City administrators are evaluating a move in Edmonton to create a higher taxable class for "derelict" residential property in an effort to spur development of problem properties in that city and boost available housing.--News Photo Collin Gallant
cgallant@medicinehatnews.com@CollinGallant
Doubling the tax bills of boarded up homes in Medicine Hat – a move to pressure owners to fix them up or sell them off – might not cover cost of implementation, according to city administrators, who say the potential will be studied.
The issue arose this fall as Couns. Shila Sharps and Andy McGrogan pushed for a review of the city’s unsightly properties bylaw as well as potential tax measures to address derelict properties that are often a source of scorn by neighbours.
On Thursday, the city’s corporate services committee heard Edmonton will be the first municipality in Canada to create a special sub-class in its assessment of the coming year’s tax roll.
Local officials said that effort should be studied before any local effort is taken focusing on 28 local homes that might qualify. It could potentially bring in $43,000 in new revenue each year, but cost $122,000 in staff time and resources to institute and monitor.
“We’d like additional time to see how it is implemented in Edmonton,” said Sue Sterkenburg, the city’s chief assessor, adding that a two-year process in Edmonton saw outreach to housing industry and the specific property owners.
A similar effort here would be needed, and even if started now, the change might not be legally in effect until the 2025 tax year.
“We’re definitely curious about the results, but it could take a year or two whether or not it is effective,” said corporate services managing director Dennis Egert. “We’re really interested to see what happens in Edmonton.”
That city created a new subclass for property tax assessment – “Mature Area Derelict Residential” – and starting in 2024 will charge the non-residential (commercial) mill rate to about 300 properties.
That will effectively double the tax bill, potentially to put cost pressure on owners who might be holding land and buildings for long periods of time for resale.
Since municipal taxes are based on the property value, there can be a reverse incentive to letting its value decline.
Egert says there are already costs on property owners beyond taxes, such as financing costs and insurance, and wider measures may be studied or required.
But, he says, leaving a property empty hurts the municipality by dragging down the tax assessment.
When the study was approved, city manager Ann Mitchell said the number of properties was a concern, and the issue appeared to be a link between several problems the city is trying to tackle.
Those include affordable housing and increasing redevelopment in existing neighbourhoods.
City staff are also studying changes to the unsightly property bylaw, potentially changing standards or increasing penalties. That report is due in early 2024, but committee members said this week it is a complex problem.
Vice chair Coun. Cassi Hider says additional taxes might target those already experiencing financial hardship.
“I get the idea behind it, but will it work?” she said. “Can you get more taxes from these property owners?”
Coun. Allison Knodel says despite the lack of cost-recovery, the program might create non-monetary benefits, and should be considered alongside other options.
“If cost outweighs the revenue, dealing with the properties might gather some momentum toward redevelopment,” she said. “What other benefits are there? What would inspire people to take care of these problems? Do you incentivize?
“That’s another process.”
City bylaw officers can issue work orders or proceed with work and bill the owners, but if the building is secure and the tax account in good standing, the city has limited legal recourse to compel owners to improve properties.
The item will proceed to council for information purposes.
Staff advised committee that a new property assessment class could not be applied to properties which are simply considered to be unsightly, have weeds or are in minor disrepair.
The Edmonton bylaw applies to homes:
– Deemed to be deserted or abandoned;
– Partially or fully boarded up;
– Subject to a health order that the structure is uninhabitable, or;
– Abandoned partway through construction or demolition.
Edmonton identified about 280 homes in specific central communities that would qualify, which paid a total of $699,000 in municipal taxes last year.
At the new mill rate, the total would rise to $1.66 million, but require $291,000 in added expense to manage the list, perform twice yearly inspections and communicate with property owners.
In Medicine Hat, local assessment officials believe 28 properties would qualify under Edmonton’s criteria, but the resulting tax revenue increase would be $46,000.
That is about one third the estimated cost to the department.
One new assessor might be required to compile and monitor a final list, communicate with property owners, perform twice-yearly inspections and deal with potential appeals.
Egert says of the 28 single-family residential properties, 20 are connected to owners who have a mailing address inside city limits, and eight who lived outside the city.
