City of Edmonton Commercial Taxes Hit a Pothole

The City of Edmonton will be releasing the mill rates in the next week or so and we’re expecting a non-residential rate over 20.00 (expressed in mills).  We’re basing this prediction on the fact that property assessments have declined from last year yet the City is on a spending bender.  Declining values and increased spending invariably leads to a higher mill rate.

Here is how the mill rate for non-residential properties in Edmonton has changed since 2010:
2016: 19.1256
2010: 15.5588

Over this time, the mill rate for non-residential properties rose 23%.  This increase has been rising alongside property values, amplifying the costs for property owners and businesses.  Combining the inflation in property values with the inflation in the mill rates shows how large of an impact this has been.

Edmonton Non-Residential Tax Rate

In this simple example we assumed property values rose 10% over the past 6 years (a compounded rate of 1.6%), whereas the amount of taxes property owners paid rose 35% (a compounded yearly rate of 5.12%).

Taxes have continued to increase because the City continues to spend and borrow.  While the City hasn’t released its 2016 financial statements yet, the interest and bank charges on the existing debt increased 14.5% year-over-year in 2015.  With the amount of projects the City has committed to, we’re expecting this to have increased in 2016 as well.

To finance the spending in light of declining property values, the choice has been to raise mill rates.  The problem is that the non-residential mill rate is already distressingly high compared to surrounding municipalities.   Companies are often looking to lower expenses, particularly when we’re going through the worst recession in decades.  Will companies in south Edmonton be drawn to Leduc/Nisku or Sherwood Park to save money on taxes?  How attractive will Acheson look to companies in west Edmonton?

This lead us to a bold speculation (which admittedly lacks empirical proof, so take it with a grain of salt):  We think the City has approved all these recent large projects (often against advice from its own planners and fierce opposition from community leagues) primarily because they need the money.  In order to curb the mounting frustration from the commercial sector, the City recognizes the debt problem – and the corresponding interest payments – is only going to worsen.   Approving these projects ultimately allows the City to add to the tax base, and hopefully reduce further upward pressure on the mill rate.

We’re not arguing that any of these projects should or should not have been approved, we simply feel the timing is dubious.  Figuratively speaking, the car has already hit the pothole, we’re now seeing how the driver reacts.


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One thought on “City of Edmonton Commercial Taxes Hit a Pothole

  • I HEARD THE MAYOR SPEAK AT THE FORUM THIS WEEK AND HE WAS ASKED ABOUT THE MILL RATE. GAVE A COMPLETE BS ANSWER ABOUT HOW CITIZENS WANT REC CENTRES, ETC. I THINK CITIZENS WANT REC CENTRES WITHOUT THEIR TAXES RISING WELL BEYOND THE RATE OF INFLATION. GOOD ARTICLE EXPOSING THIS BS.

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