As the City of Edmonton continues its goal of expansion in the city, while experiencing a smaller growth in tax base in recent years, it has been working to cut costs by freezing wages and looking for inefficiencies, but one way it has been getting extra income is to raise property taxes to what some say are now unbearable amounts.
Residential property taxes have increased 70% over the past 10 years, while businesses have seen their property taxes more than double in the past four years alone.
Edmonton’s tax take increased by 35% in the last five years, to $1.5 billion in 2017 from $1.1 billion in 2013, and a 3.6% increase was just announced by the City in November.
The biggest tax driver was the City’s growth agenda, namely medium-sized projects such as recreation centres, roadway interchanges, park upgrades and fire halls. Each of those isn’t just a one-time construction expense, it also adds significant ongoing staff and maintenance costs.
The total value of property in Edmonton grew by $28 million in 2017, which increases the tax base. But that’s a fraction of the growth Edmonton was seeing several years ago, when numbers between $40 million and $45 million were common, said the City’s chief financial officer Todd Burge.
“Businesses and tenants can’t afford the burdens of these types of cost increases, it’s not sustainable continuing on to increase at that rate,” says a frustrated Cameron Naqvi, Executive VP of Cameron Development Corporation. “Think if you doubled the amount of residential property taxes, what would happen? It’s not sustainable or practical. I understand they need to maybe increase their operating costs, but they can’t burden the private sector like this.”
It is common for businesses to pay more in property taxes than homeowners. Since Edmonton has so many more residential properties than business properties, the smaller number of businesses end up with much higher bills. In 2017, they paid a property tax rate 2.8 times what homeowners paid.
However, in addition to the increase in property tax, business owners have also had the added burden of the carbon tax and the minimum wage increase, which is getting to be too heavy a load to bear for some.
In fact, the city’s property tax rate was the top concern in a survey Leger Marketing released in late 2017. Thirty-four per cent of the 500 voters contacted picked "reducing the tax burden" as a key focus for the next term.
The increases have many retailers making moves to lower their operating costs, like cutting staff. Businesses such as the Ford Parts Warehouse and Distribution centre for Western Canada are moving outside the city. Ford announced in March 2017 that after months of negotiations, they were moving their facility to the city of Leduc into a new 400,000 square foot facility and a considerable tax savings.
Meanwhile, just like retailers, property owners and managers need to pass on their added business costs as well. “I know one commercial property owner who has seen the property taxes for their industrial portfolio going up from 11% to 32% in a down market, that’s a huge increase for tenants,” says Naqvi. “Usually we would go outside of downtown and look at possibly raising the costs of space in the suburbs, but right now they’re not doing any better either.”
Tax rate increases are not a problem that is limited to the business in any one part of the city, such as the downtown. Naqvi adds there are major flaws in the assessments that have some of their chain retailers in the downtown paying less property taxes than their suburban locations, “which doesn’t make any sense.” But as the population continues to move from the downtown core to the newer homes at the edges of the city, the benefits of operating a business out in those areas decreases.
In December, the Edmonton Chamber of Commerce urged the City to drop the tax to at least 3%.
Soon after making that request, the city's chief financial officer told council the city has an unprojected $7.7 million in savings to work with, coming from the provincial government approving a one-per-cent decrease in the amount the city contributes to employee pension plans. With that savings, the property tax increase could be limited to 3.1 per cent.