No Tax Relief for Edmonton’s Commercial & Industrial Property Owners

Commercial and industrial property owners continue to be whipping boy for the City of Edmonton’s out-of-control spending.

City council ratified the tax rates for 2017 last Tuesday but there has barely been any reporting of that news.   The City’s website is still showing the tax rates for 2016 (as of May 2) and their own press release only briefly mentions that the average overall taxes for non-residential properties is increasing 2.9%.  We had to dig into council’s minutes from April 25th to discover the  tax rate proposals passed the required three readings and the non-residential tax rate is rising over the 0.020 mark we predicted a few weeks ago.

Following is an excerpt from the council meeting:

2017nonresidentialtaxrateEdmonton

Look carefully at these numbers.  The City applied the tax rate to an arbitrary $100,000 in 2017 to determine the tax levy but applied the tax rate in 2016 to $105,000.  They aren’t doing any nefarious, it just implicitly takes into account the decline in assessed values.  However, while the amount of taxes the average non-residential owner will pay is rising nearly 3% year-over-year, it only tells half the story.  This increase is based on the fact that assessed values fell on average 5.2% from 2016, which means the mill rate is being applied to lesser amounts.  Leaving the decline of assessed values aside, the mill rate (or tax rate) for 2017 is .0207617, representing an increase of 8.55% from last year.

Why does this matter?  As we wrote about last year, the City of Edmonton had the highest mill rate compared to Calgary, Red Deer and all surrounding municipalities.  What’s interesting, the City cites a report by KPMG from 2014 which claims Edmonton is one of the most tax competitive cities in North America.  While we don’t deny the value of that proposition, any company conducting location analysis and site selection will undoubtedly consider surrounding municipalities, and Edmonton is becoming less attractive with each passing year.  Admittedly there are numerous other factors to account for, but all other things being equal most prudent companies will go to the location that offers the lowest cost.  Acheson, Leduc/Nisku and Sherwood Park each offer lower property taxes and also offer historically lower land prices.

It is our opinion that the City of Edmonton is putting an inequitable burden on commercial and industrial property owners.  Unless a building sits vacant, tax expenses are typically passed onto the businesses that occupy the property.  This includes companies that own and occupy their own buildings and to tenants that have operating expenses (including property taxes) passed through via a common clause in their leases.   Therefore, it is the companies conducting business in Edmonton that are incurring the brunt of these continuously rising property taxes.  These increases, combined with the provincial recession, new carbon taxes, increased provincial and federal corporate taxes and rising minimum wages are compounding the challenges of operating a business in Edmonton.

As property taxes continue to increase, the ratio of non-residential taxes to residential taxes has increased alongside it, with the most recent ratio equating to 2.44.  Stated another way, a $500,000 home owner will pay $4,254.35 in taxes this year.  A $500,000 commercial property owner will pay $10,380.85.

If you have read any of our previous posts, you’ll know we are proud Edmontonians.  We love this City and believe unequivocally that we are a better city now then we were 5, 10 or 25 years ago.  Our concern is that civic spending is spiraling out of control and consequently the tax base (particularly commercial and industrial property owners) is bearing the burden of the City’s fiscal irresponsibility.  We’re all for a better city, just not at the expense of tax payers.

The most recent report from KPMG (2016) shows Edmonton has now fallen behind Winnipeg and Saskatoon in tax competitiveness.  It’s likely not surprising, but it is disappointing nonetheless.

Tax notices will be mailed out May 23rd and the deadline to pay is June 30th.

 

 

 


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