Council to debate tax structure next week

By COLLIN GALLANT on April 26, 2023.

cgallant@medicinehatnews.com@CollinGallant

Each spring City Hall adjusts the property tax rate up or down against assessment changes to collect a set amount in the budget, but next week councillors will also debate how that should be spread between homes and businesses.

Council members also signalled last month that on May 1 they would also like to debate an administration plan to use healthier than expected assessment growth to eat into an operating deficit currently made up with reserve funds.

Councillors tabled the property tax bylaw April 17 in order to study five options from city finance officials.

Those include a recommendation to split the benefit of new commercial and industrial construction to offset tax increases for commercial accounts and add more revenue to offset reserve spending.

But, the five options also rearrange tax rates, tax distribution among classes with varying impacts to ratepayers, from several hundred dollars per business in some to a year-over-year tax decrease in others.

Coun. Darren Hirsch said comparing worst to best for non-residential accounts, the net difference is $372 to the average $1-million non-residential property. Most scenarios impact single-family homeowners by $10 more or less.

“I have a challenge in that we talk about small businesses being a cornerstone of the community … and you think about small business doing whatever they can to to get by,” said Hirsch.

“For less than $1 a month to (homeowners), I think I could stand to make that decision for non-res owners.”

Complicating the picture, this year the provincially set education amount will also decrease, thereby offsetting some of the municipal tax increase.

As such city finance officials recommend using a similar plan from last year, which will see lower than expected tax increases overall, but more revenue avoids using reserve funds.

Lola Barta, the city’s finance director, said in her April 17 presentation to council, that officials put a premium on stability and fairness when determining options, including the different rates for businesses and homes, often described as the tax ratio.

“We look at the impact to the prior year’s distribution and … tax ratio, looking to keep it consistent, or in the case of non-residential ratchet that down to (a ratio of) 2 and try to keep it,” said Barta.

“If you move the dial (on one thing), something else is going to be shifted or impacted.”

There are several factors that go into determining amounts that wind up on property tax bills.

A property’s assessed value can rise with improvements and market changes each year, and each property class is assigned a portion of overall tax requirement, also called tax distribution. Those are considered against a mill rate that is reset up or down each year to collect the specific amount of tax revenue called for in the budget, called the requisition.

This year the requisition rose to $84 million, about 5 per cent, but new properties or improvements built since 2022 was 0.5 per cent in the residential class and 4.1 per cent in the non-residential class.

All things being equal, that would reduce the increase across the class since accounts were added and would begin contributing a portion.

However, since growth was lopsided to one class, councillors debated whether that should be passed on as a benefit to businesses which have long argued the distribution is unfair.

The city currently collects 59 per cent of tax revenue from homes, 38 per cent from businesses and 3 per cent from multi-family housing.

New options for 2023 would adjust distribution shares up or down one per cent or flow more or less of the changed assessment values.

All things remaining equal from 2022 except for the assessment value changes, the average residence would see an $85 dollar increase, and a near $200 reduction for both apartments and businesses.

Changing the tax distribution to increase the single-family share would see $84 more for residential, $281 more for multi-family and $287 less for non-residential.

Increasing the tax rate for all by 4 per cent would play out as increases for all residential ($83), multi-family ($319) and non-residential ($276), but gain $1 million toward filling the deficit.

A halfway scenario – recommended by administrators – ($74 residential, $281 multifamily and $86 non res), would see shift the assessment growth benefit of non-residential, and collect $500,000 more in revenue.

Coun. Ramona Robins said she disagreed with raising the requisition and “each (option) has a consequence to the tax rates.

“We had 4 per cent in mind (in the budget), and it will be lower regardless, but it effects everyone in different ways.”