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Tax shift

The steep and rapid decline in the market value of a small number of high valued downtown properties has resulted in a redistribution of property taxes ($250M from 2015-2018) to other non-residential properties, causing untenable property tax increases for some property owners. With all things equal, it is estimated more than half of non-residential property owners will experience increases greater than 10% over last year.

The City is exploring options to support the business community and sustain long-term economic health for all Calgarians. It is understood that businesses create jobs and are fundamental in supporting the vibrancy of the overall community, but solutions also need to be considerate of the impact on residential property owners.

The following offers snapshot situational overviews as of April 2019. ​

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Variables

Row Count: 1
ListCat: Past
ID: 2404

Key Focus Areas

​Work is underway in three focus areas. The issue has three focus areas (the Economy, Business and the Assessment Shift) to solve the problem and support long-term economic recovery. The infographic below highlights some of the work that has already been done and is currently underway. 


Savings, Efficiencies and Reductions 2015-18

Intentional Management is a process The City’s Leadership has adopted and implemented to realize significant savings in three key areas: cost reductions and efficiencies, cost containment and operating cost savings. Savings found through intentional management are redirected to allow The City to deliver services within our means and provide benefits such as tax relief, fee relief, offsetting revenue shortfalls to avoid tax implications, and community support (social programs, affordable housing, etc.).

The Past ​- an overview of the history of the problem including information on key influencing factors (economy, business support and the assessment shift).

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Variables

Row Count: 1
ListCat: Present
ID: 2405

Assessment Shift

Of The City’s total revenue sources, property taxes account for approximately 49% of the annual operating budget to support the delivery of services Calgarians rely on every day. Historically, property taxes collected from non-residential properties (office, retail and industrial) have contributed approximately 55% of the total property tax revenue.

 

Tax Relief

City Council has provided one-time funds to mitigate the impact of extraordinary increases to eligible non- residential properties by implementing separate one-year tax cap programs, called the Municipal Non- Residential Phased Tax Program (PTP).

 

These PTPs have capped tax increases in the municipal tax portion of the non-residential property tax in the year offered. However, the following year property owners receive a compound effect of the increase from the previous year and tax increase from the current year.

The Present ​- an overview on the assessment shift (2015 to 2018) and comparisons of municipal commercial and residential property tax. ​​​​​​

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Variables

Row Count: 1
ListCat: Future
ID: 2406

Approach

This is a large and complex issue that has persisted and may be expected to continue for some time. For this reason, there is a desire to approach this issue in stages:


Short Term Levers



The City has some mechanisms that can be implemented in the short term to assist the non-residential property owners (and their tenants/businesses) who are the most severely impacted from this redistribution. Such mechanisms include: 

  • Overall budget reductions 
  • A transfer of some of the tax responsibility paid from non-residential properties to residential properties 
  • One time or short-term mitigation programs

In developing solutions that utilize these levers, a key question to consider is - what are the appropriate mechanisms to use to assist the most impacted non-residential property owners and business tenants?

The Future​ - an overview of solutions to the problem. ​​​​​​​

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On April 8, Council approved the 2019 Property Tax Rates.

For residential homeowners, Council approved a combined (municipal and provincial) 2019 property tax rate increase of 3.45 per cent. For the median residential property owner with a home valued at $475,000 this will mean an annual increase of $105 on the total tax bill.

To help non-residential property owners, Council approved a combined decrease of 3.07 per cent in the non-residential combined tax rate in 2019. Tax impacts on individual properties will vary depending on the specific assessment change from 2018 to 2019. This does not include the impacts of the Business Tax Consolidation (BTC). The BTC will increase non-residential property taxes, while decreasing business taxes by an equal amount.

This was the result of much debate. To help provide context to the situation, The City prepared background information and analysis to set the stage for Council’s discussion on the Tax Shift and decisions.

Resources

  • The Past - an overview of the history of the problem including information on key influencing factors (economy, business support and the assessment shift).
  • The Present - an overview on the assessment shift (2015 to 2018) and comparisons of municipal commercial and residential property tax.
  • The Future​ - an overview of solutions to the problem. 
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