Economic Development Highlights of the 2018 BC Budget
FEBRUARY 20, 2018
Today’s 2018 BC Budget is focused on affordability, with emphasis on housing and child care.
Both issues affect local economic development in a variety of ways, including by influencing the supply of labour, helping with the retention and attraction of youth and skilled workers, moderating the impact of short-term rentals on the housing and accommodation markets, and by affecting home construction as an economic generator.
The government unveiled a 30-point plan to address housing affordability. Notable points for economic development include:
• Broadening the taxation of accommodation properties to include short-term rentals. As previously announced, the Province has agreed with AirBnb on the collection of PST and MRDT and the same approach is being pursued for other accommodation platforms. A related point is the expansion of the powers of strata bylaws to discourage short-term rentals.
• Expanding permissible use of MRDT revenues to include affordable housing. The municipal and regional district tax (MRDT) is currently used only to fund tourism marketing and product development. It will now be eligible for use in housing initiatives, providing an additional funding source for communities struggling with housing for seasonal tourism workers.
• New and increased taxes, includZing a new speculation tax targeted at those not paying income tax in BC, an increased and expanded foreign buyers tax (increasing from 15% to 20% and expanding beyond Metro Vancouver to include the Fraser Valley, Capital and Nanaimo Regional Districts, as well as Kelowna and West Kelowna), and increasing property transfer and school tax rates for home values above $3 million. The speculation tax does not apply to homes that are used as a primary residence, but may impact, for example, second homes owned by out-of-province or out-of-country residents.
• Various measures to address tax evasion and money laundering and promote transparency in the housing market, including by creating new databases on the “beneficial ownership” of property, on the assignment of pre-sale condo purchases, and to strengthen audit and tax collection powers.
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Economic Development Highlights of 2018 BC Budget
• Planned investment of $6.5 billion over 10 years to build 114,000 units of affordable housing, including units aimed at post-secondary students, indigenous peoples, the homeless, and women and children fleeing violence. Additional measures are targeted at renters, including strengthening tenancy rights, expanding rental assistance benefits for seniors and working parents.
• Initiatives relating to local government include the leveraging of municipal tax exemptions for purpose-built rental housing by extending it to include provincial property taxes, examining the tax treatment of residential property in the Agricultural Land Reserve (ALR), and committing $5 million over three years to fund housing need assessments and a commitment to work with municipal partners on possible new policy tools, such as rental zoning.
A $1 billion investment in child care has several facets, including:
• New affordable child care benefits and child care fee reduction programs, paid directly to child care providers, to enhance child care affordability.
• The creation of 22,000 new child care spaces, the training of more Early Childhood Educators (ECE), and making it easier for current care providers to become licensed.
Rural Development Program
The Province’s Rural Development program is located within the Ministry of Forests, Lands, Natural Resource Operations, and Rural Development.
The program’s strategic direction is currently being re-assessed through the creation of a new Rural Development Strategy. Quoting from the Ministry Service Plan, the new strategy “will move beyond traditional economic development activities by broadening economic, social, and environmental objectives in alignment with community skills, assets and needs.” Consultation on the strategy is ongoing and scheduled for completion by March 31 of this year, with the finalized strategy scheduled for release in the 2018/19 fiscal year. It will include an updated Rural Dividend program that responds to Indigenous and rural stakeholder feedback.
In the meantime, the key strategies of the Rural Development program for the next year include:
• Coordinate land-based and socio-economic recovery from the 2017 wildfire and freshet season, including community engagement, and provide rapid response to other economic disruptions.
• Develop the framework and key themes for a Rural Development strategy.
• Assess proposals for Rural Dividend funds, allocate the 2018/19 funds, and develop options
around the future of the fund.
• Advance bio-economy opportunities for rural communities.
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Economic Development Highlights of 2018 BC Budget
• Engage with Indigenous peoples to advance specific opportunities for First Nations rural communities.
Ministry of Jobs, Trade and Technology
The Ministry of Jobs, Trade and Technology is responsible for attracting investment to the province, providing economic development tools and information resources to communities, supporting technology-based innovation in BC industries, promoting the integration of Indigenous people snd immigrants into the economy, and much more.
Funding allocations to the Ministry are essentially flat over the next three years, other than a $5.7 million increase for additional settlement and integration support for immigrants and newcomers, including creating a Centre for Newcomers.
A review of the Ministry’s various goals, objectives and strategies shows a series of new task forces and organizations to help plan for and support a changing economy. These include (among a long, long list):
• Creating an Emerging Economy Task Force to inform the development of a provincial economic strategy.
• Collaborating with industry through the BC Supplier Development Program pilot to help BC companies become more competitive and better integrated into global value chains.
• Establishing an Innovation Commissioner and Innovation Commission to advocate for and support the technology sector.
• Continuing to develop economic development tools and resources and raising awareness of available programs through the BC Economic Portal.
• Increasing BC’s Trade and Investment Representative (TIR) network in the United States.
• Creating a Small Business Task Force as a special initiatives of the Small Business Roundtable
to provide advice on strengthening the small business sector.
The single most significant change in the government’s fiscal outlook in the current year is a charge of nearly $900 million from losses at the Insurance Corporation of BC (ICBC).
Over the longer term, the budget is forecast to maintain a modest surplus in each year of the three- year fiscal plan, in the range of $200 million to $300 million per year.
The Province’s operating debt remains on track to be eliminated in the next fiscal year. This does not increase capital spending, but the total debt to GDP ratio (including capital spending) will remains relatively constant at around 16%.
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Economic Development Highlights of 2018 BC Budget
Funding and program support for Indigenous peoples is highlighted throughout most aspects of the budget, including $201 million over three years for housing, the Indigenous Skills Training Program and Aboriginal Friendship Centres. A further $50 million in the current fiscal year is supporting the revitalization of indigenous languages.
As announced in the Budget Update last fall, PST on electricity for business is being phased out and will be fully exempt as of April 1, 2019.
Medical Services Plan (MSP) premiums will be fully eliminated on January 1, 2020. The loss of MSP revenue is offset by a new employer payroll tax that is charged fully on payrolls above $1.5 million and partly charged on payrolls from $500,000 to $1.5 million. Employers with payrolls below $500,000 are exempt.
Ferry fares are being frozen on the three largest coastal routes and a 15% reduction implemented for non-major routes. A full 100% seniors discount will be restored for travel from Monday to Thursday.
Communities impacted by wildfires are being supported with $72 million in wildfire recovery and resiliency activities.
Additional funding is targeted to “improve land use certainty for economic development.” Wildfire resiliency and recovery is the largest element of this spending, but it also increases spending on “modernizing Crown land use planning” from $2 to $5 to $8 million over the next three years. This funding is intended to support engagement with Indigenous communities, industry, local governments, and other stakeholders to enhance land use certainty while protecting the environment.
An additional $29 million is provided for the agrifood sector over three years. This funding is allocated to the Ministry of Agriculture to support various initiatives, including assisting beginning farmers with start-up loans, supporting the fruit and nut industry, revitalizing the Agricultural Land Reserve, enhancing the Buy BC strategy, and supporting the development of a Food Innovation Centre at UBC to help small-scale processors enhance their commercialization potential.
An additional $18 million is allocated to arts organizations over three years, including $15 million for BC Arts Council grant programs and $3 million for Creative BC to promote and strengthen the motion picture, music, publishing and digital media sectors.
SUMMARY PREPARED BY:
Jamie Vann Struth
Vann Struth Consulting Group Inc.
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