Most British Columbians will face significant property tax increases or reductions in services to pay for the shift away from Medical Services Plan premiums, the Union of B.C. Municipalities has concluded.

“The introduction of the employer health tax will lead to increased Medical Services Plan related costs for a considerable portion of the local government sector,” says the UBCM position paper.

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“While a small portion of local governments will see reduced MSP-related costs once the [employer health tax] is implemented, the savings for most of these communities are negligible.

“Conversely, the cost impacts for some larger communities are considerable,” the report says.

The new employer health tax will be phased in next year, with employers having to pay 50 per cent of MSP premiums as well as the employer health tax.

Starting Jan. 1, 2020, the province will levy the full payroll tax to offset the elimination of MSP premiums.

Employers with payrolls totaling more than $1.5 million annually will face a 1.95 per cent hit. Payrolls between $500,000 and $1.5 million will get a reduced rate, and payrolls of $500,000 or less will not pay the tax.

Seventy-seven local governments of various sizes, representing about 40 per cent of local governments in B.C., responded to a UBCM survey about MSP premium costs and estimated employer health tax costs.

“As a group, the 77 communities that contributed to the survey will see its MSP related costs double between 2017 and 2020 as a result of the EHT,” the UBCM paper says.

Victoria councillors were recently told a two per cent property tax lift could be necessary to cover the shift in health care funding and several other municipalities forecast tax increases of one to two per cent to cover the costs.

The UBCM study highlighted Saanich as a case study noting that the employer health tax will have “significant budget implications” and could translate into the layoff of at least 15 employees.

The report notes the estimated cost for Saanich in 2019 (the transitional year of employer health tax implementation) is $1.78 million for the new tax plus $209,000 for employee MSP premiums.

The new cost in 2019 would be paid through a 1.3 per cent increase in property taxes, and sewer and water fees, the report says. In subsequent years, the tax will rise in step with collective agreement settlements that are currently two per cent to 2.5 per cent.

Saanich council will be faced with a choice of increasing taxes, reducing services, or a combination of the two, the report says. It quotes Saanich chief administrative officer Paul Thorkelsson as saying a 1.3 per cent tax increase cannot be managed through “simple belt tightening.”

“We would have to amputate a limb,” he says.

“If the assumption is that the increase should be managed through operating budget reductions the impact translates into a reduction of at least 15 positions and therefore impactful reductions in service levels,” the report says.

“It’s somewhat ironic that an employee health tax which is meant to benefit employees could result in the layoffs of those employees,” said Saanich Mayor Richard Atwell. “I don’t know how much that was anticipated by the province.”

He said the new health tax costs have to be looked at in addition to whatever other tax increase is necessary to maintain services.

“So I think at the end of the day the next budget cycle is going to be a grand discussion with the community about possibly a reduction in services or reduction in these positions. I think they’re both related,” Atwell said.

The UBCM paper says the impact on Saanich property owners could be compounded with increased levies for the Capital Regional District, the Capital Regional Hospital District, B.C. Assessment and B.C. Transit, which would all “be subject to the employer health tax and facing the same challenges to fund it.”

bcleverley@timescolonist.com