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by Ed Cowley, freelancer
Morinville town council is due to consider a taxation policy on Sept. 13 that targets owners of condos and other multi-family housing units for a higher taxation rate, as well as nailing commercial and industrial businesses by continuing the attack on the business sector started by the previous council.
Taxation has a convoluted equation involving tax categories, tax rate formulas and changing property assessment values. For comparison purposes, residential (single family) is the base 100%, then multi-family residential will be 120% of the base, commercial and industrial will be 150%, and small business commercial will be 127.5% of the base rate when the staged increases are completed over four years. Here’s a comparable dollar impact for the cost that the same assessment values will generate in the municipal tax bill for an assessment that generates $1,000 in the residential category.
Residential $1,000
Multi-family residential $1,200
Commercial and industrial $1,500
Small business commercial $1,275
You may recall that earlier this year, the City of Edmonton politicians chatted about the issue of surcharging property taxes on mansions to bring in additional tax revenue. At least that would have hit the high-income residents in the municipality. Morinville is considering supersizing the tax rate for multi-family homes with low individual unit assessments (and logically, containing lower-income citizens.) If Morinville approves this policy, it would have the owners of modest homes subsidizing the tax rate for the high-assessment homes. That is neither logical nor decent.
If you rent or own a condo, row house, 4-plex, triplex or duplex, it is essential that you contact every councillor and the Mayor now. Although it should be expected that council has sufficient sense to throw the proposed policy out, doing nothing is a high risk. If the policy is approved on Sept. 13, the challenge to get it reversed will be tenfold the effort needed to defeat it. (The town doesn’t make mistakes, so it won’t correct those mistakes without a tsunami of concern from the public).
Yes, renters, you need to contact council even though you don’t directly pay property taxes. The property owner has one source of income for the housing unit you are in—rent. So if taxes rise, your rent will follow.
The continuation of the town’s trend to hike commercial and industrial tax rates eventually reach 50% higher than residential is baffling for a town short of both commercial and industrial assessment. In July, Edmonton Global met with council and presented a list of four assets Morinville has to attract development: Competitive tax rate; Young, growing population; Available commercial space; High household income.
The first asset, as determined by the organization which markets the Edmonton Metro area, is the only real advantage—the low commercial, industrial tax rate. The remaining three can be applied almost universally to all Edmonton metro municipalities. The previous council initiated action which will diminish this advantage, and the current council will continue the self-defeating practice if the new taxation policy is adopted. The rate will still be lower than many metro municipalities but not low enough to offset numerous challenges for businesses and industry locating in Morinville—infrastructure challenges including ease of site access for industrial projects and town red tape increasing costs and creating delays.
The small business tax rate was proposed to council in July as part of the taxation section of the budget principles policy as a benefit to local small business. However, a close look at the tax incentive shows that is an illusion. While presented as a revenue decrease, it is, in fact, a tax rate increase in lockstep with the business and industrial tax rate hikes. The policy proposes increasing commercial and industrial tax rates by 10% more than residential each year until it is 150% of the residential rate. The small business rate is stated as a decrease in revenue, with its final rate to be 85% of the commercial and industrial rates. To reach this 85% mark, qualifying small businesses will see their tax rate set at 3.75% lower than the actual commercial rate. So in 2023, if residential rates increase 0%, commercial rates will increase 10%, and small business rates will go up 6.25%. In documentation presented to council, this small business tax rate is shown as having an impact of the loss of tens of thousands of dollars in tax revenue to the town, despite the reality of the steady increase in the tax bill for small business—it just won’t be as large an increase as industry and commercial property that doesn’t get the small business rate.
The small business category is also a bureaucratic swamp. Will small businesses which don’t pay property taxes on rented or leased property directly to the town (included in rent costs) get any benefit from the reduced rate? Will the landlord or the business be subject to an employee threshold (set randomly by the town) to qualify? Will business owners of a franchise qualify even if the franchise has hundreds of employees across the province? Who will determine the employee threshold, the official count of employees at a business, and whether the business qualifies? In short, it will be a bureaucratic nightmare for businesses and the town’s contracted assessor. Just as the town now requires development permits before issuing building permits or business licenses for projects and businesses properly allowed within the zoning bylaw, small businesses can expect a permit or application fee of some type to get on the discounted tax rate, so any benefit to the business will be less than expected. (It should also be noted that businesses are assessed higher than residential, so their taxes are further inflated by the second variable. For example, a $400,000 assessed home will be much newer or nicer than a $400,000 assessed business property.)
Morinville needs to stop playing games with business taxation rates and start actually promoting business and industrial growth (if that is actually council’s goal). And don’t even think of giving a one-year tax holiday to new commercial or industrial developments. The town has given away thousands of dollars in taxes in the past without public scrutiny to unidentified businesses that would have developed in Morinville regardless. A one-year tax break doesn’t even show up on the criteria of any business evaluating sites. Would you invest even a million dollars developing in a town based upon the promise of a one year’s municipal tax holiday? Oh, they’ll take the money and politicians can stand up and say look at all the development we have attracted by giving away tens of thousands of your tax dollars, but that is a sad charade. Not one shred of documentation has ever been presented to council which shows the tax incentive does anything except bleed existing taxpayers.
When you contact the town leaders, expect some to deny the math above that shows exactly which taxpayers will be the winners and losers through this proposed policy. If they deny the above figures, ask them to show their math. You will get the same degree of spread in the four categories as shown here, or you are being fed false information and need to challenge it. However, I have confidence the six councillors will reject all aspects of the proposed policy if you can get their attention, so they study the policy and its flaws rather than just passing it as something routine.
Thx for all your work Ed.