What to do with $24M? Calgary council ponders plan for 2017 'tax room'
Province collecting less money from property taxes for education than anticipated
City council is set to make a decision at Monday's council meeting which will not only affect property tax bills this year, but potentially next year's as well.
It turns out the province will be taking less of Calgary's property tax revenue to fund education this year than anticipated — leaving about $23.7 million of what's known as "tax room" on the table.
City manager Jeff Fielding says it's council's decision whether or not to "move into" that tax room and collect the funds itself, but he can understand — given the state of the economy — why elected officials might be leery of doing it.
"Administratively, we might like to be able to use that for future years," Fielding said of the funds which, if taken, would be baked into the city's base operating budget.
"But you know, I totally understand from the perspective of where the public is today and what their expectation around taxes is."
Reserve funds
City council has already approved an effective tax freeze in the current year by using a one-time, $22.5-million draw from city reserve funds to offset what would have otherwise been a small increase.
But if council were to move into the tax room, it would boost the city's total tax haul and thereby eliminate the ability to say municipal taxes have been effectively frozen this year.
Some city councillors have expressed a desire to maintain a tax freeze this year, saying taxpayers need a break, given the economic downturn.
There is also a municipal election in October.
'Times are tough'
Mayor Naheed Nenshi said Monday it would amount to about a dollar per month more for the average homeowner's tax bills if the city moved into the tax room, but said he's "not particularly keen" on doing so unless council came up with a "good idea" of what it would use the money for.
"Times are tough and even a dollar a month might make a difference to people," Nenshi said.
One idea the mayor said he might support is using this year's tax room to mitigate any increases to next year's tax bills.
Possible hit in 2018
Since the $22.5-million draw from reserves is for 2017 only, the effective tax freeze is not permanent.
The associated increase in the city's base operating budget would be noticed on 2018 property tax bills, along with any other increases, which could add up to a hefty year-over-year total.
Assuming the city doesn't move into the tax room, Fielding said the city would need to find about $170 million in savings to maintain a tax freeze in 2018.
He said he is already making plans toward that goal.