SUNDRE – Local business owners, including several members of the municipal council, can anticipate a bigger bump in their tax bill than town residents this year.
Economic growth in Sundre as indicated by an increase of new commercial builds prompted the municipality to revise in the 2024 tax rate bylaw the residential to non-residential tax ratio, thereby effectively slightly shifting the tax burden away from homeowners and toward business owners.
The decision came by way of motion during a recent meeting following a lengthy debate whereby council discussed seven options presented by administration. All members were present although Coun. Chris Vardas joined remotely by phone.
“The methodology for establishing the tax rate and the tax rate bylaw is set out by the province in the MGA and it’s based on the idea that those with higher property values have more of an ability to support the system with higher taxes,” Chris Albert, director of corporate services, told council during a preamble to outline administration’s recommendation along with alternate options.
Providing background information, Albert said total residential assessment values had increased by 6.88 per cent.
“This is a combination of a few new homes, but it is mostly an increase of market value on existing homes,” he said.
Meanwhile, the non-residential assessment values actually decreased by 2.24 per cent, he said.
“That is despite some new construction that we did have,” he said.
Overall, the municipality’s residential total assessments increased to roughly $341 million from about $320 million, while non-residential went down to $94.5 million from $96.7 million, he said.
Albert also reminded council the municipality’s 2024 budget had been approved prior to the new year following an extensive discussion with the understanding that there would be a 5.58 per cent increase in the total amount needed to collect through taxes to ensure there’s enough funding being set aside for capital projects in the future.
“Not only replacing aging infrastructure, but continue building the additional amenities that residents want,” he said.
Presenting the options before council, Albert explained that his example calculations were for a hypothetical $400,000 home and a business valued at $1 million, both of which increased in assessed value by five per cent.
He also clarified that his calculations pertained specifically to the municipality’s portion of the tax bill and did not include the additional requisitions for the Alberta School Foundation Fund (ASFF) and Mountain View Seniors’ Housing (MVSH).
The first option, and the one recommended by administration, was to set the residential mill rate at 7.6529 and non-residential mill rate at 11.5942 with a revised residential and non-residential ratio of 1.515 to 1, up from 1.475655 to 1. The MGA mandates a maximum ratio of 5:1.
“So we are well below that ratio, and I would not even recommend coming close to that maximum ratio at this point in time,” said Albert. “The reason for the recommendation to increase that ratio slightly, is actually it recognizes the use of after income tax dollars for residential properties. Business properties have the advantage of utilizing before tax dollars.”
With this approach, the hypothetical home’s tax bill would increase by $175 for the town’s portion for the year, while the aforementioned business would see its tax bill increase by $960 for the year, he said.
The second option was to set the mill rates based on the approved budget but using the existing ratio.
That would translate for the same residential property into a $200 increase for the year, while the non-residential tax bill would increase by $730, he said.
The third option was for council to set its own rate based on the approved budget using any other different ratio determined by consensus.
The fourth option was to maintain this year’s mill rates at the 2023 levels, which Albert cautioned comes with the associated risk of ending up $53,000 deficient in covering the approved budget. In this scenario, the owner of the example home would see their tax bill increase by $150, while the non-residential property would increase $560.
The fifth option involved transferring funds from a restricted surplus account or a stabilization fund to reduce the cash required for this tax year, which presents the risk of a compounding negative effect on property owners down the road, he said.
The sixth option was essentially to revise the budget itself to reduce the amount required from taxation this year.
That could mean reducing previously approved amounts allocated for restricted surplus accounts. However, as the budget has already been “approved based on levels of service, capital requirements and of course council’s deliberations,” such an approach “would also create uncertainty both now and going forward as to the stability of the budget,” he said.
The seventh and final option was for council to set its own rates, which Albert cautioned against as not only risky but also not being in line with the MGA’s guiding principles.
Coun. Jaime Marr asked if there might be any other revenue-generating options available to the municipality. Having read over the MGA, Marr asked about sections pertaining to special taxes.
“Are there any options for extra revenue generation that we haven’t considered?” she said.
“We have considered every revenue option that either A) we currently have available to us or B) that we have seen other municipalities use,” said Albert, adding the sections Marr referred to have specific criteria.
“We do have other options for taxes, but they’re usually project-specific,” said Nelson, referring to a local improvement tax.
“And that is done by petition,” she added.
Coun. Paul Isaac, a business owner, said he was surprised by how many options were presented, and suggested narrowing down the choices to a short list.
After outlining his reasons why, Isaac said he was left between options 1 and 2.
Marr agreed, as did Coun. Connie Anderson.
“If we go with (option) 1, we can work on our streets more,” said Anderson. “And we’ve got a lot of streets that need to be redone and fixed and services that need to be fixed, because we’re going to have a major problem if we don’t.”
Vardas was also against dipping into restricted surpluses and supported his colleagues’ position favouring either options 1 or 2.
However, mayor Richard Warnock invited his colleagues to consider the fourth option, which would amount to holding the line on taxes at 2023 rates.
While the mayor said he would not entertain that option if the ensuing deficit was in the hundreds of thousands of dollars, he felt the $53,000 shortfall was an acceptable risk and that the amount could be found in operating cost efficiencies.
“Historically, we always do have additional labour dollars not used at the end of the year, so it should be quite easy for administration to find those funds, theoretically,” suggested Coun. Todd Dalke.
Coun. Owen Petersen spoke in favour of introducing the new tax ratio.
“I know that this shifts a bit of the tax burden onto business,” said Petersen, adding businesses will most likely pass that increase along to their customers by charging more.
“I like that, because it empowers the consumers to then be able to choose where they’re spending their money,” he said.
Marr also felt the time had come to increase the ratio, and Vardas agreed.
“I’m a business owner as well,” said Vardas. “More businesses are coming into our community, and we can’t always put it on the residents’ back all the time.
So levelling out a little bit the ratio, I’m in favour.”
Anderson, who also owns a business, said the new ratio “is going to cost me a fair amount of money. But I think it has to be done, (and) it has to be done now because if we wait, it’s just going to get worse.”
When asked how long the previous ratio had been in place, Albert could not specifically say when it was adopted but added it has been the same since at least 2017.
Drawing from his past experience on previous terms of council, Isaac expressed a reluctance to maintain the 2024 mill rates at least year’s levels.
“I really shy away from having a tax rate that shows a deficit,” he said.
Dalke, also a business owner, was favourable toward the new ratio.
“As we get more commercial or non-residential earnings through the town, the intent is to lower the impact on the residents,” he said.
However, Dalke preferred holding the line on the mill rates.
Following further discussion, the second reading for the mill rate bylaw using the first option passed by only one vote with Marr, Isaac, Anderson and Vardas in favour while Petersen, Dalke and Warnock were opposed.
After momentarily hesitating, Dalke then joined his council colleagues in giving unanimous consent for third and final reading, which then went on to pass with his lone dissenting vote.
The 2024 residential and farmland mill rate is 7.6529, while non-residential as well as machinery and equipment is 11.5942.
That does not include the ASFF requisition, which for residential and farmland is set at a mill rate of 2.4535 while the non-residential rate is 3.9367, or the MVSH requisition, set at 0.3851 across the board.
