April Newsletter 2019
Tax Shift Overview
The City’s primary revenue comes from taxes. They are collected from non-residential and residential tax rolls. The ratio of non-residential to residential taxes is around 4:1 (many other municipalities have a lower ratio closer to 3:1 and 2:1). In the past, the powerful real estate in the core subsidized the rest of the city with the amount that they were contributing. This, in part, is how Calgary has maintained the lowest residential taxes in Canada. Through the downturn, 126 properties in the core have lost between 12 and 13 Billion dollars in value. The city is mandated to collect taxes based on the assessed real estate value. Those devalued properties have created a 250-300-Million-dollar shortfall annually. Typically, that non-residential shortfall is transferred across the non-residential tax rolls (approximately 37,000 properties). Those are mostly small businesses, and would be a legitimately crushing increase to face alone. In the last number of years, that hole has been filled by the City finding efficiencies and savings. With those efficiencies found, that hole must be filled by the remaining tax base. The conversation now is, do we spread the hurt across just those business tax rolls, or do we spread it across the entire tax base, including residential. If it were evenly spread across all tax rolls, the average residential annual tax increase would be between $200 and $500. This would still make Calgary the lowest residential taxes in the country.
About half of the City’s operating budget is operations, and the other half is building new things to support growth. The operating side is running very lean, as seen by the hundreds of millions in efficiencies found, in part to the Zero Based Reviews that city departments have undergone. The City still needs to plan for its future, and provide the infrastructure to attract and retain business and investment, which generates tax revenue. Through the downturn, Calgary is still growing, people are still choosing to move here seeking opportunities, and diversification of industries is booming. The capital side is calling four new projects which have been on the major infrastructure list for a long time. Since 2014, we have put $5 billion of capital projects into play, keeping Calgarians employed and building the city of the future that will drive our next economy and be less reliant on our amazing oil and gas sector. One of them is to turn the Stampede into a year round event venue, and that is to double the size of the BMO Centre costing around $500 million. The other of course is to take the Saddledome down and build the next major arena, which is now called an Event Center because of its outward facing focus on events costing around $600 million. We are talking about a historic redux of the Arts Commons/Olympic Plaza and all of that in the heart of our entertainment district. Those three mega projects all anchor our Entertainment District and rationalize the heart of the Green Line as it spreads to the West and into the Southeast. The fourth mega project is the Field House which will be about $300 million. As these two issues seem very different, and often we hear "if you can find 1.5 Billion for building stuff why cant you find money for taxes", the truth is the upfront capital costs of large projects, often with private and other partnerships, earn revenue in the long run as where the tax gap we currently are experiencing shows now massive swing of disappearing anytime soon.