The Best Budget in Canada

Saskatchewan has another balanced budget. Despite pressure on oil and potash revenues, and growth-driven demand for infrastructure, we are the only province living on the money we make. Why such a big deal? Because governments that give in to borrowing find it very, very difficult to kick the habit. We all like the public programs that subsidize us. Governments that reduce our favourite programs usually get punished. So not taking that first puff of addictive borrowing is important - just say NO. The present government is strict about debt. When potash revenue dropped a massive $2 billion in 2010, they found ways to economize. And when they had a windfall in 2008, they paid off debt instead of spending it all. Today we have the lowest provincial debt in Canada. A few months ago, Finance Minister Ken Krawetz asked your Government Affairs committee to suggest priorities for this budget. The top recommendation: Do not borrow; stay in the black. There is a cost to staying in balance: liquor and smoking will cost more; the corporate income tax will not be reduced as planned; education spending is going to be limited. But, this isnt a mean budget. People with disabilities will get higher allowances. Student aid is going up. Theres more money for cutting surgery waits and raising housing supplements. Cities are getting 12% more in revenue sharing. Uranium royalties are being changed to encourage new investment. Choices were made, money is moving around inside the government to reflect priorities, not just demands.

Housing Gets Attention

The 10% rental tax credit, introduced last year, is continuing this year. It offers lower taxes on income from new rental buildings. This innovative and unique-inCanada idea makes excellent use of public funds, as an incentive to attract new private investment into a high-need sector. Uptake on the credit is slow. One reason is many investors arent aware of it. Another reason is opportunity cost even with the credit, money can turn over faster in building to sell. But the principle is sound and will eventually take hold as the market adjusts.

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Housing Gets Attention - contd

Two changes will help with the rental shortage. One is simple: open more land to build on. We need new thinking in community planning processes and priorities. Approvals are complex, and process is slow. The current fad in planning is densification, which translates into less land being developed and allocated for multi-unit development. We need more land, not less; we need plans that reflect Saskatchewan reality instead of the latest fashions in Vancouver or Toronto. The second change will have to come from the market. Real estate investment trusts can recycle dollars used to build rental apartments. Stable long-term returns are highly marketable in todays low-interest environment. The key is reviving Saskatchewans rental construction sector, and linking it to the REIT demand for returns.

Assessment and Property Taxes

The budget changes how the government sets its mill rate on commercial property. Up to now, the rate has varied, going up as assessed value rises. Going forward a single 8.28 mill rate will apply to all commercial property, and a separate class is being created for resource property. Simplification is good. Upcharging resource investment is hopefully a short-term transitional measure. The larger issue is why we tax property on its assessed value. The disruption created by this years reassessment points out the need for a better alternative. ASR has asked the government to begin work on a new model for property tax that doesnt rely on appraised value. Assessment is clumsy and costly, and slow. No sooner is an assessment rolled out than it is outdated by the market. Worse, taxing on the basis of value sets up a disincentive to improve and creates a tax on capital. We need a new, less expensive and much more flexible model. And while were at it, lets look at consolidating how we tax homes, farms and businesses under a common system.

Government Relations Committee Members

Al Didur, Co-Chairperson Ian Johnston, Co-Chairperson Gord Archibald Al Weiler Jason Yochim Len Wassill Alek Arsenic Saskatoon Regina Regina Lloydminster Saskatoon Yorkton Regina 373.7520 533.7421 791.2700 821.6262 343.3440 728.4600 359.1900 955.6235 525.1433 781.7940 780.875.5584 343.1420 728.2103 352.9696 aldidur@realtyexecutives.com ianjohnston@sasktel.net garchibald@reginarealtors.com al.weiler@bhgress.ca Jason@srar.ca Len.wassill@century21.ca alek58@hotmail.com

March 2013 - #42