As other major players in the region have opted to cancel property tax increases entirely this year, St. Albert councillors will be taking a hard look at what they can do for struggling businesses and households on Monday.
Mayor Cathy Heron has called a special meeting of council for May 11 to debate two motions councillors have put on the table.
The city needs to raise approximately $110 million through taxes this year in order to cover its expenses, which would require a 2.5-per-cent tax increase (an increase of $90 per year for the average house costing $450,000). City council approved St. Albert’s 2020 budget in December but are now looking at potentially changing the tax requirement and split, due to financial hardship caused by COVID-19.
Coun. Ken MacKay has a motion targeted at giving businesses a tax break, which would shift more of the burden to residents, while Coun. Sheena Hughes is proposing a lowered 1.5 per cent tax increase instead.
That would mean the average homeowner would pay $54 more in taxes, an additional $4.5 per month.
As the unemployment rate has soared to 13 per cent in April, according to recent data from Statistics Canada, Coun. Wes Brodhead said you “can’t ignore those sorts of stats.”
“The flipside of that, of course is that every decision that we make today has implications for next year and the following year,” he said.
Hughes told the Gazette she landed on a one-per-cent decrease (which the Gazette calculates would shave off about $1.1 million from the total taxes the city would collect) because she thought a zero-per-cent tax increase was unlikely to pass in council chambers.
“That was where I thought would be a compromise ... where we would be reducing the taxes noticeably without having it impact any service levels or ask for other efficiencies,” she said.
City staff are already aiming to reduce budgets department-wide by seven per cent, chief administrative officer Kevin Scoble said in a virtual town hall meeting May 7, which 62 people attended.
With those operational cuts already taking place, Hughes would be targeting her reduction at St. Albert’s capital budget. Last spring, council approved a recurring 1.5-per-cent increase to help manage a shortfall in funding for St. Albert’s repair, maintenance and replacement (RMR) budget.
The levy council approved lasts for three years, but Hughes is proposing that levy be 0.5 per cent in 2020 instead.
During the virtual town hall meeting, Mayor Cathy Heron said if the levy to cover capital maintenance is removed, the city would be faced with a deficit.
“We will have choices of lowering our service levels, so the roads will be rougher, or the sidewalks will have more cracks, or we raise taxes even more significantly next year to make up for that year,” she said.
Finding operational savings is not the only cost-saving measure St. Albert has implemented. Last week, council reduced budgets for the Arts and Heritage Foundation and St. Albert Public Library by over half a million dollars cumulatively, and 30 per cent of St. Albert's temporary and hourly workers have been laid off. In addition, the city is re-evaluating the deferral of capital projects.
Edmonton has already decided to shift its tax share so businesses don't see an increase this year, although that means the tax levy on residents will go up 2.5 per cent.
Strathcona County, Leduc and Fort Saskatchewan have opted to cancel previously planned tax increases for 2020.
No increase, long-term implications: councillors
Finding the sweet spot between short-term needs related to the COVID-19 pandemic and long-term upkeep of city buildings and roads will be a necessary part of council’s Monday discussion, according to Coun. Natalie Joly.
Joly said she thinks it comes down to where residents see value, whether they want to see service reductions and lower taxes, or whether they appreciate and want to maintain current service levels.
“If we decide that ... maintaining infrastructure is not a priority, then we're going to have to be dealing with the consequences of that for decades to come,” she said. The councillor said she has not considered where service level reductions could be made, but that will be reviewed “shortly this spring.”
Brodhead echoed his colleague’s sentiments, saying if “deep cuts” are made today, those cannot be reversed in the short term. However, he said there could be some leeway in the RMR budget, as Hughes is proposing, and services levels could be looked at.
When asked if Brodhead thinks residents would be willing to see service levels cut to pay less taxes, he said Twitter feeds and letters to the editor may not be the best representation of the will of St. Albertans.
“I think we need to come back from the 2.5 (per cent increase) for sure," he said. "But you know, it's just not always that easy saying it's zero. Maybe zero is not the right answer, maybe minus one is the right answer. Maybe plus one is the right answer.
“The easy path is not always the best path,” Brodhead added. He said he does not want to speculate on where potential service reductions could come from.
MacKay said St. Albert’s tax requirement needs to be able to pay for items like policing, front-line workers and waste water treatment, but St. Albert should be looking at reducing services.
“If we lower our tax rate to zero, we will have to live with the result,” he said.
Relief for business
MacKay’s motion is centred on how the city can provide relief to businesses that are barely hanging on, and the feasibility of lightening the tax burden on non-residential properties. That would put a larger share of the tax load on residents.
How taxes are split between residential and non-residential properties is what MacKay is looking at, and whether shifting more of the tax burden to the residential side could provide relief to businesses. Currently, the burden is slowly shifting toward non-residential, something the city refers to as tax migration.
“I'm looking for any amount of assistance that I can, and how do I help businesses that are just barely holding on,” MacKay said.
According to a survey conducted by the St. Albert and District Chamber of Commerce and the city, 29 per cent of local businesses reported between 76 to 100 per cent lost revenue compared to March last year.
After hearing from city staff during council’s May 4 meeting, MacKay said being able to achieve a zero-per-cent increase for businesses “might not be realistic,” and a resulting steep residential increase would not be “recommendable or acceptable.”
The councillor still had unresolved questions about how residents would be impacted if the city played with the criteria it uses to evaluate its final tax migration. Some of those criteria look at comparable municipalities’ tax rates and assessment growth in the city.
The city had higher assessment growth (and thus, higher tax revenue) than it had predicted this year, up by $387,000. Typically, some of that money is poured back into the base budget, but this year the full amount will go into St. Albert’s stabilization reserves to help offset any deficit arising out of the pandemic.
If council decides to halt the tax migration, as MacKay has proposed, the 2.5-per-cent tax increase would break down to approximately 1.7 per cent for non-residential properties and 2.7 per cent for residential properties, St. Albert’s director of assessment and taxation services Greg Dahlen said on Monday.
Tax break-down
No matter what council decides on Monday, residents will have some of their final tax burden eased thanks to a decision by the province to cancel a planned 3.4-per-cent increase to the education tax.
Since municipalities collect the education tax on behalf of the province at the same time property taxes are collected, the two are combined on tax bills – which is called a "weighted" increase.
A chart in the agenda for council's May 4 meeting shows what MacKay's and Hughes' motions could mean.
If both Hughes’ and MacKay’s motions pass, residents would see a municipal tax increase of 1.7 per cent, while non-residential properties would pay a 0.7-per-cent increase. When the education tax is factored in, that amounts to $43 more in taxes for a $440,000 home and $351 more for a $1-million warehouse.
If only MacKay's motion passes, residents would see a municipal tax increase of 2.7 per cent, while non-residential properties would pay a 1.7-per-cent increase. When the education tax is factored in, that amounts to $79 more for a $440,000 home and $457 more for a $1-million warehouse.
If only Hughes' motion passes, residents and non-residential properties would both see a municipal tax increase of 2.5 per cent. When the education tax is factored in, that would be $71 more for a $440 home and $544 more for a $1-million warehouse.
When asked for more information on the city's planned seven-per-cent budget reductions, St. Albert communications referred the Gazette to the city's May 7 COVID-19 town hall, saying chief administrative officer Kevin Scoble would be presenting on it. Scoble did not go into detail beyond saying the city is looking at an overall seven-per-cent overall budget reduction to ease the burden on taxpayers created by the pandemic.
Mayor Cathy Heron requires media requests to go through communications. A request for interview with Mayor Cathy Heron was made to city communications on May 7, who told the Gazette Heron was not available for interview until Tuesday, after council’s special meeting. The special council meeting will be held over Zoom May 11 at 9 a.m.
