The issue of balancing property taxes is a long-standing challenge for city council – and with municipalities increasingly taking on more services, in the absence of having other tools to raise needed revenue, the debate on who pays and how has become more heated.
Calgary prides itself on being the most entrepreneurial city in Canada – and that’s true in the context of the number of small businesses and start-ups, but we are increasingly hampered by one important fact – we are not competitive in the context of our property tax balance.
We now have the highest non-residential (business) property tax burden – by a fairly significant margin – compared with other major cities, including Edmonton, Vancouver and Toronto, as well as the satellite communities of Airdrie, Okotoks and Rockyview County.
To be fair, it started out as something no one paid attention to. Like so many major cities, when the economy was prosperous, the office towers full and properties values high, life was good and city coffers were full.
Our downtown core saw massive vacancy when the oil price cratered in 2014, and the pandemic hollowed out what was left of it. Our current property tax system splits the total property tax between residents and businesses: 530,000 residents pick up 52 per cent and 15,000 businesses pick up 48 per cent. There are a lot more residents than businesses, so when downtown emptied, other businesses throughout Calgary picked up the tab.
Specifically, retail, restaurants and bars on the main streets and outside the downtown core were now shouldering the burden that downtown office towers were previously responsible for.
That was acceptable for a short stint. Part of being an entrepreneur is accepting some risk that comes with market fluctuations. But next year will mark a decade since our downtown fundamentally changed, and four years since our retail and hospitality industry was decimated by the pandemic. Because of this, and the increasing demand on services, city hall cannot delay the decision to rebalance property taxes in Calgary any further.
Local businesses make up 95 per cent of businesses in Calgary, and 67 per cent of employment. It’s these businesses that are paying the price, and city hall should not jeopardize the well-being of these businesses, and the stability of their employees, to win a few extra votes at the doorsteps. The explanation for not voting in favour of a residential tax hike because there aren’t many small businesses in a particular ward ignores the fact that many in that ward likely work in a small business – their own, or someone else’s in another part of the city.
Here’s how it needs to be viewed. A competitive tax environment attracts investment and supports economic growth. We have seen that in the context of low corporate taxes in Alberta and the same applies in the municipal context.
And yes, a two per cent shift in property taxes will cost residents an extra $7.80 per month. For many, it’s not a small pill to swallow in an era of rising costs everywhere. But it is a small investment to make in our city’s future, the well-being of our local businesses facing the same cost-pressures, and the jobs that employ us and our neighbours. On the flip side, the shift the Calgary Chamber is advocating for means an almost $4,000 annual saving for small businesses – not an insignificant sum of money at a time of rising costs.
There is also the very real possibility of the province stepping in to intervene. The province can intervene in the city’s taxation system if the property tax ratio reaches 1:5 residential to non-residential tax. In 2014, we were at a healthy balance of 1:2.8 – which meant businesses paid 2.8 times as much as residents – which is the Calgary Chamber’s position on where we need to get to. Instead, since 2014, we have steadily ticked up, now projecting to reach 1:4.59 in 2024, just a hairline away from the 1:5 ratio that will allow formal intervention by the province.
There’s a broader conversation to be had at city hall about reducing expenditures – and that deserves airtime, too – but the decision coming in front of city hall is about who in our city picks up the tab. It can no longer be our local businesses.
Deborah Yedlin is the president and CEO of the Calgary Chamber of Commerce.