy, the concentration of population, and other factors. It may be estimated that 35 per cent, to 40 per cent, of the
expenditures are for services which are mandatory under provincial statutes. While
the services are mandatory, the expenditures thereon are to a degree controllable.
They include matters which are both of local and wider concern, such as education, the
social services, and the administration of justice. The two latter services are not
burdensome, although welfare costs, now borne in larger part by the Province, would
again rise in the event of a recurrence of unemployment. Education remains the
principal mandatory function under provincial statute in terms of municipal costs,
although provincial grants have recently been increased substantially.
It is important to note that expenditures on services of peculiarly local concern as
determined by local requirements are also to a degree uncontrollable, in that all organ-
* Commission Evidence, Victoria, pp. 53 and 54. MUNICIPAL FINANCES TO-DAY. X 83
ized communities require a minimum of certain essential services. It is possible, as
the depression years proved, to reduce expenditures on such services as fire protection,
sanitation, and the maintenance of streets and sidewalks, but there is a minimum below
which no municipality can reduce such expenditures without endangering the health,
the welfare, and even the lives of its inhabitants, and without accelerating the deterioration of the physical assets of the community. The proportion of uncontrollable
expenditures is further increased by debt charges.
Municipal expenditures have recently been rising and this rise is likely to continue
in order to meet both deferred expenditures and current and capital requirements incidental to growth and development. A substantial part of the rise which has occurred
is represented by higher wages and the higher cost of materials and supplies. It is
well to note, however, that the current increase is not being occasioned by mandatory
services imposed by the Province, but is almost entirely for municipal services of local
concern as determined by local requirements and by the wishes of the local inhabitants.
That an increase within reasonable limits is warranted, particularly in municipalities
which have experienced a rapid growth in population, is evidenced by the unsatisfactory
condition of some municipal services and by the inadequate expenditures on other services, such as parks and other recreational facilities, and public libraries.
3. REVENUES AND TAXATION.
The municipalities have submitted that the real property tax constitutes an inadequate and unstable tax base in relation to their responsibilities. Their tax base, in
fact, lacks the diversity and flexibility of the tax systems of larger and more powerful
units of government, since, operating within limited jurisdictional powers in a limited
geographic area, municipalities are necessarily restricted in the taxes which they can
levy. This fact does not, however, justify a policy of making only partial use of the
available tax base if larger revenues are required. I am of the opinion that British
Columbia municipalities can make fuller use of their existing powers of taxation and,
further, that their tax base can be made more stable and, within limits, can be enlarged.
The assessment of real estate is the basis of the municipal revenue structure.
There is justification, particularly in a rapidly rising market, for a lag in assessments
behind the current market price. But an examination of real property assessments in
the city of Vancouver shows that, notwithstanding the city's great development and an
increase of more than one-third in its population between 1932 and 1946, the assessed
valuation of real property in 1946 was still $35,000,000 below the valuation in 1932.
Assessments in other municipalities are likewise lagging too far behind real values.
There is also a marked tendency to assess larger and more valuable properties on a
lower real basis than smaller properties. The failure to adjust assessments, particularly of larger properties, as warranted by economic development, has restricted the
municipal tax base unduly. The base has been further restricted and made less stable
by the policy of exempting a varying and unduly large percentage of the value of
improvements: the uniform taxation of improvements in all municipalities on at least
75 per cent, of their assessed value would broaden the tax base and give it more stability.
The tax base can and should be further enlarged by the levy of a business tax based
on the annual rental value of the premises occupied. This tax, as has been pointed
out, is common to municipalities in all the provinces, except British Columbia and
Prince Edward Island, and has for many years been a productive source of revenue in
urban areas. Vancouver is the only large city in Canada which does not levy a business
tax—a particularly appropriate source of municipal revenue for a large commercial and
industrial centre. The imposition of a business tax would enable municipalities to
revise the present unfair system of trade licences and would provide substantially
increased revenues in urban areas.    Other possible sources of increased revenue, as X 84
MUNICIPAL FINANCES TO-DAY.
suggested in this report, are changes in the basis of taxation of public utilities and
payments by the Crown in lieu of taxes on the property used by Government commercial
enterprises.
Having regard to the foregoing, I am of the opinion that the municipalities in
general, and Vancouver and other cities in particular, are now in a position, or can be
placed in a position by legislation, to raise additional revenues for services required by
the local inhabitants. I quote, in this connection, the frank admission of the Mayor of
Kelowna in his evidence before the Commission:—*
Mr. Commissioner: Are you satisfied then that in asking for certain changes in the
distribution of Provincial and Municipal functions that Kelowna is doing as much as it
can insofar—or as much as it should do—insofar as its own citizens are concerned?
A. (Mayor Pettigrew) : No, I wouldn't say that, sir. I think that the people in
Kelowna could stand paying more taxes but I don't think that the people in Kelowna
should pay more taxes than people in another town of similar size say, Penticton, Vernon,
or Nelson.    Taxation to be ideal should be equitable in all towns of similar size.
On the basis of evidence submitted to the Commission, and of the Commission's review
of municipal finances, I am satisfied that the foregoing statement is true not only of
Kelowna but of the municipalities as a group.
While I have concluded that the financial situation of the municipalities to-day is
favourable and that they are in a position or can be placed in a position to increase
their tax revenues, it does not follow that these revenues alone would provide a sufficiently wide margin to meet the needs of growth and development over a period of
time or to offset the impact of a recession in economic activity. It is necessary to look
beyond the immediate present. Considering the basic services essential to the safety,
health, and welfare of the citizens provided by the municipalities, the resulting high
inflexibility of municipal expenditures which requires stability in the tax base, the
current rise in expenditures, the probable requirements of continued growth and
development, and the history of municipal finances in the depression years, I am of the
opinion that the municipalities can show that for the proper performance of their
functions over a period of time they require more stabilized finances and a wider
margin within which to operate than they had in the pre-war years.
The assumption by the Province in 1946 of a substantially larger proportion of
school costs, after its assumption of the major share of social welfare costs, will contribute considerably towards providing a wider margin for municipalities. The recommendations made herein with respect to changes in municipal assessment and taxation
policies and practices and the levying of a business tax, if implemented, will further
widen the margin. I am also of the opinion that certain additional adjustments in
provincial-municipal relations, including a limitation of the municipal responsibility
for the general services of education and social welfare, as recommended below, should
be made to this end.
* Commission Evidence, Kelowna, pp. 18-19. CHAPTER IX.
PROVINCIAL-MUNICIPAL RELATIONS.
" Now, it is impossible to observe English local government without
becoming aware of a certain tension between the local authorities and
the central government . . . The parochial attitude to-day corresponds
neither with the basic realities of governmental economy and technique nor
with the most enlightened idea of what is desirable for the present and the
future. There is, indeed, no real distinction between the purpose and function of local and central government, and therefore there ought to be no
final hostility. Each consists of bodies of citizens; the same citizens,
indeed, though grouped somewhat differently, and with a different range of
governmental discretion. The final purpose is the same; to make the nation
as a whole a better place to live in than it would be if there were no governmental apparatus at all."*
The foregoing remarks by an authority on local government in England are
peculiarly appropriate to the current relations between the municipalities and the
Province in British Columbia. As the two units of government constitute in fact one
governmental system and to a very large extent represent the same citizens, the existing
tension between them is not natural or in the best interests of the citizens.
1. APPRAISAL OF MUNICIPAL GRIEVANCES.
The principal grievances of the municipalities, as submitted to the Commission,
are that the Provincial Government has increased and is increasing municipal responsibilities without a corresponding increase in municipal revenues, and that the municipalities have been made responsible for matters which should not be a municipal
responsibility, such as education and the social services; that provincial revenues,
which are derived in largest part from the municipalities where more than 75 per cent.
of the population resides, have increased greatly in recent years, while municipal
revenues based on the taxation of real estate have continued to be inadequate for
municipal purposes; and, that whereas between 1921 and 1933 the Provincial Government made annual grants to the municipalities representing a share of certain
provincial revenues, including liquor profits and pari-mutuel taxes, the termination
of such grants in 1933 constituted a breach of faith, with serious consequences to
municipal finances.
The evidence submitted to the Commission and the facts of municipal finances and
of provincial-municipal relations over a period of years show that the allegation that
the Provincial Government has increased municipal responsibilities applies to the
depression years of the nineteen-thirties, but not to the period since the end of the
depression: municipal responsibilities are now increasing because of local development
and local needs. While unemployment relief costs, and additional burdens imposed by
the Provincial Government upon municipalities for costs of mothers' pensions, of
municipal cases in mental hospitals and Tranquille Sanatorium, and of municipal
inmates in the Boys' and Girls' Industrial Schools, materially increased municipal
responsibilities for the social services in the depression years, the facts establish that
the Government re-assumed the additional burdens in 1938 and that, with the subsequent
improvement in economic conditions and the assumption by the Province of a very large
share of the costs of social assistance, the municipal responsibility for social welfare
is now not burdensome, as has already been shown in another part of this report.
It has also been shown that the Provincial Government has assumed a large proportion
of the costs of education, and has now substantially increased its share by implementing
the recommendations of the Cameron Report in 1946.    The provincial share of the costs
♦Herman Finer:   English Local Government  (Columbia University Press, 1934), pp. 5-
85 X 86
PROVINCIAL-MUNICIPAL RELATIONS.
of social services and education in British Columbia is now probably higher than in any
other province in Canada, with the possible exception of Prince Edward Island.
While the municipalities are necessarily the principal source of provincial revenues,
which admittedly have increased very substantially in recent years, the expenditure of
those revenues benefits the entire Province and, therefore, directly or indirectly, the
municipalities where more than 75 per cent, of the population resides. Provincial
current expenditures in the fiscal year 1944-45 are shown in the following table:—
Province of British Columbia: Expenditures, 1944-45.
$
Debt charges  8,377,000
Highways, bridges, and ferries  2,905,000
Agriculture   399,000
Public domain  2,065,000
Public welfare  9,416,000
Administration of justice  1,988,000
General government and legislation   4,049,000
Education  5,993,000
Other current expenditures   575,000
Total  35,767,000
Provincial expenditures on public welfare, which represented more than 26 per cent,
of the total, include expenditures for public health, Provincial institutions, hospitals,
child welfare, social assistance, mothers' allowances, old age pensions, and other social
services. These expenditures are to a very large extent grants to or expenditures
within municipalities or for the benefit of municipal residents. This applies also to
expenditures on education which represented 17 per cent, of the total. Expenditures
on highways and bridges and on the development of the provincial natural resources
are of direct benefit to the municipalities, since these are dependent upon the highways
and the natural resources for their own growth and well-being. Having regard to the
interdependence of different parts of the Province, it may be said that the municipalities
benefit similarly from the remaining provincial expenditures, since these are incurred
on behalf of the whole population and not of any particular section thereof.
The termination of certain provincial grants to the municipalities in 1933 has
evoked much bitter criticism. Even municipalities incorporated since 1933 have
submitted that they have been " deprived " of the revenues from these grants! It is,
therefore, of interest to examine the following table showing provincial grants in
1926, 1930, and 1945, and the ratio of such grants to total municipal revenues:—
Provincial Government Grants to Municipalities, 1926-1945.
1930.
1945.
Vancouver.
Total revenue*	
Government grants	
Grants as a percentage of total revenue..
Other Cities.
Total receipts*	
Government grants	
Grants as a percentage of total receipts..
Districts.
Total receipts*	
Government grants	
Grants as a percentage of total receipts..
Total Government grants	
$10,054,464f
$1,227,456
12.2
$6,799,640
$928,368
13.7
$3,987,111
$768,213
19.3
$2,924,037
$14,
$1,
$1
110,812
463,827
10.4
769,617
049,706
15.5
i,298,687
$903,860
21.0
1,417,393
$15,326,830
$1,599,932
10.4
$9,512,412
$1,341,096
14.1
$7,019,510
$1,285,745
18.3
$4,226,773
* Including only surpluses of municipal utilities.
t Including districts of Point Grey and South Vancouver which were annexed to
Vancouver in 1929. PROVINCIAL-MUNICIPAL RELATIONS. X 87
It is significant that the ratio of Government grants to total municipal revenues in
1945, excluding the villages, showed little change as compared with the ratio in 1926
and in 1930, although the grants are now on a different basis. The grants rose from
$2,924,000 in 1926 to $3,417,000 in 1930 and to $4,227,000 in 1945. Under the new
system of school financing, introduced in 1946, school grants to municipalities are now
being further increased by about $2,000,000 annually, as compared with the figures for
1945, and by a grant of 50 per cent, of the costs of construction of school buildings.
While the special grants received between 1921 and 1933, including a share of the
Provincial liquor profits and of the revenues from motor-vehicle licences and the
proceeds of the pari-mutuel tax, were withdrawn in 1933, except for a fixed maximum
amount of $570,000 from motor-vehicle licence revenues, it is apparent that the
municipalities as a group, with the exception of the villages, have been fully compensated
for such withdrawal by the substantial increase in grants for specific services, particularly education and social welfare.
It appears to me from an examination of the facts that the municipalities are to
a large extent reiterating grievances of the depression years without regard to changes
in municipal finances and responsibilities and in provincial-municipal relations which
have since taken place. The facts do not warrant the existing tension between the
municipalities and the Province.
2. CONSIDERATIONS ON PROVINCIAL-MUNICIPAL FINANCIAL
RELATIONS.
I have already pointed out that further adjustments in provincial-municipal relations should be made with a view to more stabilized municipal finances and to providing municipalities with a wider margin for operations than they had in the pre-war
years. The municipalities have submitted that the Provincial Government should
either assume the full costs of education and the social services or that it should share
with them certain large revenues collected within municipal areas, including liquor
profits and the revenues from pari-mutuel taxes, motor-vehicle licences, and the gasoline tax. Other adjustments between the Province and the municipalities have also
been suggested. In my opinion, further changes in provincial-municipal financial
relations must have regard to the following considerations:—
(i.) The financial situation of the municipalities to-day is satisfactory. Changes
in assessment and taxation policies and the levy of a business tax, as recommended in
this report, would widen their tax base and enable them to make fuller use of their
present powers of taxation. The municipalities should, therefore, not look solely to
the Provincial Government for assistance: they are in a position to and should cooperate in meeting their own problems, particularly since these are now created by the
demands of the local inhabitants for local services.
(ii.) The instability of municipal revenues varies in different municipalities, being
higher, for example, in a municipality inhabited mainly by industrial workers, whose
income is seriously affected by unemployment when economic activity declines, than in
a wealthy residential suburb. Thus, Burnaby collected only 59.5 per cent, of its current levy in 1937, as compared with 91.7 per cent, in Oak Bay. Similarly, Fernie,
dependent upon a single industry, collected 62.7 per cent, of its current levy in 1937,
as compared with 95.5 per cent, in Kelowna. Accordingly, adjustments in provincial-
municipal financial relations should, as far as possible and where it is appropriate,
have regard to local needs and to differences in taxable capacity, with a view to the
equalization of burdens.
(iii.) The fact that the Provincial Government which serves the whole Province
collects large revenues within municipalities does not automatically warrant a claim
by the municipalities  for the whole or a fixed part of such  revenues.    Provincial revenues are required for the development of the Province as a whole. Modern government could not function if the local units were entitled as a matter of right to a
return of revenues collected within their areas by the larger units. I am, therefore,
of the opinion that municipalities are not entitled, for example, to a share of provincial liquor profits, as such, merely because liquor stores are located within their
area: they are entitled to no more and no less than would be paid by an ordinary
business engaged in selling goods for profit.
(iv.) The raising of revenue by one unit of government and the distribution of
such revenue for spending by other units within their discretion may be warranted in
special circumstances, but is not a sound policy as a general rule: it does not tend to
promote economy or efficiency in administration and it diminishes the direct responsibility of governments to the citizens. I am, therefore, of the opinion that provincial
grants to municipalities made unconditionally and without regard to local needs should,
except in special circumstances, be avoided. On the other hand, a system of provincial
grants for specific services affecting the general welfare, such as education, the social
services, and highways, accompanied by controls and prescribing minimum standards
of service, is an effective and satisfactory method of affording financial assistance to
municipalities. The Province can thereby assume responsibility for financing a large
proportion of expenditures on services of more than local concern.
(v.) Municipalities are the primary unit of government in Canada and the preservation of local self-government is necessary to the maintenance of democratic institutions. The transference of important functions to the Provincial Government would
diminish the responsibility and the status of municipal government and is only warranted in cases where the functions require centralized administration or responsibility.
It has been submitted by some municipalities that, while recommending the assumption
by the Provincial Government of the full costs of certain services, such as social welfare, they want to retain the administration of such services. In my opinion this
would not lead to efficient administration: the government which is charged with the
expenditure of money should also be charged with the responsibility of raising at least
a part of that money. I am also of the opinion that, since governmental functions are
not static and since the Province and the municipalities are part of the same governmental system, it is not possible to draw a fixed line between their respective functions
and to establish their respective responsibilities accordingly on a permanent basis.
(vi.) The mere shifting of responsibilities from the municipalities to the Provincial Government or an increase in provincial grants to municipalities will not necessarily relieve municipal taxpayers, since they are also directly or indirectly the principal provincial taxpayers. If, therefore, a shift in functions or an increase in grants
should in due course necessitate an increase in provincial taxation, the increase would
very largely be paid by municipal residents, although provincial taxation would distribute the burden differently from municipal taxation.
(vii.) While the revenues of the Provincial Government are by no means unlimited, and the depression years showed that the provincial finances may be very
seriously affected by a decline in economic activity, the fact remains that the Province
has larger and more varied sources of revenue than the municipalities, and, further,
that under the pending agreement with the Dominion Government a high proportion
of provincial revenues will be stabilized for a number of years.
(viii.) Since the municipalities provide essential services for more than 75 per
cent, of the provincial population, the performance of municipal functions is a matter
of provincial concern.
The Commission has been guided by these considerations in recommending the
following readjustments in provincial-municipal relations with a view to the proper
performance of municipal functions. A. Education.
Since education is now recognized to be a matter of concern to the State as a
whole, the standard of education must no longer be determined solely by the taxable
capacity of individual municipalities: a common minimum standard is required and it
is the responsibility of the Province to prescribe this standard and to make certain
that it is maintained. In implementing the recommendations of the Cameron Report
on Education, as outlined in Chapter II. of this report, the Government of British
Columbia has accepted this responsibility.
The principle of equalization recommended by the Cameron Report is sound and
the Government is to be commended for accepting it and implementing the recommendations so promptly, although steps must now be taken to introduce a system of
equalized assessments. The amendments to the " Public Schools Act" in 1946, introducing the new system of school grants, have, in my opinion, placed British Columbia
ahead of the other provinces in the matter of school financing. The system will, however, lose some of its effectiveness if the grants are not reviewed from time to time
and adjusted to meet changing conditions. The costs of education are not static and
the grants cannot, therefore, remain static, unless it is intended to depart from the
principle of equalization underlying them.
The new school legislation, in addition to providing grants of 50 per cent, of the
cost of new school buildings, makes available throughout the Province a basic educational programme on an equalized cost basis. The basic programme is the sum of a
minimum cost assigned to each of the principal items of unavoidable current expense,
namely, teachers' salaries, supervision, and other current expenses. The cost to the
school districts is the product of a levy of 5 mills on 100 per cent, of the assessed value
of the land and 75 per cent, of the assessed value of taxable improvements: the difference between the yield of this levy and the cost of the basic programme is the provincial grant. Since all costs above the basic cost fall entirely on the local tax base,
it is evident that the value of the formula for determining grants depends on how
closely the basic costs, as estimated, approach the actual expenditures of typical school
districts.
The estimated minimum costs in the Cameron Report were based on the actual
minimum expenditures in 1943-44. With the rise in salaries, wages, and prices, in the
period which has intervened, these estimates are no longer related to actual costs, and
adjustments are now warranted. The submissions to the Commission by a number of
municipalities that rising school costs have largely or even wholly absorbed the
increased school grants are well founded.
The minimum teachers' salary schedule upon which grants are now based, following
the Cameron Report, is $1,000, $1,200, and $1,300 for teachers in elementary, junior
high, and senior high school, respectively. Actual salaries, however, have been substantially increased in 1946, and it is clear that very few school boards will now pay less than
minimum salaries of $1,100, $1,300, and $1,400, respectively, with correspondingly
increased maxima. In fact, the majority of the school boards will be paying higher,
often much higher, salaries than these. Accordingly, I recommend that the provincial
grants be computed on the basis of a minimum teachers' salary schedule which is $100
higher for each classification than the schedule under the " Public Schools Act Amendment Act, 1946," and that the figures be again reconsidered and, if necessary, revised
in the light of the salaries as renegotiated at the end of the school-year 1946-47.
The allowance for current school operating expenditures under the Act of 1946,
for computing school grants, is fixed at $13, $17, and $20 per pupil in elementary,
junior, and senior high schools, respectively, based on the average daily attendance. X 90 PROVINCIAL-MUNICIPAL RELATIONS.
Since these figures are now out of line with actual costs, I recommend that each of these
allowances be immediately increased by $3.
For the further relief of rural districts, I recommend that the provincial share of
the costs of school transportation, which is now 50 per cent., be increased to at least 60
per cent, of the total of such costs.
It has been estimated that under the recommendations of the Cameron Report, as
implemented, school grants to municipalities will be increased by about $2,000,000 in
the year 1946-47, in addition to the grants of 50 per cent, of the cost of school buildings.
The changes which I have recommended above, exclusive of the suggested relief for
rural districts, would further increase the provincial share of school costs by an amount
estimated at $860,000, of which more than $600,000 will be for the benefit of municipalities. A rise in municipal assessments will, of course, reduce provincial grants, offsetting such increase in the grants as may be occasioned by an increase in the number
of pupils and of teachers. In order to limit the municipal share of school costs and to
maintain the principle of equalization, I recommend that the provincial grants be
reviewed from time to time and adjusted to meet changing conditions.
The increase proposed herein will raise still further the provincial share of the
total costs of education. It is not to be anticipated, however, that this share will, or
should, remain fixed, as the provincial grants should be reviewed and adjusted from
time to time. I am of the opinion that the Provincial Government must be prepared
to assume over a period of time an increasingly larger share of the costs of education
with an accompanying increase in control over the expenditures of local school boards.
Furthermore, as education is a matter of major concern to the State and as school costs
constitute the largest item in municipal budgets, the assumption by the Province of an
increasing share of the financial responsibility for education is, in my opinion, one of
the best means of effecting necessary readjustments in provincial-municipal financial
relations.
B. Social Services.
The social services, as discussed in Chapter II. of this report, include social welfare, hospitalization, and public health. They are services of national and province-
wide concern as well as of local concern, and are, therefore, financed in varying degrees
by the Dominion, the Province, and the municipalities.
(a.) Social Welfare.
As outlined in Chapter II. of this report, the Government of British Columbia has
accepted responsibility for a very substantial share of the costs of social welfare.
It has in practice recognized the fact that the mobility of the population has now rendered obsolete the old concept of exclusive local responsibility for the care of the poor
and destitute. Since 1939 the Government has assumed 80 per cent, of the cost of
general social assistance, except for cases requiring nursing-home or institutional care,
and 50 per cent, of the cost of medical care for the recipients of such assistance.
The Social Assistance Regulations provide for a sharing of administrative costs under
certain conditions. Progress in the transfer of social welfare responsibilities from
the municipalities to the Provincial Government has been generally greater in British
Columbia than in the other provinces.
It has been submitted to the Commission that the Province should assume the entire
financial responsibility for social welfare, although the urban municipalities, in particular, desire at the same time to retain administrative responsibility therefor. I am
of the opinion that responsibility for the administration of governmental services without any responsibility for raising some portion of the money for financing such services
is unsound.    I am also of the opinion that in assuming 80 per cent, of the costs of general social assistance the Province has left to the municipalities as a group a minimum share necessary to maintain local responsibility and to assure sound administration.
While the sharing of social assistance costs on the basis of the Province bearing
80 per cent, of such costs and the municipalities 20 per cent, is now established, it has
not been extended to all forms of assistance. This division of costs extends to general
social allowances, boarding-home care, and allowances for tuberculosis cases, but not
to nursing-home care, for which the Province and the municipality pay 100 per cent, of
the cost of their own patients, nor to medical care and drugs or emergency health aid
for public assistance recipients, the costs of which are shared equally by the Province
and the municipality.
It has been submitted that the division of costs on the 80 per cent. Provincial-
20 per cent, municipal basis should be extended to all the foregoing social welfare
matters in order to afford relief to municipalities, as well as to reduce costs of administration and to eliminate the confusion caused by the absence of uniformity in the system
of grants. This submission is well founded. No satisfactory reason has been given
for requiring municipalities to pay 100 per cent, of the costs of nursing-home care and
only 20 per cent, of the costs of boarding-home care: this discrimination actually
accentuates the hospital problem, as it is cheaper for a municipality to maintain a
person in a hospital than to maintain him in' a nursing-home. Similarly, I see no
reason for discriminating between social allowances, as such, and medical care or
emergency health aid for social assistance recipients.
The Provincial Government does not share in the costs of municipal child welfare
cases under the " Protection of Children Act."* These costs have been rising, and it
has been established that they have in some instances imposed an inequitable burden
upon municipalities. For example, it is manifestly unfair for a municipality alone to
have to maintain children until the age of 18, as is required by law, in cases where a
parent establishes residence therein and then deserts his family. Since child welfare
is an essential branch of public welfare, I am of the opinion that the Province should
share in the costs of municipal cases, as it does in other forms of social welfare, and
that the joint provincial-municipal responsibility should extend to both " ward " and
" non-ward " cases.
Accordingly, I recommend that the 80 per cent.-20 per cent, division of social
welfare costs between the Province and the municipalities, respectively, be extended to
cover the welfare services generally, and, more specifically, that the Province assume
80 per cent, of the costs of general social assistance, nursing-home care, boarding-home
care, medical care and drugs, emergency health aid, child welfare under the " Protection
of Children Act," allowances to tuberculosis cases in private homes and in registered
boarding and nursing homes, transportation of tuberculosis cases to and from clinics,
and comfort allowances to tuberculosis patients in hospitals.
For institutional care the municipalities now pay 80 cents per day for municipal
cases in provincial tuberculosis institutions, $1.10 per day in provincial infirmaries,
and 75 per cent, of the daily per capita costs in the Provincial Home in Kamloops. I am
of the opinion that the 80 per cent.-20 per cent, division of costs should also be
extended to cover the foregoing institutional care. Accordingly, I recommend that the
present per diem rates be abolished, and that, in lieu thereof, the municipalities pay 20
per cent, of the daily per capita cost for municipal inmates in provincial tuberculosis
institutions, provincial infirmaries, and the Provincial Home.
It has been submitted that the availability of provincial institutions at a relatively
low cost per municipal inmate tends to encourage municipalities to send persons to such
institutions rather than to make provision for them within the municipality where they
* B.C. Statutes 1943, chap. 5. have been living. This is not desirable. Accordingly, I recommend that the Provincial
Government give consideration to plans for assisting municipalities in financing both
capital and maintenance costs of local welfare institutions, such as homes for the aged.
The assumption by the Province of 80 per cent, of social welfare costs in municipalities must be accompanied by provincial supervision to assure the maintenance of
certain prescribed standards of service and administration and the employment of
qualified personnel. The Provincial Government has, accordingly, made certain regulations under the " Social Assistance Act,"* requiring municipalities with a population
of 10,000 or over to employ at least one social worker on a full-time basis and giving
other municipalities the alternative of employing a full-time worker or arranging with
the Social Assistance Branch of the provincial Department of Health and Welfare to
undertake social work within the municipality at an annual cost to the municipality of
15 cents per capita. The regulations also provide for a sharing of administrative costs
where more than one social worker is employed.
It has been submitted by some municipalities that the Social Assistance Regulations
are unnecessary and will impose an undue burden on them. I am advised that the city
of New Westminster, among others, has refused to comply with them. In my opinion,
this attitude is wrong and unreasonable. I am satisfied that social welfare services
will be best administered if the municipalities are made to comply with the regulations
under the Act: the municipal clerk or tssessor, upon whom the responsibility seems to
fall, is not necessarily a qualified social worker. Furthermore, in so far as concerns
New Westminster, the absence of a welfare department in a city with a population of
25,000 cannot be condoned. Accordingly, I recommend that the Provincial Government
enforce the regulations under the " Social Assistance Act," and that a proportion of
social welfare grants be withheld from municipalities which refuse to comply therewith.
The majority of the municipalities in British Columbia, because of their small
population, cannot operate as effective units for social welfare purposes any more than
for school or health purposes. The difficulties in the case of the latter services are
being met by the formation of large school units and health units. The Social Assistance Regulations provide for the operation of the social welfare administrative services
by two or more municipalities on an amalgamated basis. I recommend that municipalities avail themselves of this provision with a view to the formation of larger welfare
units, and, further, that the Provincial Government take steps to promote the formation
of such units.
It has been pointed out in Chapter II. of this report that the municipal share of
social welfare costs is not onerous now. If the recommendations made herein are
implemented by the extension of the 80 per cent.-20 per cent, division of costs
between the Province and the municipalities, respectively, to cover welfare services
generally, it may be estimated that the municipal share of the total costs will be reduced
further by at least $250,000. While these adjustments will make the total municipal
burden relatively small, it is well to note that local costs are determined by the local
incidence of welfare cases and not by local taxable capacity, and that the distribution
of the burden is consequently uneven because of the unequal financial resources of different municipalities. In the event of an economic recession, this unevenness would be
accentuated, and 20 per cent, of social welfare costs could then become very onerous to
some municipalities if they are again required to finance costs of large-scale unemployment which cannot be related to local causes.
In estimating the probable effects of an economic recession, it is necessary to take
into account the national unemployment insurance system and other social security
measures introduced since the last depression, which will lessen the initial impact of
a  decline  in  employment  on  government  finances.    It  is  also  anticipated  that the
* B.C. Statutes 1945, chap. 62. PROVINCIAL-MUNICIPAL RELATIONS. X 93
Dominion Government will expand its social security measures to include a national
system of unemployment assistance for employable unemployed persons who have
exhausted their benefits, or who have no benefits under the " Unemployment Insurance
Act." A measure of this kind is essential in the national interest. The municipalities
should in any event not again be compelled to finance unemployment relief costs for
able-bodied and normally employed persons. The limitation of the municipal responsibility for social welfare, which I recommend, by the acceptance of the principle that
municipalities are not responsible for unemployment relief, the acceptance by the
Province of financial responsibility for 80 per cent, of social welfare costs, and the
distribution of the municipal share of such costs on an equalized basis, should prevent
municipal welfare and relief costs from again becoming unduly burdensome.
While restricting the municipal share of social welfare costs as recommended, the
Provincial Government should prepare and give effect as soon as possible to an equalization plan, on a per capita of population or other basis, in order to spread the municipal
costs more equitably, to protect individual municipalities against unreasonable burdens,
and to assure a basic minimum standard of social welfare services throughout the
Province, thereby extending the principle already applied to education. Such a plan,
which may be introduced progressively by categories of social assistance, should be
reviewed periodically and adjusted to meet changing conditions. An equalization
scheme of this nature will raise the costs in some municipalities, but this must be
accepted as a necessary consequence of a more equitable distribution of the burden.
(6.)  Hospitalization.
Hospital requirements and the financing thereof, except in so far as they affect
municipalities, are not within the terms of reference of this Commission. Municipal
expenditures on hospitalization take the form of varying contributions to capitil costs
and a per diem grant of 70 cents for municipal patients in general hospitals entitled to
receive aid from a municipality under the " Hospitals Act." The city of Vancouver
bears additional costs because it meets the annual deficit on hospital operations and
makes a special grant of $100,000 annually to the Vancouver General Hospital. Other
municipalities also assist in meeting hospital deficits. To the extent that such deficits
result from indigent cases, I am of the opinion that the Provincial Government should
assume responsibility for payment of a portion thereof in line with its responsibility
for financing social welfare costs. Accordingly, I recommend that the Government pay
80 per cent, of hospital deficits attributable to the treatment of indigent cases.
It has been submitted that hospital grants paid by villages fluctuate widely and at
times absorb an undue proportion of annual revenues. This submission is well founded,
and I recommend that the situation be examined with a view to limiting the financial
responsibility of villages for hospitalization.
The inauguration of a health insurance scheme or of hospital insurance alone
would, depending upon the completeness of its coverage, considerably reduce or completely eliminate per diem hospital grants.
(c.)  Public Health.
Expenditures on public health represent only a small fraction of municipal budgets.
The Province is now making possible the provision of adequate health services at
low cost through the establishment of health units, and is to be commended therefor.
I recommend the further extension of these units on the basis of the financial arrangements adopted in 1946. I recommend also that consideration be given to plans for the
further consolidation of health services in the metropolitan areas of Vancouver and
Victoria, with the assistance of expanded provincial grants on a per capita basis, the
grants to be fixed with due regard to the more extensive services already provided X 94 PROVINCIAL-MUNICIPAL RELATIONS.
by the Province in the cities of Vancouver, Victoria, and New Westminster, and to
the respective capacities of these cities and the adjoining municipalities to provide
health services.
C. Streets and Roads.
For the reasons stated in Chapter II., the Provincial Government has over a period
of years accepted the fact that the construction and maintenance of highways are
matters of general as well as local concern. While the Province collects the revenues
from the taxation of motor-vehicles, it has since 1921 paid to the municipalities a share
of the aggregate annual motor-vehicle licence fees to assist in the construction and
maintenance of roads. The " Municipalities Aid Act "* provides that the municipalities shall be paid one-third of such fees, after deducting the cost of administration,
the payment to be apportioned among them in proportion to their respective population,
but, since 1930, it has limited the aggregate payment in any one year to a maximum of
$570,000. I am of the opinion that the fixing of a maximum is illogical and arbitrary,
for the following reasons:—■
(i.) The revenues from the taxation of motor-vehicles are collected by the Province, but the increasing use of automobiles, trucks, and buses has increased the costs of
construction and maintenance of streets and highways and consequently necessitates
larger expenditures in municipalities as well as in extra-municipal areas.
(ii.) Municipal requirements are increasing because of growth and development,
but the effect of fixing a maximum aggregate payment and apportioning such payment
in proportion to population is to reduce the per capita payments to municipalities as
population increases.
Accordingly, I recommend that, to assist in the construction and maintenance of
roads, the Provincial Government pay to the municipalities annually one-third of the
revenues from motor-vehicle licence fees, after deducting costs of administration, the
payment to be apportioned on the basis of population, and that the provision of the
" Municipalities Aid Act " fixing a maximum aggregate payment of $570,000 in any
year be repealed. If this recommendation is implemented, it is estimated that the
municipal share of these revenues will amount to about $1,300,000 in 1947, which is
an increase of $730,000 over the maximum now payable.
It has been shown in Chapter II. that, in addition to sharing the revenues from
motor-vehicle licence fees, the Provincial Government pays the entire cost of construction and maintenance of arterial highways and a proportion of the cost of construction
and maintenance of primary and secondary highways within the limits of all municipalities other than cities having a population of more than 2,000. Provincial participation in financing highways running through municipalities is in accord with the
practice in other provinces and in the United States, although, for reasons already
stated, urban municipalities do not generally receive assistance to the same extent as
rural areas. Having regard, however, to the peculiar features of municipal organization in British Columbia, I am of the opinion that it is not fair, in the case of cities,
to restrict provincial participation in financing classified highways to those with a
population of not more than 2,000. Accordingly, I recommend that section 38 of the
" Highway Act" be amended to extend such participation to all cities with a population not exceeding 15,000.
With respect to cities with a population of more than 15,000, I recommend that
the Provincial Government make special grants to assist in financing the cost of construction of streets, within the limits of such cities, which form part of specified provincial arterial highways.
* R.S.B.C. 1936, chap. 201. PROVINCIAL-MUNICIPAL RELATIONS. X 95
I further recommend that the payment of provincial grants for the construction
and maintenance of roads and the assumption by the Province of the whole, or part, of
the costs of certain highways running through municipalities be accompanied by adequate provincial supervision of the expenditure of such moneys in order to assure
proper and efficient administration and the maintenance of certain minimum prescribed
standards.
D. Administration of Justice.
I have pointed out in Chapter II. of this report that the municipalities of British
Columbia are charged with very important responsibilities for the administration of
justice, although this is a matter of concern to the State as a whole. I recommend that
consideration be given to such redistribution of these responsibilities between the
Province and the municipalities as may be required in the best interests of the even
administration of justice.
I further recommend that the municipalities be immediately relieved of the obligation to pay the cost of conveying prisoners to a provincial gaol and the cost for the
maintenance of prisoners confined in a provincial gaol, and that sections 426 (1) and
429 (1) of the " Municipal Act " be amended accordingly.
4. CONCLUSION.
The Commission's inquiry has led to the conclusion that the position of municipal
finances to-day is favourable, but that, looking beyond the immediate present and to
the proper performance of municipal functions over a period of time, the municipalities
require more stabilized finances and a wider margin within which to operate than
they had in the pre-war years.   To this end, I have recommended :■—
(i.) Limitations on the financial responsibility of municipalities for the general
services of education and social welfare, and immediate increases in provincial grants
for these services.
(ii.) An extension of provincial participation in financing expenditures on streets
and roads forming part of classified highways within municipalities, and an immediate
increase in the municipal share of the revenues from motor-vehicle licence fees.
(iii.) Other readjustments in provincial-municipal relations affecting hospitalization, public health, the administration of justice, and Crown property.
(iv.) Changes in municipal assessment and taxation policies and practices in
order that municipalities make fuller use of their existing powers of taxation.
(v.)   The levying of a municipal business tax.
The proposed limitations on the municipal responsibility for education and social
welfare and the extension of the principle of equalization in financing these services
will lead to greater stability in municipal expenditures and are, therefore, basic to the
recommendations in this report. If the recommendations are implemented, the relief
to the municipalities through increased provincial grants or by transference of responsibilities to the Province may be estimated at about $1,750,000 in the fiscal year
1947-48. This figure will tend to rise as a result of the recommended periodic reviews
and as new policies based upon other recommended readjustments are developed. It
is also important to note that the relief thus afforded will be in addition to the increase
in school grants to municipalities estimated at $2,000,000 in 1946-47, pursuant to the
recommendations of the Cameron Report.
The municipalities are in a position to raise additional revenues for services
requested by the local inhabitants by introducing the recommended changes in their
assessment and taxation policies, while the urban areas, particularly the larger cities,
should also be able to raise substantial revenues by levying a business tax, as in the
other provinces of Canada.    The city of Vancouver submitted to the Commission that X 96 PROVINCIAL-MUNICIPAL RELATIONS.
it requires $2,000,000 more than its revenues in 1945: if the measures recommended
herein are adopted by the Province and by the city, the latter should have no difficulty
in increasing its revenues by the required amount. The municipalities must cooperate in meeting their own problems. The Province should also co-operate by not
imposing any further responsibilities upon municipalities except after consultation
with them and with due regard to their capacity to finance such responsibilities.
I am satisfied that the implementation of the recommendations of this report, following the introduction of the measures recommended in the Cameron Report, will,
with wise municipal administration, provide greater stability in municipal finances.
If changed conditions or other circumstances warrant further readjustments in provincial-municipal relations, I recommend that such readjustments be made in the distribution of responsibilities for financing education.
With a large proportion of provincial revenues to be stabilized for a number of
years under the financial agreement now pending with the Dominion Government, the
Provincial Government will be in a position to assist in stabilizing municipal finances.
It should, however, be pointed out that the continued assumption of increasing responsibilities by the Province may in due course require an increase in provincial taxation
and that such increase would largely be paid by municipal residents. As has already
been noted in this report, the mere shifting of responsibilities from one unit of government to another will not necessarily relieve the taxpayer: the citizen who demands
services must pay for them, whether as a taxpayer of the Dominion, or of a province,
or of a municipality. A wider appreciation of the fact that these are not three separate and distinct units, each with its own group of citizens, is necessary for cooperation among the different units of government in Canada. CHAPTER X.
SUMMARY OF FINDINGS AND RECOMMENDATIONS.
I. MUNICIPAL ORGANIZATION.
1. Municipal Units.
Municipal organization in British Columbia has been largely conditioned by its
physical features and the localization of its resources, with the result that only about
one-half of 1 per cent, of the land area is municipally organized. This area now contains
about 78 per cent, of the total population of the Province. Even with the increase in
population in recent years, small units remain an outstanding feature of the municipal
system. Larger units are required for the performance of some important functions
of government.
Recommendation.—That the municipalities consider arrangements for the provision
of services on a joint basis, where appropriate, and that they avail themselves of the
authority conferred by the " Municipal Act " for the joint exercise of their powers.
Recommendation.—That the Provincial Government consider changes in the legislation governing the incorporation of urban municipalities to provide that in future no
locality be incorporated as a " city " unless it has a population of at least 4,000, that an
urban area with a population of less than 4,000 but not less than 1,500 be incorporated
as a " town," that where the population is less than 1,500 the area be incorporated as a
" village," and that villages may apply for incorporation as towns and towns for
incorporation as cities when they have attained the required population; and, further,
that the legislation define the powers and duties of municipalities in each classification
with due regard to their requirements and to the efficient administration of municipal
affairs, and that the various Acts relating to municipalities be reviewed and amended
accordingly.
2. Metropolitan Areas.
The two metropolitan areas of Vancouver and Victoria contain about 60 per cent,
of the population of the Province. Each area consists of a number of separate but
economically interdependent municipalities, with consequent duplication of effort and
varying standards of service. The Vancouver area has made progress in the direction
of the joint provision of services.
Recommendation.—That consideration be given to the provision of additional
services on a joint basis in the Vancouver area.
Recommendation.—That consideration be given to the amalgamation of the four
municipalities comprising the Victoria metropolitan area, or, in lieu of amalgamation,
to the negotiation of arrangements for the joint provision of utility services and services
for health, sanitation, and public safety.
3. Urban Sections in Rural Districts.
The development of large urban sections within the limits of district municipalities
has led to some friction between such urban sections and the rural sections over the
provision of services required by the urban area.
Recommendation.—That where necessary the municipalities should exercise the
powers conferred upon them by the " Municipal Act" and the " Local Improvement
Act " for the provision of special services for specified areas within their limits.
4 97 X 98 FINDINGS AND RECOMMENDATIONS.
4. Regulation of Areas Adjacent to Municipalities.
Uncontrolled development in unorganized areas adjacent to municipalities constitutes a health and fire hazard to the inhabitants thereof and to the adjoining
municipality.
Recommendation.—That the Provincial Government exercise its authority under
the " Town Planning Act," as it has already done with respect to the area adjacent to
Kelowna, to regulate unorganized areas adjacent to municipalities and to prescribe and
enforce the necessary regulations with regard to minimum building and sanitary
standards.
Recommendation.—That consideration be given to amending the " Municipalities
Incorporation Act" with a view to facilitating the extension of municipal limits by the
annexation of adjoining territory.
5. Municipal Administration.
The one-year term of office for elected officials is not necessarily in the best interests
of municipalities.
Recommendation.—That the " Municipal Act" be amended by repealing the provisions for annual elections and enacting that all mayors, reeves, aldermen, and councillors be elected for a term of two years, the election of aldermen and councillors to be
staggered as at present.
Recommendation.—That in the larger cities more discretion in matters of administration be allowed the senior administrative officers in order that the mayor and
aldermen be in a position to concentrate on matters of policy rather than on day-to-day
administration.
Recommendation.—That the present superannuation plan for civic employees be
reviewed.
6. Department of Municipal Affairs.
The Department of Municipal Affairs maintains satisfactory relations with the
municipalities but requires additional staff to enable it to discharge its responsibilities.
II. MUNICIPAL FUNCTIONS AND EXPENDITURES.
The services provided by and the responsibilities imposed upon municipalities in
British Columbia follow the general pattern of municipal functions and responsibilities
in Canada. Municipal expenditures are partly determined by the local inhabitants and
partly the result of mandatory responsibilities imposed by provincial statutes.
1. Education.
School expenditures, including interest and sinking fund on school debts, continue
to be the largest item in municipal budgets. The Provincial Government has assumed
a considerably larger share of total school costs under the new system of grants introduced in 1946, pursuant to the recommendations of the Cameron Report. The relief
thereby afforded to the municipalities has been partly offset by the current increase in
school costs.
2. Social Welfare.
The Province now bears a very substantial share of the costs of social welfare.
While the burden imposed upon municipalities by welfare and relief costs became
onerous in the depression years because of the local responsibility for financing a share
of unemployment relief, it is not onerous now, although it is distributed unevenly in
relation to taxable wealth. FINDINGS AND RECOMMENDATIONS. X 99
3. Hospitalization.
The ratio of municipal expenditures on hospitalization to total expenditures has
remained fairly steady, except in villages, over a period of ten years. Under the present
system of provincial and municipal grants to hospitals there is no correlation between
the amount of aid received by hospitals and the amount of " free service " provided by
them. This affects the city of Vancouver and other municipalities which assist in
meeting hospital deficits.
4. Public Health.
Expenditures on public health services represent only a small fraction of municipal
budgets, and local health services require further development. The extension of
health units throughout the Province by the Provincial Government is a forward step
and is the most effective means of providing adequate health services in the smaller
municipalities. Further consolidation of health services in the metropolitan areas is
necessary.
5. Administration of Justice.
The costs of policing represent by far the larger proportion of municipal expenditures on the administration of justice. The municipalities which are policed by the
Provincial Police, under agreement with the Province, are receiving police services at
less than the cost to the Province and considerably less than would be the cost of
policing by the municipalities themselves. The Dominion Government absorbs even
a larger share of police costs under agreements with a number of provinces for policing
by the Royal Canadian Mounted Police.
Municipal costs for the administration of justice other than policing are very
largely offset by the fines and penalties which the municipalities retain. Nevertheless,
it appears that in the interests of the administration of justice the municipalities should
be relieved of some of the costs incidental to the administration of justice.
6. Municipal Works and Services.
Expenditures on ordinary municipal works and services were substantially reduced
in the depression years of the nineteen-thirties, and the shortage of labour and of
materials prevented a full resumption of such expenditures during the war years.
These expenditures are now increasing to finance deferred maintenance and new
requirements, as well as to meet rising wages and prices.
The Provincial Government assists in the construction and maintenance of public
roads within municipalities by making an annual grant out of revenues from motor-
vehicle licence fees, and by assuming certain responsibilities for the costs of classified
highways within municipalities other than cities with a population of more than 2,000.
7. River Bank Protection.
The municipalities bordering on the Fraser River have incurred municipal expenditures and losses of agricultural land because of erosion of the banks of the river.
Consideration should be given to the establishment of a Fraser River Authority, representing the Dominion and Provincial Governments and the interested municipalities,
to deal with the problems of river bank protection and related matters, the costs to
be distributed with due regard to the fact that these matters are not primarily a
municipal responsibility.
8. Municipal Debt Charges.
The burden of municipal debt charges has declined substantially since 1936 in
terms of total annual requirements for debt service and of the ratio of such require- X 100 FINDINGS AND RECOMMENDATIONS.
ments to total municipal expenditures, and particularly on a per capita basis. The
current increase in debt will increase the annual charges: to keep these charges within
reasonable limits it is essential that the rise in debt be controlled.
III. MUNICIPAL DEBTS.
1. Debt Limits.
The legal limitations under the " Municipal Act" upon the powers of municipalities to incur debt are not sufficiently restrictive.
Recommendation.—That section 103 of the " Municipal Act" be amended to provide that the assessed value of land and improvements for determining debt limits
shall be the average of the revised assessment rolls of the three preceding years, and
that land and improvements exempt from taxation under section 221 of the Act be
excluded from such assessed value.
Recommendation.—That sections 103 and 107 of the " Municipal Act " be amended
to provide that if a municipality borrows on the security of utility rates under section
107, no part of the value of the utility or utilities concerned shall be included in the
base for determining debt limits under section 103.
Recommendation.—That the Inspector of Municipalities review the municipal debt
situation in the light of the current increase in debt and of proposed further increases,
with a view to such statutory readjustment of the debt limits as may be warranted
in the best interests of the municipalities.
Recommendation.—That section 103 (c) of the " Municipal Act" be amended to
provide a maximum maturity period of thirty years for municipal debt.
Under the " Vancouver Incorporation Act " school debts are included in the determination of debt limits, and the assessed value for computing such limits is averaged
over the two years antecedent to the creation of the debt.
Recommendation.—That the " Vancouver Incorporation Act " be amended to provide that the assessed value for determining debt limits shall be the average of the
revised assessment rolls of the three preceding years, and that land and improvements
exempt from taxation under section 46 of the Act be excluded from such assessed value.
While the maximum period for debt retirement is fixed at fifty years, the city is to
be commended for its recent policy of restricting borrowings to a term of twenty-five
years.
Recommendation.—That the " Vancouver Incorporation Act" be amended to provide that debt maturities shall not exceed thirty years.
2. Control by the Inspector of Municipalities.
The control provided by the requirement under the " Municipal Act" that every
borrowing by-law must first be submitted for approval by the Inspector of Municipalities is essential, particularly since municipalities have already entered a new period
of debt expansion. The exercise of this authority has proved beneficial and has not
been abused, but it is a serious responsibility for one person.
Recommendation.—That consideration be given to the appointment of a Municipal Board of three persons, under the chairmanship of the Deputy Minister of Municipal Affairs, to which borrowing by-laws shall be submitted for consideration and
approval, the members of the Board other than the chairman to be appointed to serve
on a part-time basis.
Recommendation.—That the staff of the Department of Municipal Affairs be increased by the appointment of additional personnel competent to prepare and to analyse
the necessary data on which major decisions affecting the municipalities must be made. FINDINGS AND RECOMMENDATIONS. X 101
3. Municipal Defaults.
Six municipalities defaulted on their debt during the depression years, and commissioners were appointed to administer their affairs. With improvement in their
financial position, local self-government has been restored in all except two cases.
Factors contributing to these defaults included over-expansion, which must now be
avoided, and the guarantee of the bonds of private business enterprises.
Recommendation.—That the " Municipal Act" be amended by adding thereto a
provision that no municipality shall give or loan its credit to or in aid of any individual
or private business undertaking, but this provision shall not be construed to prevent
aid to hospitals, charitable institutions, and for the relief of the poor.
4. Sinking Fund and Serial Debentures.
The number of municipalities issuing serial debentures has been increasing, and
a growing proportion of the municipal debenture debt is now in serial form. There
are still, however, a large number of municipal sinking funds in operation. Few municipalities are in a position to provide the expert administration required for the
operation of a sinking fund.
Recommendation.—That the " Municipal Act " be amended to make it mandatory
for all municipalities governed by the Act to issue serial debentures only.
Recommendation.—That the " Municipal Act" be amended by adding thereto a
provision to enable municipalities to provide by by-law for the administration of their
sinking funds by the Provincial Minister of Finance.
5. Sinking Fund Shortages.
In 1933 twenty-five municipalities reported sinking fund shortages, whereas in
1945 such shortages were confined to Vancouver, New Westminster, North Vancouver
District, and Merritt. In considering the position of Vancouver, it is important to
note that, in contrast to other large cities in Canada, it created no funded debt for
unemployment relief expenditures during the depression years, although it used funds
which otherwise would have been paid into sinking fund. While it does not appear
to have been necessary for the city to defer levying the full amount for sinking fund
purposes over a period of nine years, and as late as 1943, the city is to be commended
for the policy which it has pursued in reducing the shortage from more than $16,000,000
in 1941 to $9,500,000 in 1945.
Recommendation.—That the city of Vancouver be authorized to provide for financing the deferred sinking fund instalments by the issue of debentures to the sinking
fund, and that the debentures issued under this plan be of the serial type.
The city of New Westminster has also been pursuing a policy of reducing its sinking fund shortage, and is in a position to continue to pay more than the minimum legal
requirement annually into its sinking fund in order to eliminate the shortage and to
retire all its debentures at maturity.
6. Conclusions on Municipal Debt.
The debt position of Vancouver and the other municipalities has improved substantially in recent years and is now generally satisfactory. The improvement is
shown by the extent of the decline in debt since 1930 in total amount and in relation
to population and to assessed valuation.
The rapid growth of the municipalities, their accumulation of deferred improvements and replacements, and their improved financial position are now contributory
factors towards an increase in municipal debt. It is important that the new capital
expenditures and the borrowing therefor be carefully planned and controlled with a
PROVINCIAL  LIBRARY
VICTORIA. B. C. X 102 FINDINGS AND RECOMMENDATIONS.
view to preventing a repetition of past experiences resulting from unplanned and
undue expansion. The tendency to expand debt too rapidly and to provide facilities
which are not essential is already apparent. The municipalities and the economy of
the Province generally would benefit if in all cases only those municipal improvements
which are required immediately are now proceeded with, while other improvements,
if warranted, are planned and timed for execution when the current high level of construction declines.
IV. MUNICIPAL REVENUES.
1. Real Property Tax Receipts.
The real property tax continues to be by far the principal source of funds for
financing municipal expenditures, but the share of expenditures financed by this tax
has tended to decline with the increase in the surpluses of municipally owned utilities
in the cities and the large proceeds from the sales of tax-sale properties in cities and
in districts. Since, however, receipts from the sale of tax-sale properties will decrease
as the number of available properties declines, and as utility surpluses may also decline,
the ratio of real property tax receipts to total receipts is likely to rise.
2. Receipts from Sales of Tax Sale Properties.
Receipts from the sale of tax-sale properties have been an important factor in
municipal finances in the past few years, but municipalities have already disposed of
a substantial proportion of their holdings. While the city of Vancouver applied its
receipts against overdue sinking fund instalments, and some municipalities set them
aside as reserves, others preferred to take advantage of them to maintain or to lower
tax rates.
Recommendation.—That municipalities adopt a policy of using receipts from the
sale of tax-sale properties for debt reduction or of setting them aside as reserves for
capital purposes or for expenditures of a special nature.
3. Provincial Government Grants.
In 1945 Provincial Government grants constituted the second largest item in the
receipts of cities and districts.
4. Municipal Utilities.
Municipally owned utilities were the third largest source of receipts in cities
(excluding Vancouver) in 1945. While a number of municipalities show fairly large
profits on their waterworks, the profits on municipally owned electric light utilities are
in some cases very high. It is apparent that the rates charged to consumers are frequently very considerably in excess of the cost of the service, and that the utility
operates to relieve taxpayers by shifting some of the burden of municipal costs to the
consumers of the utility service. While this is an expedient method of raising revenues,
it cannot be considered equitable, particularly in cases where, because of the exemption
of improvements, wholly or in large part, some persons are relieved from taxation
which they should properly bear.
Recommendation.—That consideration be given to the introduction of a system of
uniform accounting practices, with separate accounts for each municipally owned
utility, and that the Provincial Government make available personnel and facilities for
advising municipalities as may be required on the operation and maintenance of
utilities. FINDINGS AND RECOMMENDATIONS. X 103
V. MUNICIPAL TAXATION:   THE REAL PROPERTY TAX.
The real estate tax has been subject to widespread and organized criticism over
a period of many years. It is by no means a perfect tax, but, having regard to the
fact that it is one of the few taxes that can be successfully imposed and administered
by municipalities, that it is a very productive tax and is widely diffused, and that
municipal services definitely confer special benefits on real estate, it is inevitable that
the taxation of real estate will continue to be the mainstay of municipal finances.
Since the tax on buildings tends to be shifted and appears in the rent paid by tenants
and also in consumers' prices, the widespread belief that the owners of real estate alone
finance municipal services is wrong.
1. Assessments in Vancouver.
Notwithstanding Vancouver's growth and an increase of more than one-third in
its population between 1932 and 1946, the assessment of land and improvements, less
tax-exempt properties, in 1946 was $35,000,000 below the peak of 1932. While land
assessments were highly inflated in the period of the land boom, and a deflation was
essential, the assessment roll has surely been purged of the inflated values added in
the years before 1914. A substantial increase in land assessments is now warranted
and, in fact, is required by the charter. In raising assessments for 1947, the assessor
has only discharged his responsibility under the charter.
The assessment of buildings in Vancouver is lagging considerably behind the
market price. While there is justification for a lag in assessments behind the market
price, particularly in a rapidly rising market, efforts to maintain assessments on the
basis of low pre-war values are not warranted by existing facts. It is admitted that
real estate prices are now inflated, but indications are that they will not return to the
pre-war level. The increase in population, the continued high level of economic activity, and the continuing high price of real estate, warrant an increase in the assessments of improved properties, particularly of the larger and more valuable properties
which tend to be assessed on a lower real base than smaller properties.
The city assessor is now introducing practices and procedures based on scientific
methods and should receive the full support of the city council in his efforts.
Recommendation.—That section 56 of the " Vancouver Incorporation Act " be
amended to provide that the right of appeal from the Vancouver Board of Assessment
Appeals to the Court of Appeal shall be restricted to questions of law only on a stated
case from the Board to the Court of Appeal.
2. Assessments in Other Municipalities.
There are only a few municipalities where attempts are now being made to assess
real property on a scientific basis. Some municipalities have not reassessed property
for a period of many years. An improvement in assessment practices with a view to
some uniformity and equalization is necessary, but the majority of the municipalities
are not sufficiently large units to permit the employment of a full-time assessor and
a trained and competent staff. In some of the Provinces and in the United States,
assessment commissions on a permanent basis have been appointed to supervise and
to equalize municipal assessments.
If, as a result of the prospective inquiry into assessments, under the provisions of
the " Public Schools Act Amendment Act, 1946," a Provincial Assessment Commission
with supervisory powers is appointed, consideration should also be given to empowering such a Commission to hear assessment appeals under the " Municipal Act" and
the " Village Municipalities Act " and to make a final decision on the facts. 3. Fixed Assessments.
Assessments are occasionally fixed by special Acts without regard to the provisions
of the " Municipal Act," and far beyond the limits therein prescribed. This is undesirable and inequitable.
Recommendation.—That fixed assessments be discouraged and restricted to a minimum, and, in any event, that fixed assessments beyond the limits prescribed by the
" Municipal Act" be not granted by special legislation.
Recommendation.—That municipalities be not allowed to benefit from fixed assessments by using such assessments as part of the base for determining provincial grants.
4.  CO-ORDINATION OF TAX SALES.
Various taxing authorities hold tax sales on different dates and covering different
periods. Since the same property may be affected, this results in unsatisfactory tax
administration.
Recommendation.—That immediate consideration be given to amending the provisions of the various Acts dealing with tax sales with a view to co-ordination and
uniformity, and, in any event, that to this end the different taxing bodies should be
empowered to enter into agreements fixing the dates of tax sales and the periods to be
covered by the sales.
5. Taxation and Exemption of Improvements.
In 1946, as a consequence of the policy of exempting a larger percentage of the
value of improvements than the minimum exemption required by law, the taxed valuation in cities (excluding Vancouver) was 72.5 per cent, of the taxable valuation, and in
the districts it was 78.5 per cent, of the taxable valuation. It follows that even on the
basis of existing assessments and of the limitations imposed by law, a large number of
municipalities are in a position to enlarge their tax base substantially by a change in
policy with respect to the taxation of improvements.
The effects of wholly or largely exempting improvements have been to subsidize the
holders of large improved properties; to make the distribution of the tax burden more
uneven as between municipalities; and to restrict the tax base to the narrow and
unstable base which may have satisfied the requirements of the community in its early
stages but is no longer appropriate.
Recommendation.—That the " Municipal Act," the " Vancouver Incorporation Act,"
and the " Village Municipalities Act," be amended by repealing the present provisions
with respect to the rate on improvements, and substituting therefor a provision that the
tax on improvements shall be levied upon 75 per cent, of the assessed value thereof.
Recommendation.—That the Commission on Assessments which is to be appointed
under the " Public Schools Act Amendment Act, 1946," consider and prepare a uniform
definition of " land " and " improvements " for purposes of municipal and school taxation.
6. Tax Rates.
With a large percentage of the value of improvements exempt from taxation in all
municipalities, nominal tax rates in British Columbia are naturally higher than in
municipalities in other provinces where both land and improvements are taxed on
100 per cent, of their valuation. If, however, the rates are applied to the full valuation,
it is found that they are frequently lower than and, in any event, not out of line with
rates in Canadian cities where the tax is levied on the total valuation. It should be
further noted that these cities also levy a business tax and, in some cases, other taxes as
well. The limits on tax rates under the statutes governing municipalities are necessarily FINDINGS AND RECOMMENDATIONS. X 105
arbitrary and take no account of the requirements of different municipalities, and of
changing requirements over a period of time.    These limits should be raised as required.
7. Tax Collections.
The percentage of the current levy collected in 1945 was approximately 95 per
cent., and tax arrears in that year were at a low point of $1,730,000 as compared with
the peak of $12,200,000 in 1934.
Recommendation.—That the Acts governing municipalities be amended to provide
that the annual levy should include a provision for uncollectible taxes and other taxes
which it is estimated will not be collected during the year.
Recommendation.—That the " Public Schools Act" be amended to provide for the
collection of school taxes in villages by the village municipality instead of the Provincial Government.
8. Conclusion on the Real Property Tax Burden.
An analysis of the tax situation in the twenty years since 1926 shows that low
income in the period of depression resulted in a low percentage of tax collection, and,
consequently, an accumulation of large arrears, and of large holdings of tax-sale properties by municipalities, although it should be noted that such properties consisted almost
entirely of unimproved land. Considering, however, the very high percentage of the
levy which is now collected and which has been collected over a number of years, the
great decline in tax arrears, the very considerable decline in tax-sale lands, and the
current high level of construction, the facts do not establish that the real property tax
is now onerous.
VI. MUNICIPAL TAXATION:   BUSINESS AND OTHER TAXES.
1. A Municipal Business Tax.
The most common form of taxation in Canadian municipalities, apart from the tax
on real estate, is the business tax. It is a tax on the occupier of premises used for
carrying on any business, trade, profession, or other occupation, except agriculture,
and is imposed in all the provinces except British Columbia and Prince Edward Island.
It is generally either a tax levied on a percentage of the assessed value of the premises
occupied or a rate on the annual rental value of the premises.
In the absence of a municipal business tax in British Columbia, the municipal tax
base is more restricted than in other provinces, and municipalities have had to resort
to licences which have, in fact, become taxes on businesses and occupations imposed
purely on a basis of expediency and without regard to any principles of equity as
between licensees. The experience of municipalities in other provinces over a period
of many years has shown that the business tax broadens the tax base, that it is easy
to administer, and that it is productive and will result in a substantial increase in
municipal revenues in urban areas, particularly the larger cities. The tax would also
be payable by persons engaged in businesses which are not now subject to municipal
licensing. All municipalities and the larger cities, in any event, should levy a business tax.
Recommendation.—That the " Municipal Act," the " Vancouver Incorporation Act,"
and the " Village Municipalities Act," be amended to empower all municipalities
governed by these Acts to levy a business tax on all occupiers of premises used for
carrying on any business, trade, profession, or other occupation, except agriculture,
and that the tax be a rate on the annual rental value of such premises, which rate may
vary as between different classes of business; and, further, that in municipalities
levying a business tax, only such trades and businesses as require regulation or control X 106 FINDINGS AND RECOMMENDATIONS.
by or receive special services from the municipality shall be required to hold a trade
or business licence.
Recommendation.—That in regulating unorganized areas on the outskirts of
municipalities the Provincial Government give consideration to the imposition of
a business tax, or to adjustment of the fees for trade licences in such unorganized
areas, in order to prevent unfair competition to businesses subject to a business tax
in the adjoining municipality.
2. Taxation of Public Utilities.
The taxation of utilities under the provisions of the " Municipal Act," on the basis
of a fixed assessment per mile of pole-lines, cables, and wires, is necessarily arbitrary,
in that the assessment is not intended to represent nor is it related to actual value.
Recommendation.—That consideration be given to the taxation of privately owned
utilities in municipalities governed by the " Municipal Act," on a basis similar to the
taxation of the British Columbia Power Commission under the " Electric Power Act,"
1945, which provides that the Commission shall pay municipal and school taxes on land,
and a sum equal to 3 per cent, of the annual gross cash revenues from the sale of power
within a municipality in lieu of taxes on buildings, pole-lines, and other improvements.
The city of Vancouver is proposing an amendment to its charter which will increase
the present rate of 1% per cent, of gross receipts as a tax payable by utilities. The
city should receive larger revenues from these sources.
3. Taxation of Beer Licensees.
The " Government Liquor Act" suspends municipal licensing powers in respect of
the business carried on by beer licensees. If a municipal business tax based on rental
value is levied, such a tax would, of course, be applicable to beer licensees.
Recommendation.—That if a municipal business tax to which beer licensees are
subject is not levied, municipalities be empowered to tax beer licensees, such tax to be
fixed with due regard to the existing scale of business licence fees.
VII. MUNICIPAL TAXATION:   TAX-EXEMPT PROPERTY.
Crown property accounts for a large proportion of the total of tax-exempt properties in municipalities. With the continued expansion in governmental activities, the
Dominion and Provincial Governments should review the application of the principle
of exempting Crown property from municipal taxation. Different considerations are
applicable to Crown property used for commercial purposes and to that which is used
for ordinary governmental purposes.
Recommendation.—That with respect to Crown property used for commercial purposes, including the warehouses and stores of the Liquor Control Board, the Provincial
Government make payments to the municipalities in which such property is located
equivalent to the taxes which would ordinarily be paid thereon, including real property
taxes and business taxes or business licences.
Recommendation.—That with respect to Crown property used for ordinary governmental purposes, where there is an undue concentration of such property in a municipality, or where the exemption of such property is discriminatory in its effects on
local taxation, or where a municipality can establish other reasons which warrant
special consideration, the Government should make a grant in aid of local taxes to
such municipality.
VIII. MUNICIPAL FINANCES TO-DAY.
The Commission's review of municipal finances shows that:—
(i.)   The municipalities have for a number of years, including a period of rapid
growth in population, financed current expenditures out of current revenues and, at
the same time, effected substantial reductions in debt.
I FINDINGS AND RECOMMENDATIONS. X 107
(ii.) The municipal tax situation is currently very satisfactory, and the tax on
real property is not onerous now.
(iii.) The municipal debt is to-day probably less burdensome than at any time
since the end of the First World War.
The improvement in municipal finances is the result of improved economic conditions
but also, in part, of the deferment of expenditures on maintenance and replacements
during the depression and war years. Municipalities could have diminished their
post-war problems of financing deferred expenditures and increased requirements by
setting aside reserves in the period of high incomes during the war years. Such
problems as have arisen cannot be considered as serious as has been submitted when
regard is had to the current level of economic activity, to the improved municipal
financial position, and to the fact that a large part of the increasing expenditures is due
to economic growth and development which in themselves increase tax-paying capacity.
The state of municipal finances over a short period is, however, not an adequate
basis for general conclusions on municipal problems. Municipal functions and expenditures are to a high degree inflexible while the municipal tax base lacks the diversity and
flexibility of the tax systems of larger units of government. Expenditures have
recently been rising, and this rise is likely to continue. While the tax base is relatively
narrow, it should be noted that it has been further restricted by the failure to adjust
assessments, particularly of larger properties, as warranted by economic development,
by the exemption of an unduly large percentage of the value of improvements, and by
the failure to levy a business tax as in other provinces.
The municipalities are in a position, or can be placed in a position, to increase their
tax revenues, but it does not follow that these revenues alone would provide a sufficiently
wide margin to meet the needs of growth and development over a period of time, or to
offset the impact of a recession in economic activity. Looking beyond the immediate
present, and having regard also to the history of municipal finance in the depression
years, the municipalities can show that for the proper performance of their functions
over a period of time they require more stabilized finances and a wider margin within
which to operate than they had in the pre-war years. The assumption by the Province
of the major share of social welfare costs and, in 1946, of a substantially larger share
of school costs will contribute considerably to this end, but further readjustments in
provincial-municipal relations are required.
IX. PROVINCIAL-MUNICIPAL RELATIONS.
1. Municipal Responsibilities.
The allegation that the Provincial Government has increased municipal responsibilities applies to the depression years of the nineteen-thirties but not to the period
since the end of the depression. Municipal responsibilities are now increasing because
of local development and local needs. The Provincial Government has assumed an
increasing financial responsibility for certain services to the extent that the provincial
share of the costs of social services and education in British Columbia is now probably
higher than in any other province in Canada, with the possible exception of Prince
Edward Island.
2. Provincial Revenues collected in Municipalities.
While the municipalities are necessarily the principal source of provincial revenues,
which, admittedly, have increased very substantially in recent years, the expenditure
of those revenues is incurred on behalf of the whole population and benefits the entire
Province and, therefore, directly or indirectly, the municipalities where more than
75 per cent, of the population resides.    The collection of large provincial revenues X 108 FINDINGS AND RECOMMENDATIONS.
within municipalities does not automatically warrant a claim by the municipalities for
the whole or a fixed part of such revenues.
3. Provincial Government Grants.
The ratio of Provincial Government grants to total municipal revenues in 1945,
excluding the villages, showed little change as compared with the ratio in 1926 and in
1930, although the grants are now on a different basis. The grants rose from $2,924,000
in 1926 to $3,417,000 in 1930, and to $4,227,000 in 1945. They will be further increased
by about $2,000,000 annually under the new system of school grants and, in addition,
by a provincial grant of 50 per cent, of the costs of construction of school buildings.
The municipalities as a group, with the exception of the villages, have been fully
compensated for the withdrawal of the special grants received between 1921 and 1933
by the substantial increase in grants for specific services, particularly education and
social welfare.
4. Municipal Grievances.
An examination of the facts shows that, while further readjustments in provincial-
municipal relations are warranted, the municipalities have been reiterating grievances
of the depression years without regard to changes in municipal finances and responsibilities and in provincial-municipal relations which have since taken place. The facts
do not warrant the existing tension between the municipalities and the Province.
5. Considerations on Readjustments in Provincial-Municipal Relations.
Further readjustments in provincial-municipal relations should be made with due
regard to the following considerations:—
(i.) The financial situation of the municipalities to-day is satisfactory, and they
should, therefore, not look solely to the Provincial Government for assistance, but
should co-operate in meeting their own problems, particularly since these are now
created by the demands of the local inhabitants for local services.
(ii.) The instability of municipal revenues varies in different municipalities, and
adjustments should, where possible, have regard to local needs and to differences in
local taxable capacity.
(iii.) The raising of revenue by one unit of government for spending by other
units within their discretion is not a sound policy as a general rule, but a system of
provincial grants for specific services of a general nature, such as education, the social
services, and highways, accompanied by provincial controls, is a satisfactory method of
affording financial assistance to municipalities.
(iv.) To maintain responsibility to the citizens, the government which is charged
with the expenditure of money should also be charged with the responsibility of raising
at least a part of that money.
(v.) The preservation of local self-government is necessary, and as the transference of important functions from municipalities to the Provincial Government would
diminish the responsibility and the status of municipal government, such transference
is only warranted in cases where the functions require centralized administration or
responsibility.
(vi.) The mere shifting of responsibilities from the municipalities to the Provincial Government will not necessarily relieve municipal taxpayers, as they are also
directly or indirectly the principal provincial taxpayers: the citizen who demands
services must pay for them whether as a taxpayer of the Dominion or of a province
or of a municipality, since these are not in fact three separate and distinct units, each
with its own group of citizens.
(vii.) While provincial revenues are by no means unlimited, the Province has
larger and more varied sources of revenue than the municipalities, and under the FINDINGS AND RECOMMENDATIONS. X 109
pending financial agreement with the Dominion Government, a high proportion of
provincial revenues will be stabilized for a number of years.
(viii.) Since the municipalities provide essential services for more than 75 per
cent, of the provincial population, the performance of municipal functions is a matter
of provincial concern.
6. Education.
The Provincial Government is to be commended for accepting the recommendations
of the Cameron Report and introducing the principle of equalization in financing the
costs of education. The new system of school grants must be reviewed from time to
time and adjusted to meet changing conditions. The estimated school costs on which
the recommendations of the Cameron Report were based are no longer related to actual
costs owing to the recent increases in salaries, wages, and prices.
Recommendation.—That the provincial school grants be computed on the basis of a
minimum teachers' salary schedule which is $100 higher for each classification than the
schedule under the " Public Schools Act Amendment Act, 1946," and that these figures
be again reconsidered and, if necessary, revised in the light of the salaries as
renegotiated at the end of the school-year 1946-47.
Recommendation.—That, for computing school grants, the allowance for current
school operating expenditures be immediately increased by $3 per pupil in each
classification.
Recommendation.—That the provincial share of the costs of school transportation
be increased to at least 60 per cent, of the total of such costs.
Recommendation.—That in order to limit the municipal share of school costs and to
maintain the principle of equalization, the provincial grants be reviewed from time to
time and adjusted to meet changing conditions.
The foregoing changes will increase the provincial share of school costs by an
amount estimated at $860,000, of which more than $600,000 will be for the benefit of
municipalities. This figure is in addition to the increase in school grants to municipalities under the Cameron Report.
7. Social Welfare.
Progress in the transfer of financial responsibility for the social services from the
municipalities to the Provincial Government has been generally greater in British
Columbia than in the other provinces. In assuming 80 per cent, of the costs of general
social assistance, the Province has left to the municipalities a minimum share necessary
to maintain local responsibility and to assure sound administration.
Recommendation.—That the 80 per cent.-20 per cent, division of social welfare
costs between the Province and the municipalities, respectively, be extended to cover
the welfare services generally, and, more specifically, that the Province assume 80 per
cent, of the costs of general social assistance, nursing-home care, boarding-home care,
medical care and drugs, emergency health aid, child welfare under the " Protection of
Children Act " covering both " ward " and " non-ward " cases, allowances to tuberculosis
cases in private homes and in registered boarding and nursing homes, transportation
of tuberculosis cases to and from clinics, and comfort allowances to tuberculosis patients
in hospitals.
Recommendation.—That in lieu of the present per diem rates, the municipalities
pay 20 per cent, of the daily per capita cost for municipal inmates in provincial
tuberculosis institutions, provincial infirmaries, and the Provincial Home in Kamloops.
Recommendation.—That the Provincial Government give consideration to plans for
assisting municipalities in financing both capital and maintenance costs of local welfare
institutions, such as homes for the aged. X 110 FINDINGS AND RECOMMENDATIONS.
Recommendation.—That the Provincial Government enforce the regulations under
the " Social Assistance Act," and that a proportion of social welfare grants be withheld
from municipalities which refuse to comply therewith.
Recommendation.—That municipalities, wherever possible, avail themselves of the
provision of the Social Assistance Regulations for the operation of the social welfare
administrative services on an amalgamated basis, and that the Provincial Government
take steps to promote the formation of larger welfare units.
The foregoing changes will further reduce the municipal share of social welfare
costs by at least $250,000. The resultant small share could, however, become onerous
to some municipalities if they are again required to finance costs of large-scale unemployment which cannot be related to local causes. The financing of unemployment
relief costs for able-bodied and normally employed persons should not be a municipal
responsibility.
Recommendation.—That, in addition to the assumption by the Province of 80 per
cent, of the costs of welfare services, the municipal responsibility for social welfare be
further limited by the acceptance of the principle that municipalities are not responsible
for financing unemployment relief costs.
Recommendation.—That the Provincial Government prepare and give effect, as
soon as possible, to an equalization plan in order to spread the municipal share of social
welfare costs more equitably, to protect individual municipalities against unreasonable
burdens, and to assure a basic minimum standard of social welfare services throughout
the Province. Such a plan should be reviewed periodically and adjusted to meet
changing conditions.
8. Hospitalization.
Recommendation.—That in line with its responsibility for financing social welfare
costs, as recommended, the Provincial Government pay 80 per cent, of hospital deficits
attributable to the treatment of indigent cases.
Recommendation.—That the expenditures of villages for hospitalization be examined with a view to limiting their responsibility.
The inauguration of a health insurance scheme or of hospital insurance alone would,
depending upon the completeness of its coverage, considerably reduce or completely
eliminate per diem hospital grants.
9. Public Health.
Recommendation.—That the Provincial Government extend the system of health
units on the basis of the financial arrangements adopted in 1946.
Recommendation.—That consideration be given to plans for the further consolidation of health services in the metropolitan areas of Vancouver and Victoria, with the
assistance of expanded provincial grants on a per capita basis, the grants to be fixed
with due regard to the more extensive services already provided by the Province in the
cities of Vancouver, Victoria, and New Westminster, and to the respective capacities of
these cities and the adjoining municipalities to provide health services.
10. Streets and Roads.
The fixing of a maximum aggregate payment in any one year as the municipal
share of revenues from motor-vehicle licence fees is illogical and arbitrary.
Recommendation.—That, to assist in the construction and maintenance of roads,
the Provincial Government pay to the municipalities annually one-third of the revenues
from motor-vehicle licence fees, after deducting costs of administration, the payment
to be apportioned on the basis of population, and that the provision of the " Municipalities Aid Act" fixing a maximum aggregate payment of $570,000 in any year be repealed. It is estimated that on the recommended basis the municipal share of revenues from
motor-vehicle licence fees will amount to about $1,300,000 in 1947, an increase of
$730,000 over the maximum now payable.
Having regard to the peculiar features of municipal organization in British Columbia, it is not fair, in the case of cities, to restrict provincial participation in financing
classified highways to those with a population of not more than 2,000.
Recommendation.—That section 38 of the " Highway Act" be amended to extend
provincial participation in financing classified highways to all cities with a population
not exceeding 15,000.
Recommendation.—That, with respect to cities with a population of more than
15,000, the Provincial Government make special grants to assist in financing the costs
of construction of streets, within the limits of such cities, which form part of specified
provincial arterial highways.
Recommendation.—That the payment of provincial grants for the construction and
maintenance of roads and the assumption by the Province of the whole or part of the
costs of certain highways running through municipalities be accompanied by adequate
provincial supervision of the expenditure of such moneys.
11. Administration of Justice.
Recommendation.—That consideration be given to such redistribution of the
respective responsibilities of the Province and the municipalities for the administration
of justice as may be required in the best interests of the even administration of justice.
Recommendation.—That the municipalities be immediately relieved of the obligation to pay the costs of conveying prisoners to a provincial gaol and the costs for the
maintenance of prisoners confined in a provincial gaol, and that sections 426 (1) and
429 (1) of the " Municipal Act " be amended accordingly.
12. Conclusion.
To assist in stabilizing municipal finances and to provide a wider margin for
municipal operations, this report has recommended:—
(i.) Limitations on the financial responsibility of municipalities for the general
services of education and social welfare, and immediate increases in provincial grants
for these services.
(ii.) An extension of provincial participation in financing expenditures on streets
and roads forming part of classified highways within municipalities, and an immediate
increase in the municipal share of the revenues from motor-vehicle licence fees.
(iii.) Other readjustments in provincial-municipal relations affecting hospitalization, public health, the administration of justice, and Crown property.
(iv.) Changes in municipal assessment and taxation policies and practices in order
that municipalities make fuller use of their existing powers of taxation.
(v.)  The levying of a municipal business tax.
If the recommendations of this report are implemented, the relief to the municipalities in the fiscal year 1947-48, through increased provincial grants or by a transference
of responsibilities to the Province, may be estimated at about $1,750,000, which figure
will tend to rise as a result of the recommended periodic reviews and as new policies
based upon other recommended readjustments are developed. This relief will be in
addition to the increase in school grants, estimated at $2,000,000 in 1946-47, pursuant
to the recommendations of the Cameron Report.
The municipalities are in a position to raise additional revenues by introducing the
recommended changes in their assessment and taxation policies, while the urban areas,
particularly the larger cities, should also be able to raise substantial revenues by levying X 112
FINDINGS AND RECOMMENDATIONS.
a business tax as in the other provinces of Canada. The municipalities must co-operate
in meeting their own problems. The Province should also co-operate by not imposing
any further responsibilities upon municipalities except after consultation with them,
and with due regard to their capacity to finance such responsibilities.
Recommendation.—That, if changed conditions or other circumstances warrant
further readjustments in provincial-municipal relations, such readjustments should be
made in the distribution of the responsibilities for financing education. APPENDIX A    '
STATISTICAL TABLES
s f  LIST OF TABLES.
Table No.
1. Incorporations of Cities, Districts and Villages, 1860-1945.
2. Population of British Columbia in Organized and Unorganized Areas, 1921-1945.
3. Percentage  Distribution  of  Population   in   Organized  and  Unorganized  Areas,
1921-1945.
4. Population—Cities, 1921-1945.
5. Population—Districts, 1921-1945.
6. Population—Villages, 1931-1945.
7. All   Municipalities    (excluding   Vancouver) :    Gross   Current   Disbursements,
1926-1945.
8. Selected Municipalities:   Gross Current Disbursements, 1926-1945.
9. Cities    (excluding   Vancouver) :    Gross   Current   Disbursements,   by   Services,
1936-1945.
10. Districts:   Gross Current Disbursements, by Services, 1936-1945.
11. Villages:   Gross Current Disbursements, by Services, 1936-1945.
12. All Municipalities   (excluding Vancouver) :   Net Current Disbursements—Gross
Current Disbursements less Government Grants, 1926-1945.
13. All Municipalities (excluding Vancouver) :  Current Disbursements, Assessed Valu
ation, and Population, 1926-1945.
14. Vancouver:   Gross and Net Current Expenditures, 1930-1945.
15. Vancouver:   Gross Current Expenditures, by Services, 1936-1945.
16. Vancouver:   Current Expenditures, Assessed Valuation, and Population, 1926-1945.
17. Vancouver:  Comparative Expenditures, in Detail, 1929-1945.
18. Education:   Gross and Net Current Disbursements, 1937 and 1944.
19. Education:  Gross  and Net  Current  Disbursements  in  Selected  Municipalities,
1937 and 1944.
20. Social Welfare:   Gross and Net Current Disbursements, 1937 and 1944.
21. Social Welfare:   Gross   Current   Disbursements  in   Selected   Municipalities,   1937
and 1944.
22. Social Welfare:   Gross and Net Current Expenditures in Vancouver, 1937, 1944
and 1945.
23. Hospitalization:  Municipal Disbursements, 1937 and 1944.
24. Hospitalization:  Disbursements in Selected Municipalities, 1937 and 1944.
25. All Municipalities: Gross and Net Debenture Debt, 1926-1945.
26. Selected Municipalities:  Gross and Net Debenture Debt, 1926-1945.
27. Selected Municipalities:  Analysis of Debt, 1926-1945.
28. Vancouver:   Municipal Debt, 1930-1945.
29. Vancouver:  Analysis of Debenture Debt, 1945.
30. All Municipalities (excluding Vancouver) :   Gross Current Receipts, 1936-1945.
31. Selected Municipalities:   Gross Current Rece