Realty Glimpse 42

Rory Tarant
Former City Counsellor
City of Grande Prairie

 

 

Mark – We’re talking about taxes – what are property taxes used for?

Rory – The property taxes are used for for all the cities operations, everything from our police, to our fighter service, to our parks, recreation, you name it, all the municipal services that you see, a lot of it goes into our capital projects, the road projects, the facilities that are built, and that’s the municipal portion of our property taxes.  You will notice when you get your property tax bill that there is an education component, and that’s charged by the province, and the city collects it on their behalf and remits it to them and that goes toward paying for the education system within the province, and then you also see a small bit that’s for the Grande Spirit Foundation, and it goes towards paying for some of the senior homes and social housing in the areas.

Mark – I followed a post, and it was about our property taxes, and how our taxes in Grande Prairie are so high compared to other cities, it said number one or number two, it was way up high, and he was disgruntled because he said that’s too much taxes, so why is Grande Prairie taxes, it seems, so heavily compatibly?

Rory – You’re right, Grande Prairie is usually the second in theprovince, only second to St. Albert.  They have the highest property taxes; we’re number two.  So there’s a lot of different reasons when you study why we are high compared to other cities across the province, you can look at everything from the northern climate, and the different challenges it brings there…

Mark – like clearing roads, and repairing them…

Rory – yes, exactly, and some of the capital budgets that are required for northern… there is a bit of a difference there, there’s economies of scale, you can look at.  So obviously the bigger centres, like Calgary and Edmonton, are able to deliver services just a little more efficiently, because they have those economy of scale.  There’s other factors, Medicine Hat owns their own gas plant, so there’s revenue generated from there, so that offsets some of their taxes, so there’s lots of different variances, but the number one things, when you look at all the different variables across the province, the one thing that’s common is when you look at the ratio between non-residentialand residential taxes.  Non-residential being all your business, commercial, industrial taxes, and generally, as you look at across the province, the areas that have a higher more reliance on the industrial tax base, or they have a greater assessment base that’s industrial or commercial, tend to have lower residential taxes, because they offset [them].

Mark – because the industrial and commercial may not be as much to service…

Rory – exactly, and when you think of a pipe lay-down yard just out of city limits, what’s required for municipal servicing is quite limited compare to high density residential development.  And that’s the trend line, when you look across the province, those that have a greater industrial, commercial, tax base within their city, have lower taxes, and that’s one common variable, like I said, there’s lots of others.

Obviously, people always look at spending.  [They say], well if you have the highest property taxes, you must be spending more than anyone else.  But when you look across the province, and there’s lot of different ways you can slice it, but the general one that give you somewhat of an idea is looking at a per capita basis – how much is being spent per person that lives within a municipality, when you look at it that way, Grande Prairie is right in the middle.   There’s certain areas, [like] we spend a lot more per capita on community groups, funding to different groups, but things like transit, we spend significantly less than other similar size cities.

Mark – so we’re spending about the same, but we’re still collecting a lot more?

Rory – no, it’s that there is greater reliance on the residentialtaxes [rather than industrial/commercial], and that’s why the residential taxes are higher.  Like I said, there’s lots of other variables that explain it, but our overall spending per capita is right in the middle, smack dab in the middle, almost perfectly, compared to other cities across the province.

Mark – so if we had some more commercial and more industrial, that would really help?

Rory – yes, so that’s one [reason].

Mark – we’ve talked about city to city comparison, but being a realtor, I know if someone is looking for a house, especially in the higher price bracket, like $500,000 plus, they haven’t forgot about the County, in fact, there’s a big draw.  And everyone who’s watching will have noticed that on the way into town, they will see that big billboard on the way in from Carriage Lane, that says, city services, but 45% less taxes.  Statistically it’s clear, there’s more houses that sell over $500,000 out in the County, than in Grande Prairie.  So why the big difference between the County and the City, in taxes?

Rory – absolutely, and that’s a question I got all the time when I sat on city counsel, and trying to explain that difference.  Here you are living in the same spot, you should have those other factors, like northern climate, they should all be the same, so why is the tax rate so different?  In my time on counsel, I’ve studied the issue, and I broke it down to 3 main areas that explain that tax differential between the City and the County.  The main one, is getting back to that ratio between residential and non-residential.  The County has significantly more commercial/industrial, particularly the industrial tax base.

Mark – How come that is, especially with that being a consideration that what have been known from other cities – we really want that commercial/industrial, and yet somehow Grande Prairie has been left with a lesser percentage?

Rory – We could spend a long time talking, but in a nut shell, the city didn’t have significant amounts of land to develop for industrial.  We’re fairly hemmed in, and every so often we have to do an annexation to acquire more lands, but in the mean time, when there was growth in the region, particularly starting around 2003, when Aquatera was formed, and waste water and water services were sent into the county, there was a proliferation of industrial developed land, and the County and Clairmont exploded.  If you go anywhere north of town, even out to Sexsmith, out highway 43, going east, going west, there’s all those industrial lands.  And the City just didn’t have that [land] base  to have the big pipe-yards, the big industrial shops, the big energy services and so the City got left behind and that ratio started…  And it’s interesting, looking even further back in history it was the City that used to be the rich one, and it was because all the commercial and industrial activity was in the city.   So it was the county that was always the poor one, struggling.  Now things have changed, they obviously have a significant industrial tax base, so that’s number 1.  So because of that, they’re able to subsidize their residential tax rate, keep that low, because they have that significant industrial tax base.

Mark – So number 1, residential vs commercial/industrial ratio.  What is number 2?

9:32

Rory – Number 2 is another significant revenue source for the county.  It’s called linear assessment, and another category is called Machinery and Equipment.  So these are taxes that are based on your pipelines, transmission lines, your warehouses,your Canfors, big industrial processing plants, those types of things.  And the County receives significant property taxes in this regard.  They have all the pipelines, they have all the transmission lines, the majority of them run through their lands, so they get the property taxes for them.  The City gets some of those too, within the City limits, we get about $2,000,000 a year that is used to help keep residential rates down and pay for services, but the County gets between $20,000,000 and $23,000,000 a year in these taxes.

Mark – so this $2,000,000, as far as its impact on helping us with our roads, or helping us with our museums, the Eastlink Centre, you know, the attractions, it’s not a lot that’s really contributing to that, relative to [the $20,000,000 to $23,000,000 the County gets).

Rory – the County, you have to recognize, have a significant number of roads, bridges, they have the most bridges out of any municipality in the province, those are expensive, and they need to be maintained, and chunk of that Linear Assessment belongs in the County to pay for some of those things.  The question is, should some of it be shared?  Is there some rationale, if you look to the BC Peace; Fort St. John, Chetwynd, Dawson area, what they have is a fair share agreement, where all those industrial taxes are collected on a regional basis, put into one pot, and then divvied out based on per capita, kilometres of roads, and then shared equally among everyone.

Mark – And that’s what you were saying [before the interview], that’s why they can afford things like the Encana Centre.

12:03

Rory – and there have been some movement from some political parties, and some people at the provincial level to try and maybe share that more on an equal footing, and to adjust that portion so it’s shared more regionally, so we’ll see what comes from that.  So that’s number 2, because they have a significant revenue base there, that the City doesn’t have as much of, that helps subsidize their residential taxes.

12:30

Rory, the third… of the big 3, is policing costs.  The City pays about $20,000,000 a year for 100 officers, and the Counties and MD’s of the Province of Alberta are not required to pay for any policing, to the County’s credit, they do pay for several, and that’s above what they’re required, they’re not required any, the province just grants them about 22 officers right now that the province pays for, and so when you look at our costs of $20,000,000 compared to what they’re required to pay, there’s quite a big difference there.  So if the Counties were required to pay at a same level per capita what we pay for policing, that would be another $5,000,000 or $6,000,000 expense to the County, which would have to bump up their taxes

12:34

So when you look at all these things, they might be a small piece here, a small piece here, a small piece here, but you have the City tax rate, the County tax rate, and all of the sudden if they have to pay $5,000,000 more in policing, if they had to share even just a couple million dollars in Linear [taxes], and then even just a portion of industrial taxes were given to us, that would help equalize things more.

So those are the big 3 reasons that the tax rates are [different].