St. Albert could gradually reduce its reliance on residential property taxes by adopting a taxation philosophy that puts more emphasis on generating revenue from non-residential tax income.
In a presentation from acting chief financial officer Ed Kaemingh, councillors, sitting as the standing committee on finance (SCOF) learned that numerous factors are contributing to the city’s dependence on residential tax revenue, but a proper philosophy embedded in policy could gradually reduce or even reverse the tax increases homeowners pay every year.
“While there is no silver bullet here to solve all of these issues, the city can take important steps in the right direction,” Kaemingh said.
A mix of a small, non-residential assessment base, smaller economies of scale, an unwillingness to pursue other revenue sources such as franchise fees, and passive taxation that rely heavily on past practices have contributed to St. Albert’s current scenario, Kaemingh said. Unravelling that will take some political will and potentially more than a decade, but it can be done if councillors are willing to incorporate some changes.
“If we do nothing, does this get worse? If we continue the same practice the last 50 years, will taxes go up or stay flat?” Mayor Nolan Crouse asked.
“I’m not sure if it gets worse but it will stay relatively the same,” Greg Dahlen, director of assessment and taxation services said.
What administration is asking for is to bring forward several amendments to the city’s budget guiding principles that will reinforce previous positions on taxation while adopting some changes that will shift tax burden away from homeowners and more towards business. At present, the residential tax burden — the amount of tax revenue the city collects from residential properties — is 83 per cent compared to 17 per cent for non-residential. In essence, no matter how many new businesses come to town, they will be responsible for 17 per cent of the city’s revenues.
Conversely assessment as a whole sits at 89 per cent residential and 11 per cent non-residential. The city has historically wanted to adjust that ratio to 80 per cent residential and 20 non-residential.
“What we’re trying to illustrate here is, because of tax policy, you’re getting a different ratio,” Dahlen said. “There could be another municipality that’s the same as us but their tax policy might be different — taking more from residential or more from non-residential.”
Administration is recommending four specific amendments that could help gradually correct the city’s tax situation. First would be clarifying council’s philosophies on taxation and encoding them in policy, instead of simply relying on past practices. The city should also clarify that its revenues do not increase automatically with increases in market assessment. Most importantly, the city should also implement a standard related to tax burden and residential benefit from growth because the burden “can be re-adjusted in favour of the residential class over time,” according to the report. One way to accomplish that would be to clarify the city’s approach to a split tax rate — presently non-residential properties pay a fraction more than residential properties while other municipalities tax business at a higher rate.
“The formula is we can increase taxes on non-residential to drive decreases in residential assessment,” Crouse said.
Councillors will spend the next month receiving additional “tutoring,” as Crouse called it, in order to fully understand what administration is proposing before the amendments and a draft policy come back to SCOF in March.
“We’re going to piss off the business community in some fashion if we don’t understand it,” Crouse said.
