Deadline for setting tax rates hangs over Calgary city council

City administrators laid out a variety of options for city council on Tuesday for how to deal with large tax increases on business properties outside the core.

Cutting spending. Boosting residential property taxes. Selling off land and other assets. Reaching into reserves to offer rebates.

While there are a number of scenarios, city council's time to decide what should happen on the 2019 property tax bills is running out. 

It wants to finalize the 2019 property tax rates on April 1.

The fact that downtown property values remain depressed — resulting in major increases in property taxes for non-residential properties outside the core — is at the heart of the problem.

And nobody knows how much longer that situation will last.

Near the end of another marathon meeting over two days, council members voted on Tuesday to have administrators do more work and come back to them on April 1 with recommendations.

Tax shift

In each of the last two years, city council voted to use $40 million in savings to give business property owners a rebate, which limited tax hikes to no more than five per cent.

However, not all of that money was actually spent and there are concerns it didn't really help many business owners who didn't benefit from rent cuts from their landlords.

Council is weighing another year of assistance, but there's also a movement to shift some of the non-residential tax burden over to residential accounts.

In one scenario, the owner of a median-priced house worth $485,000 could see their tax bill jump from $1,940 this year to over $2,440 in four years. 

Maybe it won't be businesses getting rebates

Coun. Jyoti Gondek is pushing a proposal to give rebates to homeowners instead of business property owners over that time to buffer them from any large increases.

She wants to move to homeowners and business property owners each paying 50 per cent of the taxes that the city needs. Currently, residential accounts pay about 45 per cent.

At the end of the program, she agrees homeowners would see higher taxes in order to ensure businesses can be viable.

"We just need to tell homeowners that if we make this shift, you will pay more in residential property taxes," said Gondek.

However, if doing nothing to stem the tax hikes results in the neighbourhood doctor's office, drugstore, coffee shop or grocery store closing, she said that will only add to the city's problems and affect people's quality of life.

"This is super complex. It will not be an easy decision."

Rebates and cuts

Coun. Shane Keating agrees it's time to shift more of the tax burden over to homeowners, but not without easing that shift.

"I do like the possibility of a rebate to the residential component because we know it goes directly to those who are paying the taxes," said Keating.

Coun. Evan Woolley also agrees there needs to be a shift from business properties to residential ones. 

He's proposing tax rebates for homeowners as the tax burden shifts. But he also wants the city to find another $100 million in spending cuts so it doesn't require as much money in taxes.

But Woolley is already worried that council may not deal with a longer-term structural fix on April 1, instead opting for another one-year fix and keep talking about a longer-term fix.

"Time is of the essence," Woolley told council. "I think that we need to have a thoughtful conversation about what a structural change over this budget cycle looks like."

Big decision

At times, the pressure council is under was apparent.

During the debate, Coun. Gian-Carlo Carra took a shot a Woolley for issuing a news release last week about his proposal for a tax shift, spending cuts and offering a rebate to homeowners.

Several councillors have been involved in a series of private meetings to work on alternate proposals.

"You can go off and you can craft a notice of motion and you can do a press release or you can sit down with the rest of us and work through it like we've all been doing, right? And so, chill out a little bit with the outrage," said Carra to his colleague.

Solution could be a blend

After the debate, Mayor Naheed Nenshi told reporters he believes there needs to be a multi-pronged approach to the problem. 

"I'm not going to homeowners and saying, 'You pay another $500 and that will solve the problem,' period."

He expects it will be a combination of shifting some taxes to residential accounts, finding more efficiencies at city hall and reaching into savings to help blunt the size of the tax hikes.

"We've got to be thoughtful about how we do this," said the mayor.

In last November's budget, council approved a property tax hike of 3.45 per cent for homeowners and just over one per cent for business property owners.

However, the shift in the tax burden from downtown properties to those outside the core means there are nearly 7,800 non-residential accounts facing tax hikes of more than 10 per cent.

The city also hasn't heard from the provincial government on how much education property tax it wants for 2019. A provincial budget has not been introduced and on Tuesday, Premier Rachel Notley called an election for April 16.