by Colin Smith
Municipal officials are looking at developing a long-term tax strategy to ensure Morinville’s finances are sustainable and provide residents with predictability.
In April, Council directed Administration to move ahead with development of a long-term tax strategy, prior to the 2019 budget.
The Administration has come back with a “roadmap” towards a strategy, which Council discussed Sept. 18 at a committee of the whole meeting.
The document indicates major issues to be considered, foremost whether Morinville should move to a policy of split tax rates for residential and non-residential property.
The Town’s current policy of charging the same mill rate for both types of property is unusual for Alberta municipalities, which generally charge a considerably higher rate for non-residential.
Morinville has the second-lowest rate for non-residential property among thirteen regional municipalities, while it has the third-highest rate for residential property.
The administration analysis sees splitting the rates, resulting in higher tax payments for non-residential property owners, as key to sustainable finances for Morinville, which is facing financial challenges including inflation growth, service demands and particularly the multipurpose recreation facility project.
Another taxation strategy to be considered is different assessment classes for small and large businesses, allowing them to be taxed at different rates, which is now allowed by the Municipal Government Act.
Establishing short, mid, and long-term incremental tax increases to meet budgetary requirements is a further aspect to be examined.
“Up until now, there has been no long-term tax strategy, and Council after Council has just carried forward the practice of equal tax rates,” commented Mayor Barry Turner following the meeting. “This has been informally referred to as a strategy to attract and retain commercial and industrial development.”
Turner pointed out that splitting tax rates is a complex issue. Questions include whether lower non-residential property rates do attract business development, and what effect raising them would have on Morinville’s economic development program.
Other considerations are what the target tax ratio should be, whether the non-residential rates should be split to reduce the impact on small business, and how long a transition period is needed to give business a chance to adapt, according to the mayor.
“If the plan is to maintain rates and attract business, residents need to know what that costs and whether or not they are prepared to invest in this plan,” he said. “If the plan is to split rates, the business community will need to know the potential impact, and what the planned target split may be so they can make any business decisions required to adjust.”
Turner said public engagement on the issue would be needed so Council can determine whether or not the community as a whole would support this change, with both residents and businesses to be consulted.
“The point is that even if Council does decide to split rates, there are many more questions to answer, and it should not be done quickly as we need to get the answers right, and keep Morinville’s long-term interests in mind.”
Further discussion of the long-term tax strategy will take place at the October 9 regular Council meeting.
The Administration “road map” presented to council notes that municipalities historically have gone through intense and difficult budget processes each year to set tax rates to fund expenditures.
“This practice rarely results in municipalities achieving the revenue levels they require,” it states. “Further complicating the issue, the budget process is publicly and politically challenging for both administrations and municipal councils. This can result in making short-sighted decisions that are not in the best interests of the municipality’s long-term sustainability.
“A long-term tax strategy and implementation plan forces the municipality to think about its best interests in the long term, prompting better decisions that create a foundation for sustainability.”
The document envisions full implementation of the long-term tax strategy for the 2020 budget.