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    Categories: Business

Why St. Albert is not viable

In the last article, we examined the assessment ratios for St. Albert, the mix of residential and non-residential property values, and how they impact the local taxes. It has been suggested that to be sustainable, the City of St. Albert should strive for an assessment ratio of a minimum 20 per cent of assessment from non-residential properties and 80 per cent from residential properties. The City of St Albert Economic Development Master Plan suggested this target would help reduce the burden of taxes now supported by residential property owners.

To explain further why it is important to diversify the tax base, a number of Community Cost of Services studies were reviewed. In the 2009 Business and Tourism Development Long Term Department Plan, staff identified that residential growth was not paying for itself.

St. Albert councillors and administration have stated that St. Albert offers a superior quality of life and is attractive for residential development. Particularly, the city is known for its large single-family lots and upscale neighbourhoods, feeling this is the easiest and best development that the city can attract, while marinating its small town feel. For the most part, it was believed that commercial development would follow the “roof tops.” As the population grew, then additional retail services would be attracted. In effect, this type of thinking has contributed to the higher taxes that are being paid by St. Albert residents.

Sarah Gardner, Ph.D., the assistant director, Centre for Environmental Studies at Williams College stated: “There is a commonly held belief that development enhances the local tax base. Therefore, it follows that housing development is a way to increase the wealth of towns, including schools and other public services. This thinking is based on the idea that more houses equal more property tax. While this sounds logical, this logic has been disproved many times over. Numerous studies have shown that residential land is the most expensive for local government to support: it costs the public more money than it pays in taxes and charges. It’s more expensive to serve residential areas than commercial, industrial, farm or open land. Large lot housing developments are the most costly type of land use for towns.

To further support its contention that the city needed a more diverse tax base, the economic development team found additional research on the costs of providing community services, to further demonstrate that residential growth was not the best solution to addressing the rising taxes, but was compounding the problem. The Mistakis Institute undertook a Cost of Community Services Study for the County of Red Deer, an example closer to home that might garner credibility with local civic officials.

The Red Deer study suggests councils, staff and communities must weigh numerous factors in determining which land use patterns best serve the public interest. In setting annual budgets, councils look at expenditures, the cost of providing services to the residents. When they look at land use planning, they look at how development may occur in the various land use districts, and not necessarily understanding the monetary impacts of development. This creates a fundamental disconnect between land use planning and its implications on the bottom line.

The Red Deer study found that for every dollar collected in residential property taxes, it was costing the county $l.84 to deliver the services to these residential properties. At the same time, the study determined that for every dollar collected from commercial properties, it was costing the county only $0.74 for services. Industrial properties were only costing $0.09 for every dollar collected in taxes from these industries. Obviously, according to this study, industrial properties would provide the greatest net benefit to the municipality. Detractors were quick to point out that this study was conducted for a rural county area and that it would not be the same in a more urban municipality like St. Albert.

Toronto determined that it was making 80 per cent profit on industrial taxes collected (industrial was only costing $0.20 for every dollar collected) whereas residential properties were creating a 40-per-cent loss. Again, this study was dismissed as St. Albert was not comparable to Toronto, and that our residential base was different.

Many other studies have been conducted across North America and as yet, none have determined that residential taxes can generate enough income to cover the expenses. If the city were a private business, it would cut its costs by stopping to offer this service and concentrate on diversifying its products and services where there was a greater return on investment. These other examples were presented to city council in the City of St. Albert Future Industrial Land Requirements Study conducted by Millier Dickinson Blais in 2011.

This time, detractors questioned the credibility of the firm hired by the city to conduct the review. In their study, Millier Dickinson Blais pointed out St. Albert has grown at a healthy rate over the last decade. However, residential growth alone cannot sustain an economy over the longer term. The report goes on to state in Halton Region, Ontario, new industrial development is expected to produce a significant annual net fiscal benefit, whereas commercial development is expected to produce a small annual net fiscal benefit, and residential development an annual fiscal deficit.

The City of St. Albert Economic Development Master Plan used the City of Spruce Grove as the benchmark in 2004, in setting the 80/20-assessment ratio goal. Spruce Grove has recently approved a new economic development strategy. In their report, they suggest assessment composition is an important indication of municipal capacity and represents an ongoing challenge for Spruce Grove – as it does for most Alberta municipalities. The challenge will be to attract more industrial and commercial assessment and to ensure that the reliance on residential assessment remains balanced.

The Spruce Grove report also reinforces the concept that residential development costs the communities more in services than is generated by residential property taxes. Their studies concluded that for every dollar of revenue from non-residential developments, the range of municipal service expenditures was usually between $0.20 and $0.60. In comparison, the analysis found that for every dollar of revenue from residential developments, the range of municipal expenditures was most likely in the range of $1.10 to $1.25.

I rest my case. Studies across North America, both urban and rural, have concluded that residential property taxes do not cover the costs of services, whereas a healthy blend of industrial and commercial development will actually subsidize the residential tax burden.

St. Albert does not want to become an industrial city with smoke stacks, as it believes it will adversely impact its quality of life. In future articles, I will explore options for increasing the city’s sustainability without the inclusion of large industrial smoke stacks and demonstrate that it would not have a negative impact but can complement our environment. In fact, it can be demonstrated that industrial development (of which there are many types) will serve to improve the quality of life St. Albert residents expect.

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