Council caps tax increase for non-residential property owners $45-million program APPROVED

The City is reaching out to help non-residential property owners and businesses affected by the economic downturn.

On Monday, Council approved a $45 million program to limit to a maximum of 5% the increase in the municipal portion of non-residential property taxes caused by a shift in market value.

“Calgary is open for business,” said Mayor Naheed Nenshi. “We know times are tough, but our prudent fiscal management lets us help Calgary business when they need it most.”

The Municipal Non-Residential Phased Tax Program (PTP) is in addition to $183 million of benefits already approved in November during mid-cycle adjustments to the 2015-18 Action Plan.

After Council approved the PTP, a media availability was held at CBN Commercial Solutions in the northeast. The company is one of the thousands expected to benefit from the program. Back row, from left: Councillors Magliocca, Chu, Demong, Jones, Farrell, Wolley. Front row: Councillors Stevenson, Sutherland, Carra, Pootmans, Mayor Nenshi, Todd Schmautz from CBN Commercial Solutions, Adam Legge from the Calgary Chamber, Mary Moran from Calgary Economic Development.

Monday’s announcement brings the total benefits to $228 million, of which approximately $113 million is directed at the non-residential property class.

The PTP does not include the effect of Business Tax Consolidation or any property tax increase due to the provincial non-residential tax requirement, which is currently not known.

It is expected that approximately 6,000 non-residential properties will benefit.

There will be no application process for the PTP. The tax effect of the phase-in will be applied to 2017 non-residential property tax bills.

Vacancy rates and reductions in rent have impacted downtown market value assessments.

The downturn has seen an increase in downtown vacancy rates and a reduction in rents. Generally speaking, this has resulted in market value assessment decreases in the core. Because market value assessment is revenue neutral, this is expected to cause a tax shift for some non-residential properties.

In November, Council earmarked $15 million to develop a program to assist Calgary businesses affected by the downturn and directed City administration to report back with a proposed plan for implementation by the end of January. Monday’s decision increases that amount to $45 million, which will be funded from intentional savings in 2016 corporate programs.

The original $183 million in benefits approved in November includes property tax relief ($73 million), user fee relief ($66 million), targeted initiatives for areas of greatest need ($9 million) and $35 million in adjustments to offset reductions in City revenues. Council also approved the Capital Investment Plan to help spur economic growth, build infrastructure and create jobs.

The online tax calculator has been updated to reflect the PTP. Visit www.calgary.ca/ourfinances for more information.

The 2017 property tax rate will be finalized by City Council after the Government of Alberta approves its budget and 2017 provincial property tax requisition in the spring. Property tax bills will be mailed in May and are due June 30.

Eligibility for PTP

This is a one-year phase-in program that applies to non-residential properties that have experienced a 2017 municipal property tax increase above 5% due to the shift in market value assessment. Non-residential properties that have experienced a 2017 municipal property tax increase below 5% due to the shift in market value assessment will be unaffected by the phase-in.

Properties that have had physical enhancements or changes that affected the 2017 assessment relative to the 2016 assessment or had changes due to other external non-market impacts (e.g. a zoning change, servicing, remediation, a change in taxable status) would not be included in the PTP.

General criteria

To be included in the PTP, non-residential properties:

  • Must have existed in 2016
  • Must have a tax status of “taxable”
  • For properties assessed under more than one assessment class, only those properties where the non-residential component is 50% or higher will be included.

To improve administrative efficiency, the program will only be applied to accounts where:

  • The 2017 municipal non-residential property taxes are greater than $50
  • The amount to be phased in exceeds $25.

More program details are available on the PTP web page.

Non-residential properties

Non-residential properties include:

  • Office
  • Retail
  • Industrial
  • Non-residential vacant land
  • Recreational properties
  • Accommodation properties (e.g. hotels)
  • Golf courses
  • Parking
  • Institutional properties

Business Tax Consolidation

Business Tax Consolidation refers to the transferring of business tax revenues into non-residential property tax. This process will occur through incremental transfers between 2014 and 2019, culminating with the elimination of the business tax. This will result in a single, easy-to-understand real estate-based assessment and tax system for non-residential property and business owners.

The consolidation is intended to be revenue neutral so there is no need to phase in or mitigate the municipal non-residential property tax increase, because the mitigation is taking place through a corresponding drop in the business tax. In 2017, an additional 20% of the business tax will be consolidated into the non-residential property tax, with non-residential property taxes expected to increase by approximately 5% solely due to the effect of the consolidation

In November's mid-cycle adjustments, $73 million was allocated for property tax relief.

Mid-cycle adjustments

The mid-cycle adjustments approved by Council in November 2016 continued The City’s economic response, with $183 million in benefits to Calgarians.

Tax relief

Council reduced the approved property tax increase to 1.5% and provided a one-time rebate, effectively bringing the 2017 property tax rate increase to zero. It is a $73 million benefit being achieved through a combination of corporate funding sources (reserves from previous years’ savings), department savings from efficiencies, and service reductions.

Fee relief

Council maintained many user fees at previously approved 2016 levels. It is a $66 million benefit in fee relief:

  • Transit, recreation, parks, and pet service fees ($8.8 million);
  • Planning, development and fire code inspections and permits ($1.6 million);
  • Utility rates ($41 million);
  • Landfill tipping fees ($1.5 million); and
  • Green Cart program fees in 2017 ($13 million).

Targeted initiatives

Funding of $9 million in specific targeted projects and initiatives to address areas of greatest need:

  • Community Emergency Resilience Fund ($5 million);
  • Affordable Housing ($1.5 million);
  • Small business micro projects ($150,000);
  • Festivals, ward/community events ($320,000);
  • Accessibility strategy ($250,000); and
  • Pedestrian strategy ($1.9 million).

Revenue shortfall

City administration absorbed a $35 million shortfall in City revenues through draws on previous years’ savings (reserves) and operational cuts.

Capital Investment Plan

The City’s Capital Investment Plan will help spur economic growth and diversification, maximize investment to create jobs, build and maintain infrastructure, and attract and retain people, business and investment to Calgary. The Capital Investment Plan will be funded through existing capital sources and better position The City of Calgary to take advantage of federal and provincial grant funding programs.

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