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Calgary tax solutions could shift responsibility to city homeowners

While Calgary city councillors were presented with different tax distribution examples Tuesday, much of the debate centred around tax regime, value for dollars and looking at the city’s bigger picture.

Councillors were presented with the final report of the Assessment Tax Shift Working Group at Tuesday’s Priorities and Finance Committee, in response to the massive reallocation of the city’s tax base when downtown market values plummeted.

Coun. Jyoti Gondek, who led the working group, delivered the report Tuesday and said they brought together stakeholders to talk about both long- and short-term tax implications.

RELATED: Calgary business tax: Long term solution sought for complex city problem

“Ultimately, the working group understood its mandate to be providing recommendations that offer some immediacy of action to this committee,” Gondek said.

Calgary tax shift: The scenarios

Three recommendations were provided, but the one with a direct impact was to make a values-based decision on the proportion of operating budget responsibility for both residential and non-residential property owners.

Scenarios on the 2020 projected assessment base were delivered to the committee on the different proportions – each a slight variation around a 50/50 split in proportion.  (Attachment below shows some of those scenarios and is far easier to digest than us explaining it in words. NOTE: Does not include provincial portion of the tax, and it is based on a 0% budget increase.)

Calgary Tax Proportion Scen… by Darren Krause on Scribd

One aspect that complicates the proportion is the Phased Tax Program (PTP) that provided 2019 property tax relief to business owners. Gondek said that while in many of these scenarios the raw value of non-residential tax is lower than before, it’s still considerably higher (as much as 25 per cent higher for the city’s retail strip malls) than the tax they paid in 2019.

“This is the bow wave that everyone’s been talking about,” said Gondek.

“Because we’ve provided one-time money, it’s now come back to roost and people have to pay their full bill, even though the value of that bill has declined.”

The solution that limits damage to city business the most, also digs deeper into homeowner pockets – to the tune of $136 annually on a $455,000 home (that was valued at $475,000 in 2019).

Changing Calgary’s tax regime

Coun. Shane Keating brought up changes to the market assessment property tax calculation that’s mandated by the province. Keating called the system “convoluted and very difficult to explain.”

“Yet, we just continue down this path and saying, ‘Well, if we do this, then we’re OK.’ But that’s our system. Should we change our system?” Keating asked.

Gondek said there were discussions around the city’s taxation system, but the working group felt that there wasn’t enough time to come up with an answer to that and provide the immediate recommendations for the city to address the short-term tax situation.

Larger tax reform would involve the province and potential changes to the Municipal Government Act.

More suggestions came up, including establishing different tax classes in the short term to address some of the immediate challenges.

Coun. Druh Farrell said the recent tax situation might be reason enough to go back to the province to talk about tax structure.

“Hopefully this will create the impetus to go to the province and say, ‘This system is brittle. It doesn’t work when you’re having booms and busts,’” she said.

 “Market value (assessment) just doesn’t make sense in general. It just doesn’t make sense.”

Property Tax Situation PFC2019 1306 by Darren Krause on Scribd

Calgary taxes: Wants versus needs

With the potential tax implications in mind, councillors steered the conversation toward value for services and Calgarians’ understanding of how revenue aligns with the bigger, future version of the city.

Coun. Ward Sutherland suggested that when we see no tax increases, it actually means services need to be cut because the cost of delivering those services doesn’t go down.

“People don’t realize that zero is actually a negative. Because just like in the household, when you go to the grocery store, and wherever else, there’s inflation and costs go up,” he said.

“Therefore, the cost of delivering the services every year go up, they never go down. So, when we do a zero, it’s actually a negative, and we have to cut some services in some way.”

Farrell said called the conversation about services and wants/needs frustrating.

“It’s just rinse and repeat until we start talking about the kind of city we want,” she said.

“This is really nibbling at the edges.”

The Ward 7 councillor said having that conversation as a part of determining any sort of tax distribution or reform is essential.

“We really have to have a bigger picture conversation on what kind of city do we want. And what is the tax regime that helps us achieve it,” Farrell said.

“Maybe this is the start of a conversation.”