City finance manager Lola Barta provides an overview of city property tax philosophy at Monday night's council meeting.--News Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
City council could debate nudging its property tax burden when it sets rates later this month – which would affect rates to a much greater degree than a planned 3.5 per cent tax increase – but most council members say they hope to get a full view of implications before more study in the coming year.
Monday’s council meeting heard a presentation about how property tax rates are set and the philosophy behind the city’s current spread for collecting tax revenue, and heard that potential options and analysis for change will be presented along side this year’s tax rate on April 18.
“It’s going to be a very difficult balance, but we have the ability to see what things will look like and (staff) will come forward with some scenarios,” said Mayor Linnsie Clark. “We’ll know the implications at that time. But it is a balance and we’ll do our best to strike it.”
Driving the discussion is an apparent difference in business versus residential tax rates.
Business lobby groups across the province typically point to the business-residential tax ratio, though the local Chamber of Commerce hasn’t come out strongly against the city’s ratio of 2.25.
That translates to rates two and one-quarter times higher for commercial businesses compared to homes, which many argue shows basic unfairness, but also which local administrators and past councils have said represents fair distribution in the local situation.
This month, council could consider closing a gap between tax rates charged to residential and business properties, as well as potential to offer tax incentives for new business investment.
Council heard an incentive bylaw could come forward as a separate item early this spring.
Coun. Alison Van Dyke said her interest is in potential incentives for affordable housing. Coun. Robert Dumanowski said the overall discussion is interesting, but could take until 2023 to properly consider.
Coun. Shila Sharps said making major adjustments in two weeks would be difficult, but says the business community is upset with the status quo. She also wants to see a comparison of property bills for businesses across the province.
“You have to ask the question at some point,” said Sharps, who says Medicine Hat’s business bare mill rate appears to be one of the highest in the province.
“When we want to attract businesses, is this just Ma’s and Pa’s, or is it just the big ones?”
Currently, 59 per cent of the city’s total tax revenue comes from single-family home owners, three per cent from multi-family properties (a sub-class of residential), and 38 per cent from non-residential properties.
Council heard they have the ability to further subdivide and create classes, such as small business, with specific rates.
“You have to keep in mind that you have to shift that tax burden to other classes,” said finance manager Lola Barta.
Coun. Darren Hirsch told council that bedroom communities, like Chestermere, where there is little industry base, are hard to compare to stand-alone municipalities like Medicine Hat.
He also points to Medicine Hat’s non-collection of a machine and equipment levy that many other municipalities charge.
“It’s comparing apples to onions to oranges,” he said. “I’d be worried about politicizing it.”
Barta said the city budget is the biggest factor of tax bill amounts – the assessment value is set against an annual tax rate to collect a certain amount, and both change each year to collect that amount. However, City Hall also determines which class of property – residential, non-residential, farmland – pays what portion of the total bill.
Adjusting that distribution could have larger effects than the average annual tax increase.
The business ratio has been declining for about 10 years and now sits at 2.25 compared to single-family homes, while the multi-family rate is 1.22 times the single-family rate.
Barta said lowering that ratio to 2.0 would result in a $915 savings on the median non-residential tax account, but would add $100 per average single-family home and $700 per multi-family account.
“If a business is opening up here that’s great, but would we attract more people to our community if their residential taxes are that much more,” she asked. “That’s where the fair and equitable principles come in.”
