In April 2021, when Alberta municipalities set our property mill rates, it may not be pretty – COVID-caused. Additionally, there may be increasing disparity between municipality types – COVID-caused.
Based on the provincial Municipal Affairs website, Alberta’s 87 villages’ mill rates are 20 to 40 per cent higher than those of Alberta’s towns and cities. At times, village mill rates are double or triple that of the county that surrounds them.
Bottom line: mill rate disparity is a challenge in Alberta and may be exacerbated by COVID-19.
A tax rate, expressed in mills, is established based on many factors. Arithmetic-wise, it is the number that a property's assessed value is multiplied by (decimal-adjusted) to determine its property taxes. On a $400,000 home and a tax rate of 8.4437 mills, for instance, the municipal property taxes would be $3,377 per year.
Municipal Affairs reports the average non-residential mill rate for Alberta counties is 13.4411. The average non-residential rate for all towns is 13.4643 and the 2018 Alberta average for all villages for non-residential is 16.2665. While there are many classes of machinery, commercial, industrial and linear affecting these numbers, data shows disparity exists between small urbans and counties.
Disparity is greater on residential taxes, where the 2018 average for all counties of residential/farms was 4.1261 compared to the average for all town residential rates at 8.1847. The average of all village for residential rate is 10.7570. While there are nuances in each class (for example, farm properties), for simplicity sake, disparity exists.
Bottom line: small urban tax rates are substantially higher than counties. What might this mean when setting the tax rates in 12 months?
Municipal districts and counties are likely facing a disproportionate non-res tax challenge compared to urbans, because of possible unpaid industrial taxes – not the least of which is the challenged oil and gas sector. Collection of unpaid residential taxes is much easier than collecting unpaid industrial taxes. Houses can be repossessed and sold to collect unpaid taxes. That is easier than repossessing and selling abandoned oil and gas assets to collect taxes.
In contrast, urban municipalities have higher commercial assessment than counties. Simply put, shopping areas are much more common in urbans than in rurals. If the commercial vacancy rate is significant and commercial property owners are unable to pay taxes, low municipal tax revenue from those properties could be a factor for the urbans. That will likely be the case in 2021.
Since urbans receive a substantial portion of their revenue from residential taxes, house price stability will also be an important factor for the calculation of residential tax rates.
Finally, disparity will emerge for Edmonton and Calgary compared to all other municipalities. Edmonton and Calgary will have a particularly challenging time with taxation. These two cities have the largest facilities that are low revenue generators. Swimming pools, recreation centers, sports stadiums, museums, libraries, art galleries and public transit are not able to “break even” through user fees at the best of times, and COVID-19 will impact that further. Edmonton and Calgary also rely on parking revenues, which will also be substantially reduced. And while each Alberta municipality has its own unique social challenges, homelessness disproportionately costs Edmonton and Calgary more, compared to all other municipalities. Other orders of government have not adequately addressed this matter, nor other large city social costs.
In summary:
Towns and villages have little room to raise mill rates.
Counties will be challenged collecting all their taxes from industry.
Big cities will be challenged due to reduced revenues and collecting commercial taxes.
The least affected group in Alberta may be the most diverse counties along with the 20 mid-sized cities.
Where will this all shake out for our taxes? Will the province bail out the villages differently than the counties, differently than Edmonton and Calgary? What are the federal government's plans?
There will be a day of reckoning in 2021 and perhaps again in 2022.
