2018 property tax relief: A big win for your business

March 21, 2018

Significant support for Calgary business was announced on March 19, 2018 as City Council approved property tax relief for businesses facing increases due to the re-distributive effect of the 2018 assessment process.

This program – known as the 2018 Municipal Non-Residential Phased Tax Program (PTP) – will cap 2018 municipal business property tax increases to 5%, and is estimated to benefit close to 7,500 business properties and provide $41 million in tax relief.

As a recommendation in the Chamber’s Layered Cost Assessment, along with policy team’s work to assist with the development of the 2017 tax relief program, the 2018 PTP illustrates how the Chamber’s advocacy directly benefits your business.

Here are the details of the tax relief program you should know about.

The core issue

At nearly 30%, Calgary has the highest downtown office vacancy rate of any major global city. The high vacancy rate – spurred by the economic downturn – has resulted in a significant drop in the assessed value of Calgary’s office towers. In fact, the total assessed value of Calgary offices is now $10.5 billion less than in 2015 assessment roll.

To fund the operating budget, the City needs its revenue regardless of a declining business assessment base. The City’s “revenue neutral” process guarantees that the drop in the total tax base (of all property) will coincide with an increase in the tax rate to ensure the same amount of revenue is still collected.

This means that the budget gap that is created by lower business property tax revenues from the downtown core, must be made up elsewhere. This has resulted in the redistribution of taxes from downtown to surrounding business communities such as the Beltline, more suburban business, and industrial locations.

Approximately 6,000 businesses outside the downtown core were set to see their property taxes increase in 2017, some as much as 200%. Fortunately, the City decided to access Calgary’s reserve fund to cap all 2017 municipal business property tax increases at 5%.

The 2018 Municipal Non-Residential Phased Tax Program (PTP)

Total assessed value of offices has continued to drop, amounting to nearly $2.9 billion less than 2017. This continued decline in assessed downtown office values means many suburban businesses are set to see further property tax increases in 2018.

To support business, on March 19, City Council announced it would be capping 2018 municipal business property tax increases to 5% of 2017 levels. This Phased Tax Program (PTP) is estimated to benefit close to 7,500 business properties and provide $41 million in tax relief. On average, the program is expected to provide eligible businesses nearly $5,500 in property tax relief.

Eligibility for the 2018 PTP will be consistent with 2017 requirements. Here are some key things about the relief to be aware of:

• The tax relief will only be applied to the municipal portion of property tax bills.
• The PTP will not provide relief for provincial property taxes, the effect of the business tax consolidation, or increased tax burdens due to physical, or other non-market (e.g., zoning) changes in the property.
• The relief will be applied automatically to eligible business properties so there is no application required.

You can learn more about the details of the tax relief program here.

As a specific recommendation from the Chamber, and building off of the 2017 program we helped develop, the 2018 PTP illustrates how our advocacy directly benefits your business.

Moving forward

Through our consultations with Calgary businesses, one thing has been all too clear – policies from all levels of government are making it harder for them to succeed. And while we appear to be out of the depths of the recession, Calgary’s economy still needs support.

This is clearly illustrated by Statistics Canada’s most recent employment numbers, showing Calgary as having the highest unemployment rate among Canada’s major cities – over two percentage points above the national unemployment rate.

At a time where many government policies – from all levels – layer on costs, the business community welcomes lower relative property tax burdens from the City.

However, this is a long-term issue as business will face the same property tax increases that were mitigated by tax relief in 2017 and 2018, and will face increases in 2019 and beyond, due to continued vacancy rates in the downtown core, and spending increases.

As always, we welcome an opportunity to work with the City to solve this issue and support your business’ continued success.