Varcoe: Calgary businesses see tax share soar, setting table for key council decisions next month

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Here’s a “wake-up” call for city councillors as they head into budget deliberations next month — a new report highlights the disproportionate share of taxes that local businesses are paying on commercial properties in Calgary.

A report released Wednesday by real estate research firm Altus Group finds that among the 11 major Canadian cities it surveyed, Calgary saw the largest increase in the commercial-to-residential property tax ratio in 2023.

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The ratio, which compares the commercial tax rate to the residential tax rate for a similar-valued property, jumped in the city by 9.5 per cent this year, with Calgary “continuing the trend of increasing its rate significantly for the past two years,” according to Altus. Nationally, the average increased by less than one per cent.

“Calgary has been the story for the last couple of years with the highest increases,” said Sandi Prendergast, director of research and tax marketing at Altus.

“Generally, the office market has been struggling and it has pulled down the total value of commercial properties. But the residential market continues to be strong. So that’s why you are seeing a decrease in the tax rate for residential as compared to commercial.”

In other words, the massive erosion in the value of downtown office buildings since 2015 has had a major impact, while local house prices continue to climb.

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Over the past decade, Calgary’s commercial-to-residential ratio has increased 49 per cent, while it has risen by 11 per cent in Edmonton, she noted.

The Calgary ratio this year sits at 3.36 times, meaning a local commercial property owner would pay more than three times the civic taxes of a residential property owner with a similar value. The report found the rate in the 11 cities averaged 2.82.

For business leaders who’ve been pressing the city to rebalance the tax rate to remain more competitive with other centres, it’s more evidence council needs to act during next month’s budget talks.

“This should really be a wake-up call to city councillors,” said Annie Dormuth of the Canadian Federation of Independent Business.

“It’s a report that will highlight, again by a third party, what we need to do to stay competitive,” added Calgary Chamber of Commerce CEO Deborah Yedlin. “You can’t ignore it.”

In February, after a lengthy debate at city hall, councillors voted 8-7 to turn down two options by civic administration that would have reduced the tax load on commercial property owners by redistributing more of the burden onto all homeowners.

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The majority opted to stick with the status quo for 2023.

Mayor Jyoti Gondek, who has supported shifting some of the tax load onto the larger residential base, said the situation continues to deteriorate.

“I have been raising the alarm on this for years,” Gondek said Thursday in an interview. “If we don’t act in November, we are not a competitive city for business.”

The ratio can be a difficult number to sort out, but Michael Evans, president of Atlas Development Corp., paints the picture in different terms.

The local company, which owns a number of commercial properties in Calgary, has seen municipal tax bills on some of them soar by as much as 140 per cent over the past seven years.

One commercial building on 17^th Avenue S.W. — home to a fast-food outlet — saw its property taxes jump 74 per cent since 2016. The levy on another property on Fourth Street S.W. ballooned to $124,000 from $54,000.

“What else has gone up 140 per cent? I don’t get it,” Evans said.

“You can’t just be looking at the commercial component, especially the inner city and Beltline, as an ATM.”

Business groups and some councillors have been seeking to redistribute some of the tax burden from about 15,000 businesses to the larger group of more than 500,000 residential property owners.

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Calgary homeowners currently pick up 52 per cent of the city’s total property tax load, while non-residential property owners shoulder the remaining 48 per cent. (That figure compared with 43 per cent in Vancouver, 45 per cent in Edmonton, and 33 per cent in Toronto last year.)

Shifting the split by one percentage point would move about $21.7 million of civic taxes onto homeowners.

In 2023, that would have increased the property bill for a typical home by about $4 per month; for a commercial property with an assessed value of $5.1 million, it would have lowered property taxes by about $163 a month, according to city assessor Eddie Lee.

He noted the ratio is one measurement that the city watches, but it also looks at total comparable tax rates. According to Altus, Calgary has the second-lowest residential tax rate among the cities.

Sonya Sharp, one of the councillors who voted to keep the status quo last February — contending it wasn’t the right time to redistribute taxes — noted Thursday that for every one percentage point that’s shifted off of non-residential properties, it translates into a two per cent tax hike for homeowners. 

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“The tax ratio is only one way to look at it and doesn’t give the whole picture,” she said in a statement.

“We need to look at how we compare to other cities in terms of the actual taxes that businesses pay, and when we do that, we are a whole lot more competitive than most major Canadian cities.” 

But given the latest Altus report — and concerns that Calgary is approaching a provincial legislated limit on the commercial-to-residential property tax ratio for Alberta municipalities — expect this issue to be a hot topic of discussion at city hall in the coming weeks.

“We are trying to fix an imbalance that honestly impacts people being able to keep their jobs and keep their businesses open,” Gondek said.

“This is something we need to do.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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