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Businesses won’t be forced to pay extra to cover shortfall in tax revenues, council decides

Council voted 4-3 against adjusting the mill rate for the commercial and industrial property class to reflect the 2019 commercial appeal losses and the projected 2020 commercial appeal losses

With businesses already hurting due to the pandemic, city council will not force commercial properties to pay extra to cover a shortfall in taxation revenue, and instead, the money will come from the accumulated surplus.  

Every year commercial property owners can appeal their property’s assessed value and, if successful, can have their values reduced. This harms the budget since it leaves a gap in commercial taxation revenues. What council has generally done is shift the tax burden onto other commercial properties so they pay for the loss.

However, that won’t be the case this year.

In a fairly significant vote, during its March 23 executive committee meeting, council voted 4-3 against a recommendation to adjust the mill rate for the commercial and industrial property class to reflect the 2019 commercial appeal losses and the projected 2020 commercial appeal losses.

Councillors Brian Swanson, Crystal Froese, Scott McMann and Dawn Luhning were opposed, while Mayor Fraser Tolmie and councillors Chris Warren and Heather Eby were in favour.

This was a small victory for Swanson who, for the past 12 years, had lobbied against forcing other commercial properties to pay extra when similar properties have their land values reduced.

Besides this recommendation, council voted on several others:

  • That the mill rate factor for agricultural land and non-arable agricultural lands be established so these properties pay the same taxation rate as if they were in the RM of Moose Jaw and that city administration calculate this mill rate factor and include it in the bylaw once the right information is available (unanimous vote)
  • That the 2020 municipal tax increase be shared between residential and commercial property classes based upon the percentage of taxable assessment in each class and that this split be accomplished by adjusting the appropriate mill rate factors for each class of property (unanimous vote)
  • That $337,500 be taken from accumulated surplus to cover the taxation shortfall this year due to commercial property assessment appeal losses (unanimous vote)

All the recommendations will have to be approved during the April 13 regular meeting to become official.

Commercial property losses

It’s absurd to make other commercial properties pay for the loss of revenue from the successful assessment appeals, Swanson said. An increase of 3.30 per cent — composed of the commercial mill rate and surcharges — would have to be placed on the commercial rate this year to cover the losses.

“I don’t agree with doing that. A lot of talk is about the impact of the pandemic. But Moose Jaw’s commercial sector has been under great assault before that. This is only adding insult to injury … ,” he added.

Assessment appeals

There were 361 commercial assessment appeals in the last six years, with most happening since 2017, explained finance director Brian Acker. The municipality agreed to adjust 48 appeals since an error was detected in the assessment. Fifty-seven appeals were sent to the Saskatchewan Municipal Board, while the rest were dismissed or withdrawn.

The net loss in commercial and industrial assessment in 2019 was two per cent, or $12.8 million. While an appeal loss allowance covered that, the municipality was still short $184,000, so that was charged against last year’s municipal tax revenues.

“We are short $337,500 (in total from last year and this year). That would require an overall tax increase of 1.14 per cent on top of the 2.3-per-cent increase you have already approved,” said Acker.

One option is to reduce expenses, said Swanson. Another option is to use money from the accumulated surplus.

Using the accumulated surplus is an option, but only for one year since that lost income will continue forward every year, said Acker. Meanwhile, the budget has already been passed and the year is growing old. It would be difficult to adjust the budget to find this revenue.

There is about $1.7 million in the surplus account.

Community fears

“… This is a situation where I am really quite fearful for the businesses and commercial community in our city right now,” said Froese.

She has spoken with many businesses that have laid off workers and even closed their doors. She didn’t think an extra taxation burden was right. She was thrilled to hear that taxes aren’t due until June 30, which might provide a buffer against the coronavirus’ negative effects.

Moose Jaw faces major issues that other cities don’t, Froese continued. She thought the process was flawed when other commercial properties are burdened with paying more due to successful assessment appeals.

“This is a tough one. These policy issues come to us every year,” said Luhning. She, too, didn’t agree — and never agreed — with taking extra taxation from the entire commercial class.

“In the current state of affairs, we may need that accumulated surplus for something else,” remarked Eby. “This is not a creative solution. I am not in favour of it at all.”

Eby later clarified that she didn’t like using the surplus for one-time issues. Furthermore, she begrudgingly supported the use of that money and still supported the business community — she is a business owner, after all. While she didn’t think using the surplus was the right answer, it was the right answer right now.

Making decisions ‘on the fly’

Defeating the original recommendation before coming up with something else was wrong, said Tolmie. Council learned recently that there are 135 properties in tax arrears this year, compared to 115 last year. He was concerned that council might add another burden on residents.

Tolmie was also unhappy with the process and thought council was making decisions “on the fly” about its accumulated reserve, which might be needed in the long-term.

“The idea that somehow we’re flying by the seat of our pants because we turned down a motion that dumps it all on the remaining commercial owners — I don’t agree with that,” Swanson said. “We should start living within our means … . I think our leadership calls upon us to do something other than just dig deeper into the property tax base of Moose Jaw.”

Surplus is for rainy days

Taking money from the accumulated surplus isn’t the worst thing to do since bigger issues are facing the city, said Luhning. It’s foolish to debate this issue since council will likely have to re-adjust the budget. That could also mean attempting to help businesses, some of which might never open again.

The money there or in other accounts is for rainy-day situations, and right now, it’s pouring, said Froese. Moose Jaw businesses have closed and people have been laid off; nationally, more than 500,000 people have applied for employment insurance. Therefore, alleviating even some pain among community businesses might help a little.

The next executive committee meeting is scheduled for April 13.

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