Council hears on tax rate process

By Lori Larsen

During the City of Camrose Committee of Whole meeting held on April 4, City of Camrose Financial Services general manager Travis Bouck and City assessor Travis Lantz presented council with a detailed review of the City’s tax rate process concluding with three alternative tax strategies, including: status quo, shift 0.5 per cent to residential, or shift 1 per cent to residential.

Bouck said that the goal is to be able to approve the tax rate bylaw by May 2, depending on when Camrose County has passed the County tax rate bylaw due to annexed land.

After the City’s tax rate bylaw has been approved by council, the target date for tax notices to be mailed out is May 20 to 27, with a tax payment deadline of June 30 before penalties apply.

Bouck began with examples of the 2021 taxes for residential.

Based on a median home with an assessed market value of $269,500, property taxes are approximately $3,101, of which $716 is for the Province Education Tax and $2,384 for Municipal Property Tax.

City manager Malcolm Boyd further explained that the “median” value of $269,500 means that 50 per cent of the homes in Camrose are valued at less than $269,500, and 50 per cent of the homes in Camrose are valued higher than $269,500.

Based on a high value home with an assessed market value of $784,000, property taxes are approximately $9,021, of which $2,082 are for Provincial Education Taxes and $6,935 are for Municipal Property Taxes.

Bouck also provided examples of 2021 taxes for non-residential.

Based on a warehouse property with an assessed market value of $600,000, property taxes are approximately $10,222, of which $2,343 are for Provincial Education Taxes and $7,876 are for Municipal Property Taxes.

Based on a big box store property with an assessed marked value of $16,000,000, property taxes are approximately $272,590, of which $62,488 are for Provincial Education Taxes and $210,016 are for Municipal Property Taxes.

Bouck explained that the City has no ability to impact the amount collected by the City and remitted to the province for Provincial Education Taxes, which equates to 23 per cent of tax notices for both residential and non-residential. The 2022 Provincial Education Tax increased for the City of Camrose by 2 per cent for both residential and nonresidential properties.

With regards to growth, Bouck said, “Any time we get new development, it will generate more tax revenue for the City every year. If we look at our 2022 budget, we had our 2021 property tax base at the rate of $26,054,000. We estimated growth at roughly $150,000 of taxes based on $9 million residential growth and $5.5 million of non-residential growth. With a zero per cent increase, meaning that we are collecting the same amount from existing (2020) property owners, we are at about $26,204,000 tax revenue in 2022 for our budget.”

Lantz said, “The pattern in Camrose the last few years that has been particularly noteworthy is the decline in residential growth. We just haven’t had the same volume in housing starts these last few years. Non-residential growth always has a little deviation because it only takes a couple big commercial properties to generate $5-6-7 million in growth. It will be interesting to see where this goes with the boom in housing prices, moving forward.”

Bouck said the growth that the City actually had in 2021 was approximately $11.6 million for residential, $5.6 million for nonresidential, and $1.2 million in linear (pipelines, cable, phone and electric systems), which all together equated to approximately $187,000 in additional tax revenue.

Bouck explained that just because the City saw growth doesn’t necessarily mean the City may need to add resources or costs to service the new development such as recreational facilities, while other costs may need to be increased, such as road maintenance.

Overall, when determining tax base and tax rate calculation, the City considers growth and what happened to the market value when looking at residential and non-residential properties. According to the report, the City has seen a 4.7 per cent increase on an average in residential properties market value change and a zero per cent in non-residential properties. Bouck noted that this is on a total basis, and that some properties may have seen a significant increase while others have seen a significant drop in market value.

For 2021, taxes collected for residential properties were $17,979,723 on a total assessment value of $2,032,594,750 with a millrate of 8.8457. For 2021, taxes collected for nonresidential properties were $8,058,934 on an assessment value of $613,967,270 with a millrate of 13.1260.

“When we look at what we need in 2022 collecting the same amount from the same residence, the assessment total is $2,139,526,120 in 2022, less growth of $11,612,190, gives a 2022 assessment of 2021 properties at $2,127,913,930. In order to generate tax revenues of $17,979,723 (equivalent to 2021 and zero per cent tax increase), the starting point millrate would be 8.4495.

“We are not decreasing our tax revenue, we are just decreasing the millrate because of the increased assessed value.”

Bouck said that 8.4495 is a starting point because the City will need to adjust for actual growth versus estimated growth, annexed property from the County and appeals risk.

Bouck explained that if there are residents not satisfied with the assessed value of their property, they can appeal, which could potentially have an impact on the tax revenues if the appeals are successful.

“At this point, we may want to set aside funds for appeal risk when determining our tax rates. If we don’t and we lose a bunch, we could be in a significant hole operationally, because we wouldn’t get those revenues.”

For 2022, the City has received 11 appeals, putting $152,000 of tax revenue at risk.

“Seven of the 11 appeals are from one multifamily property owner, who owns a number of apartment buildings,” explained Lantz. “One is on a retirement community, one on a hotel and one on a residential house. We have a mix of everything. Two properties in particular, the hotel and private retirement community appeals, represent approximately $121,000 of the total tax revenue at risk.”

Lantz added that there has been strong results with the Appeal Board in the past years defending assessed values. “We put a lot of time and effort into preparing these assessments. Generally, an appeal is a last resort. Not to say that we are going to win every year, but we certainly have tried to defend the taxes the best we can.”

Bouck said the City also issues supplementary tax notices (not included in budget), which have averaged $36,000 over the past three years. “Given those funds are not in our budget, administration feels there is no need to set aside additional funds to address for 2022 appeal risks when we determine the 2022 millrates.”

Lantz added that administration does not anticipate losing all of the tax dollars under appeal.

According to the report, the 2021 tax gap (difference between residential and non-residential municipal tax rates) in Camrose sits at 1.48.

The 2022 tax gap for Camrose, based on status quo, increased to 1.55 per cent due to the significant increase in assessed values for residential properties.

Bouck explained to council that if a millrate

is a key factor in attracting businesses, council may wish to shift a larger amount of taxes to residential properties in order to make it less expensive for non-residential properties to operate within the City of Camrose.

“In 2020, council (of the day) approved a shift of 0.5 per cent of the tax base from non-residential to residential.”

A “tax gap” comparison of 22 cities in Alberta indicated that Camrose sits very close to the middle.

Administration proposed three tax strategy alternatives being: status quo; shifting 0.5 ($130,000) per cent to residential property owners; or shifting one per cent ($260,000) to residential property owners.

If the tax millrate remains at status quo with all other considerations, the median home property owner can anticipate an increase in taxes of approximately $9; for high value home property owners, the increase will be approximately $25; for non-residential warehouse property owners, approximately $0; and for non-residential big box store property owners, approximately $23; primarily due to the increase in the Provincial Education Tax.

With a shift of 0.5 per cent to residential properties, the median home would see an increase of approximately $26, $75 for high value home properties, a decrease of approximately $129 for warehouse properties, and decrease of $3,427 for big box store properties.

With a shift of one per cent to residential properties, the median home would see an increase of approximately $43, $124 for high value home properties, a decrease of approximately $253 for warehouse properties, and decrease of $6,727 for big box store.

Councillor Agnes Hoveland said her decision would be to remain at status quo. “There is no way of measuring the impact that shift may have.”

Councillor Lana Broker asked City of Camrose Communications and Development general manager Patricia MacQuarrie if, in her opinion, a shift would encourage more development. MacQuarrie said that she did not fundamentally believe that shifting the tax gap at this point by that much would make a difference in a business choosing Camrose over another municipality, however, said she does use the fact that council has been intentional in reducing the tax gap. “Even if council remains status quo this year, I do believe we can go forward and say that council has been intentional about creating a better business environment by reducing that tax gap.”

MacQuarrie added, “The government brought in a few years ago an opportunity for municipalities to put in a tax bylaw that would allow municipalities to wave taxes for specific targeted industries in their communities. We have not seen a spike in businesses taking up municipalities on that option.”

MacQuarrie said it (tax gap) is likely more relevant to existing businesses in Camrose than new businesses coming into Camrose.

Council directed administration in favour of the status quo tax strategy alternative.