Business

City needs to steer clear of this business model

There is a business model that seems to be gaining traction that I strongly suggest you stay clear of. The model could be called the overinflated model.

The principal is to calculate your operating costs and then divide it by the number of customers you think you may have and that is the product price. If your customer number is low it doesn’t matter, you just increase the unit price to ensure you cover your operating cost.

Sound familiar? It should. BC Ferries have continued to increase its prices even when the number of passengers using the service is dropping and now the City of Parksville is exploring the concept for its proposed development cost charges (DCC) bylaw.

In 2008, the city increased the DCCs and ended up with 40 per cent less revenue than they had projected. Why? Development dollars are mobile. We are surrounded by cheaper development and building costs in the Regional District of Nanaimo and while people living in the regional district do not receive the same quality of services (snow removal, etc.), they do have access to the same parks, libraries, recreational facilities and many other services that are available to Parksville taxpayers.

Now the city is proposing a further increase of 45 per cent. What business looks at increasing costs by 45 per cent? What will this do to future development, downtown revitalization or in-fill of vacant spaces? It will stop any and all plans.

This will likely make some Parksville residents happy, the ones that look at development as a bad thing. However, development is more than new buildings or growth, it also includes renewal and in-fill. It contributes to city projects through DCCs and increased or new property taxes. It pays for infrastructure, like roads, water lines, sewer lines and parks. Without development all of those costs will have to be funded by other revenue and the easiest most accessible revenue is property taxes.

If the result of increased DCCs is a decrease in development and a decrease in revenue from DCCs, then projects like the proposed water treatment plant will have to be paid for through other revenue, like property taxes. The math is simple, I would prefer to see lower DCCs, more projects and more DCC revenue as a result.

Kim Burden is the executive director of the Parksville and District Chamber of Commerce

 

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