The layered costs of government policies and how they impact your business
December 14, 2017
The City’s Budget
The City of Calgary’s budget process includes a four-year budget cycle, setting the direction for the City’s operational and capital spending. Using the four-year budget as a guide, City staff bring forward annual budget adjustments for Council to review and approve each November. Proposed adjustments typically include changes to property tax rates, along with capital and operational spending estimates. We are currently in the final year of the four-year plan, meaning the City is making adjustments on a budget that was initially approved in 2014.
The adjustments that have been proposed for the 2018 budget that impact the Calgary business community include:
- $170 million savings in the operating budget
- A 0% municipal tax increase for property owners in 2018. The original four-year budget scheduled a 4.7% property tax increase
- Allocating $23.7 million to fund Green Line financing costs
- Cost savings in all City departments, including the removal of 156 full-time equivalent positions
Calgary’s business community applauds the City for seeking cost savings through program and department efficiencies.
Despite the 0% tax rate increase for 2018, taxpayers will still see an average 2.9% increase on the municipal portion of their property tax bill. This is because the one-time rebates approved by City council that sheltered taxpayers from a 2.9% rate increase in 2017, must be paid in 2018.
Property Tax Assessments
As we saw last year, the drop in assessed value in the downtown core had a significant impact on the property tax bills of business property owners throughout the rest of the City. This occurred because of the revenue neutral tax process used by the City to ensure revenues do not change automatically with assessment changes caused by market fluctuations. Thus, the loss revenues from the downtown core had to be offset by greater revenue from surrounding areas.
To address the large property tax bills faced by many small and medium-sized Calgary businesses, the City chose to access Calgary’s reserve fund to cap non-residential property tax increases at 5%. Without this tax relief, some businesses were facing a 200% tax increase.
Given the continued high downtown office vacancy rate, it is likely that the non-residential assessments on properties outside downtown will once again be facing significant tax increases. While not a sustainable long-term solution, we urge City Council to extend the Municipal Non-Residential Phased Tax Program, capping business property tax increases at 5% in 2018. Throughout 2018, we urge the City to address the issues with Calgary’s property tax model to mitigate large swings in property assessments, along with balancing the distribution between residential and non-residential property taxpayers.
The Chamber’s Advocacy Going Forward
Building off the work done in our 2017 Municipal Election campaign, A Calgary that Works, we look forward to working with City Council in 2018 to build a more efficient, equitable, and entrepreneurial city for business. Specifically, we will be advocating the City to identify and address areas where inefficient program delivery is resulting in greater spending, where onerous regulations are barriers to business growth, and where there are gaps in policy that is impeding innovative businesses form starting up in Calgary.