Calgary's next council faces big, difficult property tax decisions

There are a lot of easy political slogans when it comes to property taxes: cut them, freeze them, charge rich people more, charge them less. But there are few easy answers.

And any changes that do become law almost always carry unintended consequences. 

The next mayor and city council are going to have to grapple with complicated, divisive issues that strike Calgarians right where they live. 

So … let's take a look.

One thing Calgarians often want to know is: are property taxes in Calgary on par with other cities?

But comparing the tax rates between jurisdictions is difficult, and bringing in the various fees and fines collected by each jurisdiction muddies the water further. 

Bruce Foster, a tax consultant in B.C. who has done some work for the City of Calgary on non-residential tax incentives, says it's possible to compare jurisdictions — as long as you do a lot of work. 

"It is the easiest thing in the world to pull tax rates from the major cities, say across the country, and say, 'oh, look how cheap things are in Vancouver versus Calgary versus Toronto,'" he said. "But it is tremendously misleading."

So as Calgarians prepare to head to the polls on Oct. 18, it's worth asking where Calgary stands now, what challenges it faces, what can be done.

Comparisons are difficult

First off, taxes aren't going anywhere, and despite some of the rage directed at property taxes from time to time, they are an effective way for cities to raise funds. 

Bev Dahlby, an economics professor at the University of Calgary and research fellow at the School of Public Policy, says taxing land remains a good option for cities, particularly given the other taxes levied by other levels of government. 

Land, he says, doesn't move based on tax differentials. Companies are a bit more mobile. 

"It's important for the municipalities to have a property tax source, so that there's a link between the taxes people pay and the services that they receive," he said. 

Calgary is fairly low when comparing residential property tax rates across Canada, and is slightly below average on non-residential rates, according to the 2020 benchmarking report by commercial real estate advisory company Altus Group.

However, how that tax rate is spread around continues to be one of Calgary's hot debates.

The median house price in the city is $445,000. Using the City of Calgary's online property tax calculator, the resulting tax bill is $3,293. 

For a business, that same assessment would be $9,170.

That, of course, is just the property tax. The city also collects a wide array of taxes, fees and fines that can make the true cost of owning real estate more complex.

And then there is one of the more controversial changes in Calgary taxation: the shift of the burden chiefly from the previously wealthy downtown tower block businesses to the everyday homeowner. 

In 2001, according to the City of Calgary, businesses were paying 62 per cent of the property taxes, compared with 38 per cent for homeowners. This year, homeowners are paying 52 per cent of the tax bill.

The next council is going to have to sit and take a look at these numbers and make some decisions. 

Not just about tax rates, but about what taxpayers get for the cash.

Downloading obligations

Foster says you can't really talk about taxes, or comparing taxes to other areas, without also comparing the various services they fund in each jurisdiction.

He says communication is critical to property taxes and any changes that could be introduced. People have to understand where the money is spent and why. 

Local context is important. And showing that context in relation to what other levels of government pay for is also important.

Foster said that when he looked into Calgary a couple of years ago, there were about 61 services funded partially or fully through property taxes.

"So the property tax was not intended to do that," he said. "It wasn't intended to start funding social services, or environmental protections and all of the other things that have come along."

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A lot of those services were, particularly over the past 20 years, downloaded onto cities by provincial and federal governments that were trying to rein in their own spending, says Foster. 

The next council could choose to try to renegotiate various agreements, and try to find some additional revenue or relief.

Also, council will have to think about what Calgarians fund with their property tax that benefits others.

For a regional centre like Calgary, there are questions about the degree to which city taxes pay for infrastructure that's relied upon by outlying municipalities — communities that are sometimes in direct competition with Calgary for businesses and growth. 

Roads, the airport, libraries and more all contribute to the greater Calgary region, but costs often fall to the city itself.

So what can be done?

Recommendations and changes

Downtown businesses in Calgary got slammed after the oil crash. The value of downtown towers cratered and so, too, did the taxes they paid out, so businesses outside the core were hit with tax increases.

To help alleviate that burden, the city brought in a program that paid relief to businesses. 

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Some got some much needed help. Others who were doing just fine got some extra cash. 

It also pushed the tax burden down the road, with increases every year and relief paid out by the city to match. 

But the city has tried to look at the future of taxation.

It enlisted a task force of experts to help it understand what could be done. 

That task force came out with a whole slew of recommendations, including more transparency and consistency for taxpayers.

But it also suggested options, beyond simple tax rate increases, including regulatory charges on telecommunication infrastructure, advertisement charges for billboards and the like, licensing charges, user fees for more services, memberships for things like golf courses, tourist taxes and better revenue sharing through a fund collected during good years by the province. 

It also suggested Calgary has to be nimble to address rapidly changing economic conditions and ensure it isn't losing too much of its tax base while the world changes. 

There are lots of options for the next council to debate.

The city has already brought in some changes that aren't directly tied to taxes but that could have a profound effect on the city's tax base if successful. 

For example, the $1-billion downtown plan, grants through the Opportunity Calgary Investment Fund for tech companies and more.  

And there are other options our next council could consider.

Something like Vancouver's vacant property tax rate. Or progressive property taxation that would charge a higher rate on wealthy homes, or a cap on assessments, or a tax freeze for years at a time.

But changes bring consequences.

A vision for the future

Bev Dahlby, at the University of Calgary, favours a cautious tinkering with the current tax system and city revenue streams. 

He suggests there may still be room to tax more at the local level — perhaps such things as fees tied to car registrations, and fees that could perhaps support local and regional vehicle infrastructure.

But whenever a municipality changes the way it collects taxes, it sets off a chain of reactions. 

Business tax relief means the burden has to go somewhere else. Higher property taxes for homeowners puts pressure on individuals. Higher taxes lead to talk of cutting services. All of it can become flashpoints.

Foster says that while these kinds of conversations are critical, at their core they require hard conversations about where a city is going and why.

"I guess if we are looking to politicians to really step up and lead, we'd say, 'What are their priorities?' Then say, 'Where's their community going? Where's their city or jurisdiction going?' So that we don't start introducing sort of knee-jerk reaction or ideas like freezing tax rates," he said.

"Maybe we want to start thinking a little more strategically about where's our city going?"