Time for yearly tax and mill rate shifts

A provincial property tax hike nearly as big as Calgary’s civic tax hike means that council won’t have the same “tax room” debate about further increases that divided councillors in past years.

Instead of the controversial $ 52- million hike up for debate in 2013, this year Calgary could only raise $ 3 million extra in annual funds if it chooses to raise city property taxes further to create a provincial- civic combined rate increase of 4.5 per cent, the figure council approved in budget debates last fall.

But while council finalizes its home tax rate, it must also decide whether to move its mill rate on businesses and other non- residential properties, which face a steeper uptick on the provincial/ education side of their bills.

The numbers in this complicated annual rate- shifting exercise are smaller than usual and Mayor Naheed Nenshi hasn’t yet said what he wants to do. While he successfully persuaded council to go with his tax room increases in his first term, the current group of councillors rejected the idea last year and could do the same again.

Here’s how this year’s arithmetic works:

Councillors approved a 4.5 per cent property tax increase for the city budget, but they have no control over the tax bill’s smaller provincial component, which used to be collected for the school system but actually goes into the province’s general coffers.

The Alberta government adjusts its property rate on a provincewide basis, and it shakes out to a 3.8 per cent increase for residences and 8.2 per cent for non- residential properties.

If council avoids fiddling with the rates this year, they would combine to a 4.2 per cent increase for residences and 5.4 per cent for business properties.

“By leaving it alone, you’re reducing it ( for homeowners),” said Coun. Ward Sutherland, vice- chair of the priorities and finance committee. “They’re taking a hit on the non- residential.”

Nenshi has long been a believer that a lesser provincial tax take creates tax room for the city to occupy with higher civic taxes whose proceeds go to special city purposes — in 2011, a $ 42- million tax room increase to fund the central library, recreation centres and other projects; while the $ 52- million hike two years ago will fund the green line bus corridor down Centre Street and into the southeast.

In a memo to councillors, Nenshi lays out three alternative options for 2015 taxes:

Rejig city tax rates to keep the combined increase at 4.5 per cent for everyone. That creates annual tax room of $ 3 million on the residential side, but sharply cutting the city’s non- residential tax rate would lower city revenue by $ 8.4 million, leaving a $ 5.4- million shortfall, according to the memo, provided by request to the Herald.

Hike residential property tax rate to a combined 4.5 per cent only, creating $ 3 million in discretionary spending money each year. The non- residential rate would stay at 5.4 per cent.

Hike the homeowners’ rate to 4.5 per cent, and use that $ 3 million in proceeds to lower the nonresidential combined increase to 5.0 per cent.