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RFD- 4209 Business Items   Item #   11. a.    
Regular Council Meeting Agenda   
Meeting Date: 02/22/2021  
Title:    CP-1033-21 - Property Tax Distribution Policy - Frostad
Department: Corporate Services  
Strategic Vision Element: This topic relates to all three of the City’s strategic vision elements contained in Council’s Strategic Plan Related Goal: n/a

Request for Decision Summary
A Property Tax Distribution Policy is necessary to allow Council to govern the collection of  municipal revenue from taxpayers.  It allows Council to declare intent in relation to taxation of various classes of property within the municipality.  During the 2021-2023 Corporate Plan deliberations, decisions were made requiring a policy change for the property tax split between residential and non-residential properties. The proposed policy will modernize the previous policy and bring it into line with Council direction.

Proposed Motion
That Policy CP-1033-21 - Property Tax Distribution Policy be approved as presented.
With the recent approval of the 2021-2023 Corporate Plan, Council made a decision to revisit the current treatment of the split between the residential and non-residential property tax rates. This decision required a revision of the Property Tax Distribution policy.  Upon reviewing that policy, it was also discovered that current practice in relation to multi-family properties differed from the written policy.  Multi-family properties were charged the same rate as non-residential properties in spite of the policy provision that required they be 110% of residential property tax rates.  The Council request for decision sheets for the Property Tax Bylaws for 2004 and 2005 speak to Council direction to shift the multi-family rate to be the same as the non-residential rate to reflect that multi-family properties are involved in an adventure in the nature of trade. This direction appears to have been given verbally to the administration at the time and was confirmed through the approval of property tax bylaws. There is however no record of a corresponding policy update to the Property Tax Distribution policy.  The multi-family residential rate has been charged the same as the non-residential rate for the years 2004 to 2020 to implement the verbal instructions at the time. The draft policy attached needs to formalize this previous direction given.

The draft policy contains changes to the residential/non-residential tax split and the treatment of multi-family properties.  The policy has also been modernized to include definitions and a policy statement in line with the City's corporate policy format

Property Tax Rate Split:

Policy direction given during the Corporate Plan deliberations allowed for moving the property tax split over a seven year period from the 1.38 used in 2020 forward to a position similar to the average of communities analyzed at that time to be 1.73.  The moves approved were .025 in year one and then .055 for each year of the following six years.  The Alberta communities making up that average were: Leduc, Stony Plain, St. Albert, Grande Prairie, Fort Saskatchewan, Lloydminster, Red Deer, Parkland County, Airdrie, Medicine Hat and Lethbridge.  The policy uses 1.75 as the benchmark for the property tax split after 2027 and recommends that the split be based on an average of non-residential splits of municipalities within the capital region of the province.  That split today sits at 1.66 so it is likely that the 1.75 will be a good benchmark within seven years.  At that time, in order to stay relevant, the split will be benchmarked against the capital region municipalities each year and changes will be made accordingly with 1.75 being the minimum split.

Multi-Family Properties:

It is recommended that multi-family properties still be taxed at a higher rate than single family residential properties as they do represent a business.  With the new property tax split changes however, administration is recommending a split rate that reflects the residential nature of these business properties.  It is therefore recommended that the multi-family properties be taxed at 1.40 times the single family properties and that they not advance to the full non-residential split. Using 1.40 as the revised split for multi-family would reflect a round number, made up of the previous split of 1.38 and the proposed increase to non-residential for 2021 of .025, to meet budget requirements and would then stop advancing that point. At the close of seven years, the multi-family properties will be taxed at a rate 1.40 times higher than single family residential properties and the non-residential properties will be taxed at a rate 1.75 times higher than single family residential properties. This allows for all business enterprises to pay a proportionally higher rate of property tax reflective of the reality that property taxes can be claimed as a business expense for income tax purposes and therefore have a lower after tax impact for these properties.
Council could choose to modify the property tax rate split provisions within this policy and therefore an adjustment to the 2021 approved budget would be required.
Direction for property tax rate split provisions was received from Council during the 2021-2023 Corporate Planning deliberations. Further examination in corporate records noted the discrepancy in the policy for multi-family properties.

The General Manager of Corporate Services and the Chief Financial Officer presented the property tax rate split policy direction along with the results of the 2021-2023 Corporate Plan deliberations to the Economic Development Advisory Committee and answered questions and comments related to this change.   
This policy will be implemented through calculation of the 2021 property tax rates and presentation of the property tax bylaw for Council approval.  Communication of the property tax rate split change is presented in the published 2021-2023 Corporate Plan.
Proposed Policy CP-1033-21 - Property Tax Distribution
Current Property Tax Distribution Policy

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