ANOTHER GROUNDHOG DAY FOR BUSINESSES WHEN IT COMES TO CITY BUDGET DEBATE
At the start of every budget debate at Calgary city council, Mayor Naheed Nenshi should issue a general warning about the ongoing property tax shift.
It doesn't need to be complicated. In fact, he could borrow a line straight out of Hollywood.
“OK, campers, rise and shine and don't forget your booties `cause it's cold out there today. It's cold out there every day.”
The cold truth about the tax shift facing Calgary businesses is that it never seems to end. It feels like a moment out of Groundhog Day, the 1993 movie where the main character lives out the same monotonous day, over and over again.
In Calgary, another budget debate has come and gone. Another property tax reassessment problem needed to be fixed.
Another temporary program was approved to shelter business owners from the worst of the reassessment increases.
And no one is particularly happy.
“It seems like Groundhog Day with yet another Band-aid solution to a property tax problem,” said Annie Dormuth of the Canadian Federation of Independent Business.
“Council took a good step to reduce taxes,” she said. “However, a lot of small businesses are still going to see a property tax increase. And if it's anything close to 10 per cent, that is going to be a huge hit.”
On Thursday, council approved its 2021 budget and the average homeowner and commercial property owner should see their taxes dip by about one per cent.
Given the pandemic, an oilprice collapse, double-digit unemployment and the worst recession in decades, tax relief was warranted.
Yet, it's not quite as simple as waiting for a modest tax reduction to arrive in the mail.
Every year, the city is required to conduct the reassessment process, based on property values as of July 1.
The system doesn't raise additional money for city hall, but it does shift the tax burden around. Commercial property owners who see their assessments go up will usually pay more; those who see their assessments fall generally pay less.
Yet, the system doesn't work so well when there's a steep, prolonged slump in property values, which has been the case in Calgary since oil prices tumbled in 2014.
In recent years, a sharp decline in the value of downtown office towers has led to the reallocation of about $250 million in taxes onto other commercial property owners.
With many businesses facing double-digit tax hikes each year, council has intervened, sometimes willingly, other times under public pressure.
Nonetheless, councillors have
adopted a series of one-time phased tax programs (PTP) to protect business owners from bearing the full brunt of the pain.
In 2017, it created a $45-million program to limit the increases to no more than five per cent. Council followed it up with a $41-million relief initiative the following year.
As downtown office buildings dropped further in value, the city implemented a $130-million PTP last year to cap increases at 10 per cent. In January, councillors agreed to create another $30-million program for 2020.
That's $246 million in assistance if you're keeping count, although city data on Friday indicated the actual amount out the door was closer to $200 million.
This year, downtown office building assessments have stabilized somewhat. Yet, the effect of the pandemic on properties such as hotels — their taxes will fall by about 28 per cent next year — has led to another series of shifts, this time squeezing industrial warehouses and properties on busy commercial strips.
Taxes along 17th Avenue S.W. are expected to climb by 17.4
per cent. Large warehouses are facing a 25 per cent jump.
After a brief debate, council agreed Thursday to adopt another PTP program, costing about $21 million to limit tax hikes to 10 per cent.
But the discussion showed just how exasperating the issue has become and how there are no obvious solutions to fix it.
“I hate this, but it's the only way forward,” said Coun. Gian-carlo Carra.
“Every year we say we hate this and every year we approve it,” added Coun. Druh Farrell. “There is no light at the end of the tunnel.”
The mayor pointed out the city shifted more of the overall tax burden on to homeowners last year and off of commercial property owners.
Yet, another taxing headache is coming in 2021.
“The PTP program is appreciated in the sense that it provides some measure of relief,” said Calgary Chamber of Commerce interim CEO Murray Sigler.
“But what it fails to do is address the fundamental unfairness in our property tax system and the fundamental need to reform it.”
The chamber would like to see more civic measures considered, including additional cost reductions, privatizing services, and leasing or selling off city-owned land to generate revenue.
For business owners who have seen large increases in recent years, there's simply fatigue with an issue that continues to drag on.
“In this particular climate, any taxation increase seems unjust,” said Greg Stebbe, who owns and operates Walls Alive on 17th Avenue S.W., noting restaurants on either side of his business have closed recently.
“With a 10 per cent increase, you will see more casualties on 17th Avenue,” said Ernie Tsu, owner of Trolley 5 Brewpub on the popular strip.
What is the solution? A rebound in the economy would help.
The chamber, CFIB and councillors are also calling on the provincial government to look at potential reforms to the property assessment system, which everyone agrees is broken.
However, the issue has been a muddle for five years and there's no sign of immediate help coming.
“We are open to hearing from all Alberta municipalities on their thoughts for any improvements,” said a statement from the press secretary for Municipal Affairs Minister Tracy Allard.
“However, any change to the system could mean redistributing that tax burden to other taxpayers.”
So we're back to relying on another costly ad hoc program for the fifth-straight year, and another repetitive discussion about a problem that refuses to fade away.