The tax gap between residential and commercial properties will shrink again this year, with residential taxpayers shouldering slightly more of the financial burden.
City council approved a municipal tax increase of 2.96 per cent during its December budget meeting. This was expected to generate $880,730 in taxes, with $687,299 coming from residential and commercial paying $193,431.
A report about the proposed tax policy that city administration presented during the recent executive committee meeting explained that city hall completed an analysis for this year showing the effect of sharing the tax increase, based upon the percentage of taxable assessment of both property classes.
By having both classes share the tax increase, it would be split so that residential sees an increase equal to 3.50 per cent and commercial sees an increase of 1.91 per cent, before adjustments are made for the 2021 commercial appeal allowance.
“What we have done since 2018 is allocate that (tax increase) based on overall assessment, rather than how we divvied up the assessment with mill rate factors,” finance director Brian Acker said during a recent executive committee meeting.
If a residential property assessed at $200,000 is currently paying X dollars, then a commercial property assessed at the same value would pay 2.30 times that amount, he pointed out. But by sharing the tax increase, that tax gap would shrink to 1.88 times.
This change is mainly due to the provincial government changing percentages of value for commercial properties to 85 per cent from 100 per cent, Acker added. This means 85 per cent of those properties’ values are assessed compared to the full 100 per cent.
The tax gap in 2017 was 2.59, while it will be 1.88 this year, said Coun. Heather Eby. She thought that the good work of council and city administration contributed to that number shrinking.
“(I’m) just really happy to see that. Hopefully, we can keep narrowing that gap,” she added.
If the provincial government had not changed the assessed value of commercial properties, then the tax gap would have declined slightly to 2.20, said Acker.
“That’s the movement that I talked about (with the commercial tax rates chart), trying to get up the food chain a little bit better amongst communities, and in particular, with the City of Regina,” said Coun. Dawn Luhning.
“The smaller we can make that gap, that will help us crawl up that chart. Hopefully, we can see it be bigger in the future than 0.1, but it’s better than going the other way.”
Council then unanimously approved a recommendation that the 2021 municipal tax increase be shared between the residential and commercial and industrial property classes based on the percentage of taxable assessment values in each class. Moreover, the split would be accomplished by adjusting the appropriate mill rate factors for each property class.
The recommendation will become official when council approves it at a future meeting, likely on Monday, June 14, during the regular meeting.