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City’s ‘rainy day fund’ could cover lost revenue from commercial property appeals

City council is considering using money from a rainy day account to cover nearly $500,000 in property assessment appeal losses from the commercial and industrial sectors instead of raising their taxes.
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City council is considering using money from a rainy day account to cover nearly $500,000 in property assessment appeal losses from the commercial and industrial sectors instead of raising their taxes.

During the May 25 executive committee meeting, council voted 6-1 to set the allowance for appeals of commercial assessed values at five per cent this year and take the money from the accumulated surplus account. Council would then revisit this decision during its discussion on tax policy in 2022.   

Coun. Heather Eby was opposed.  

The recommendation is not official until council approves it at a future regular council meeting, most likely on June 14.

How to cover revenue losses from commercial and industrial assessment appeals was part of a broader discussion about the proposed tax policy for 2021. 

City administration had originally recommended that allowance for assessment appeals for those property classes be set at five per cent and funded from those classes, be revisited annually, and adjusted for expected future appeal losses. The mill rate factors would also be adjusted to make up for the lost revenue. 

Council voted 4-3 against that recommendation, with Mayor Fraser Tolmie and councillors Doug Blanc and Heather Eby in favour and councillors Jamey Logan, Crystal Froese, Dawn Luhning and Kim Robinson opposed.

Assessment appeals 

Since 2017, total lost assessment of commercial appeals has been $31.7 million, which translates into lost municipal revenue of $344,978, a council report explained. However, the municipality — via the Saskatchewan Assessment Management Agency (SAMA) and the Saskatchewan Municipal Board — has successfully appealed several losses, resulting in the city recouping $74.4 million in taxable assessment. 

The appeal allowance was applied to the commercial and industrial property classes in 2017, 2018 and 2019 to make up for the lost revenue. In 2020, though, the accumulated surplus covered the $65,381 in appeal losses. 

The accumulated surplus will cover last year’s $194,000 operating deficit, leaving $1,343,000 in that account to cover the $500,000 in appeals losses, the report said. This would leave about $843,000 in that fund.

City administration’s view

City hall can lose revenue permanently when property owners successfully appeal their assessed values, said finance director Brian Acker. That places the municipality into a deeper problem where it cannot generate enough taxation to operate. 

He added that losing $500,000 in taxation from $29 million in total taxes collected is a significant loss.  

Council discussion 

The original recommendation that city administration suggested will be appropriate when some normalcy returns and businesses and restaurants are back on track, said Luhning. However, she didn’t believe it was proper to put more costs on the commercial and industrial sectors now since council had already assessed a tax increase for this year. 

Eby declined to support the second recommendation, saying council was not making the hard decisions to address this problem. 

“We always seem to find another pile of money to make a decision easier,” she said. “That is a short-term solution, and the more often we do this, the sooner we are not going to have that solution and the sooner we are going to have to make some really hard decisions when the sky falls.”

She also pointed out that taking the money from the accumulated surplus is taking money from taxpayers since that was taxation revenue. 

“I don’t like reducing that surplus because it is our cushion in case of a … disaster,” she added. 

When it rains, it pours

Using the accumulated surplus to cover the appeals losses is the right decision for one more year, Froese said. Meanwhile, it’s great that the municipality eventually wins the appeals assessments at the provincial level, but council will have to solve that ongoing problem.  

“The struggle is real out there right now,” she remarked. “I know things are looking brighter every day, but it’s been very stressful and tumultuous for businesses. We have been very good (fiscal) stewards … . Surpluses and accumulated surpluses are for rainy days. In a pandemic, I don’t know where you get wetter.” 

People often talk about businesses’ ability to pay for increased taxes, but they don’t realize that those increases are usually passed along to tenants or added to grocery costs, said Logan. Right now, many tenants — such as mom and pop shops, candy stores, or nail salons — are struggling due to the pandemic. 

“Is it (using accumulated surplus) perfect in 2021? It’s a rainy day fund. It’s raining. We can revisit this around budget time,” he added. 

The next executive committee meeting is Monday, June 14.  

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