City faces mas­sive tax­ing prob­lem

Calgary Sun - Homes - - Homes -

rate than com­mer­cial prop­er­ties, with the lat­ter be­ing the ‘golden goose’ of tax rev­enues for the city.

For the long­est time, the golden goose was the col­lec­tion of 100-per­cent-leased of­fice tow­ers down­town, pop­u­lated pri­mar­ily by oil com­pa­nies.

But, with the on­slaught of the re­ces­sion, and other mit­i­gat­ing fac­tors, those down­town of­fice tow­ers have be­come about 25 per­cent va­cant.

This has re­duced the value of the tow­ers, which has re­duced their value as­sess­ments, which has re­duced rev­enues — and sig­nif­i­cantly.

Prior to the re­ces­sion, down­town prop­erty val­ues amounted to 32 per­cent of the to­tal non-res­i­den­tial assess­ment base — that share is es­ti­mated to fall to 19 per­cent in 2019, a to­tal loss of $12.6 bil­lion in prop­erty value.

Over the last two years, the City has dipped into its rainy day fund to the tune of $86 mil­lion, of­fer­ing re­bates to busi­nesses to cap the tax rate at five per­cent.

It has also tried to re­coup some of the down­town losses by in­creas­ing taxes on busi­nesses out­side the core, which, ob­vi­ously, has hurt many of them fi­nan­cially. The in­crease was the largest in the coun­try, as re­ported by Al­tus Group in its 2018 Cana­dian Prop­erty Tax Rate Bench­mark Re­port.

“Cal­gary saw the largest in­crease in the sur­vey with a jump of 11.95 per­cent and now sits above the aver­age com­mer­cial-to-res­i­den­tial tax ra­tios at 3.06, af­ter see­ing in­creases for the last five con­sec­u­tive years,” says Al­tus. “Cal­gary saw the largest in­crease in com­mer­cial tax rates in the study for the sec­ond year in a row. Cal­gary’s com­mer­cial rates jumped by 11.36 per­cent in 2017 and again in 2018 by 9.48 per­cent.

“Head­ing into 2019, the Cal­gary tax rate is cur­rently fore­casted to be 17 per­cent higher than 2018.”

This isn’t just a prob­lem. As Coun. Druh Far­rell said in a meet­ing of the pri­or­i­ties and fi­nance com­mit­tee, “It’s a cri­sis.”

City man­ager Jeff Field­ing told mem­bers of coun­cil, “I’ve never seen any­thing like this,” go­ing on to say if noth­ing is done, even land­lords whose prop­erty val­ues have de­clined could see tax in­creases.

Far­rell has rec­om­mended two task forces be con­vened to deal with the cri­sis, one to look at short-term so­lu­tions, the other to pro­mote re­vi­tal­iza­tion of down­town to in­crease prop­erty val­ues.

City staff are also ex­plor­ing op­tions, in­clud­ing re­duc­ing the busi­ness-to-res­i­den­tial tax ra­tio, which can only be done by rais­ing res­i­den­tial prop­erty taxes.

Rock, meet hard place.

Just as prop­erty val­ues have fallen down­town, the val­ues of homes in Cal­gary are also on a down­ward trend.

Many Cal­gar­i­ans are labour­ing try­ing to man­age in­creas­ing costs, with no in­crease in wages, or be­ing out of work al­to­gether.

Many are try­ing to sell their homes to off­set in­creas­ing fi­nan­cial pres­sures. Wit­ness the record-level of prop­er­ties listed for sale on the MLS sys­tem, as well as a slow­down, and that’s an un­der­state­ment, in the new home-build­ing in­dus­try.

So, one ‘so­lu­tion’ be­ing ex­plored is to raise taxes on prop­er­ties los­ing value, be­cause other prop­er­ties have lost their value.

I don’t know if there are any mir­rors in City Hall, but if there are, I won­der if any­one work­ing there can see their re­flec­tions in them.

The only so­lu­tion is to do what Cal­gar­i­ans faced with fi­nan­cial pres­sures have done, and that is, re­duce ex­penses.

Ev­ery line in the City’s bud­get that in­cludes a ‘nice to have’ item should be elim­i­nated.

Items iden­ti­fied as ‘must have’ must face se­ri­ous re­view to make sure they re­ally are ‘must haves’ and then re­viewed again to find a way to make them less ex­pen­sive.

The good times are over — at least for now.

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