The threat of two-tiered user fees for recreation

I recieved the following question recently from a concerned resident:

What is your position on the surcharging of children involved in sports when using Penticton facilities?  I understand that my children will now be subjected to a user fee to engage in Penticton Minor Hockey.  Are we not trying to encourage families to engage in healthy lifestyles with active bodies?  This measure seems to speak against the value of involvement in physical activity.  Children who live outside of the Penticton tax zone will be penalized and many will not engage as a result of being priced out of participating. This is a major step in the wrong direction.  Many families on the West Bench and outlying areas are having their ability to cover costs stretched far too far. This is another of those situations.

Background on the City of Penticton's two-tier scheme can be found here.

This issue pops up from time to time and I sent an email to Mayor Ashton on this topic in March 2009 before the pool expansion was announced (see the posting here).  Here is my basic response to the question above:

The City of Penticton is looking for ways to recoup the cost of its recreational infrastructure. About twenty cents of each tax dollar Penticton collects is going to feed the SOEC, so their search for new sources of revenue is not surprising.  City staff have collected some data from its programs and have determined that about 4% of the users of the Community Centre swimming pool and ice rinks (Memorial and McLaren) are from RDOS Area F postal codes.  The City has conducted a similar analysis for RDOS Area D (Kaleden and OK Falls) and Area E (Naramata).  Given that these facilities cost more to operate than they earn in user fees, there is a perception within the City that Penticton taxpayers are subsidizing users of the facilities and thus rural residents (residents from RDOS areas D, E, and F who do not pay City of Penticton taxes) are free-riding.

The City met with the three rural RDOS directors close to Penticton and offered us two alternatives to address the situation:

  1. Levy a tax increase in the rural areas in order to make a contribution to the City of Penticton to offset its costs.  The estimated contribution for Area F would be roughly $100K per year. (Note: Area F has made a $20,000/year contribution to the Penticton Community Centre since the early 1980s [see a tax bill].  This deal was arranged and voted on prior to the construction of the facility.)
  2. Make no contribution, in which case the City could exercise its right to charge non-residents a higher user fee. 

I see at least two obvious objections to the City’s tax proposal: one practical and the other philosophical/economic.  Fortunately, the practical objection decides the case, which allows me to keep this posting short.  The practical objection is as follows:

  1. The RDOS must have voter assent to raise taxes for new services.  In this case, we would have to get permission from voters to create a new service area and charge an additional (say) $100 per year per household to make a payment to Penticton.
  2. This tax would be a subsidy by all Area F households to users of the City’s recreation facilities.
  3. The total number of memberships and uses by Area F residents reported in the City’s analysis varies between 332 (in 2009) and 604 (in 2007).
  4. The City’s numbers include repeat users and children. For example, my three kids use the facilities quite often during the year so my household alone likely accounts for ten or more of these 604 uses.  My guess is that a couple of hundred of Area F residents use the City’s facilities in a given year and the bulk of the visits and memberships are from a relatively small number of families and heavy users.
  5. The population of Area F is roughly 2000 people.  So even if the 604 number represented unique users, the non-users in Area F significantly outnumber the users.
  6. Based on this simple analysis, I would expect a referendum on the question of a subsidy to fail.  That is, I would expect the majority of Area F residents to favor user-pay over a new property tax.  The rural directors from Areas D and E have come to the same conclusion based on discussion within their communities.
  7. Thus, I do not believe we can levy a tax on Area F residents—it will not get through referendum.  This leaves us with no choice but to accept differential user fees for non-residents.

Taxes work a bit differently in municipalities (in municipalities there is one large pot of money to be spent at the discretion of council) so I think Penticton city councillors are having some trouble understanding the extent to which our hands are tied in this matter.  What they are asking for (a lump-sum contribution from rural areas) is simply unrealistic.  As an aside, I think a referendum would have a better chance if it were for a facility that was not already in place.  For example, I can imagine Area F residents getting behind a regional performing arts center.

Will the City actually implement two-tiered user fees for the rinks and pool?  I think they would prefer not to.  And if enough rural residents drop out of programs (as you suggest above) or swim elsewhere (e.g., Summerland, H2O in Kelowna), the City could actually lose revenue and jeopardize its programs.  In other words, the City risks being worse off with two-tiered fees than it is now.  We will see what they decide.

 

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