City faces massive taxing problem
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.