10 Things to Know About the 2018 Municipal Non-Residential Phased Tax Program
As you know, the decrease in the market value of non-residential properties is causing a tax shift, increasing the municipal property taxes for non-residential properties with a year-to-year change in assessed value greater than the typical market change. Through the 2018 Budget Adjustment process, Council set aside $45 million from the Fiscal Stability Reserve and directed Administration to report on possible options for providing further tax relief. On Monday, Council approved the 2018 Municipal Non-Residential Phased Tax Program (PTP) which will mitigate for property owners the increase in municipal non-residential property taxes due to the redistributive effect of 2018 property assessments.
The 2018 (PTP) has been developed to limit the increase in municipal non-residential property taxes to five per cent in 2018, (not including the effect of Business Tax Consolidation). It is expected to benefit owners of approximately 7,400 non-residential properties. It is anticipated that, in turn, a positive economic benefit will be realized by tenants (businesses contained within the non-residential properties).
The 2018 PTP is a separate, one-time program and not an extension of the 2017 Municipal Non-Residential Phased Tax Program (2017 PTP). It uses the same eligibility parameters as the 2017 PTP but excludes the 2017 Council-approved rebates as well as any 2017 PTP credits provided. It’s calculated using the approved 2017 municipal non-residential property tax rate, compared to the 2018 revenue neutral municipal tax rate, adjusted for the Council-approved 0.9 per cent tax increase.
1. What problem is the Municipal Non-Residential Phased Tax Program (PTP) designed to address?
The continued economic downturn has negatively affected the financial health of local businesses. The decrease in the market value of non-residential properties is causing a tax shift, increasing the municipal property taxes for non-residential properties with a year-to-year change in assessed value greater than the typical market change. To mitigate the increase in municipal non-residential property taxes due to the redistributive effect of 2018 property assessments, Council approved the 2018 Municipal Non-Residential Phased Tax Program (PTP)
2. Why is it called a “phased” property tax program?
Annual market value assessments are required by law in Alberta. However, the Municipal Government Act (MGA) allows Council to phase in a tax increase resulting from the preparation of any new assessment.
The intent of the phased-in tax program is to "soften the blow" of municipal property tax increases. It does not eliminate the impact of tax increases in 2018 but rather assists those most impacted by the redistributive effect of the increase by capping their increase at five per cent.
3. What does this mean for non-residential property owners?
It means that non-residential property owners will experience a maximum increase in the municipal non-residential property tax of five per cent resulting from a change in the 2018 market value assessment (not including the effect of Business Tax Consolidation). It does not include any property tax increase due to the provincial non-residential property tax requirement, which is unknown at this time.
4. How many non-residential property owners will be affected?
It is expected that approximately 7,400 non-residential properties will be affected.
5. Will business owners who rent their space benefit from 2018 PTP?
It is expected non-residential property owners who benefit from PTP will pass benefits on to individual businesses/tenants.
6. What properties will qualify for the PTP?
This is a one-year phase-in program that applies to non-residential properties that have experienced a 2018 municipal property tax increase above five per cent due to the shift in market value assessment. Non-residential properties that have experienced a 2018 municipal property tax increase below five per cent due to the shift in market value assessment will be unaffected by the phase-in.
Properties that have had physical enhancements or changes that affected the 2018 assessment relative to the 2017 assessment or had changes due to other external non-market impacts (e.g. a zoning change, servicing, remediation, change in taxable status, factual corrections, a change in assessment class) would not be eligible for the 2018 PTP.
7. What other criteria will non-residential properties need to meet to qualify:
To be included in the PTP, non-residential properties:
• Must have existed in 2017.
• Must have a tax status of “taxable”.
• For properties assessed under more than one assessment class, only those properties where the non-residential component is 50% or higher will be included.
• Must have 2018 municipal non-residential property taxes greater than $50.
• The amount to be phased in exceeds $25.
8. Why doesn’t the PTP mitigate the impacts of the Business Tax Consolidation?
Only the effect resulting from the preparation of the 2018 annual market value assessment is being phased in. The Business Tax Consolidation is intended to be revenue neutral so there is no need to phase in or mitigate the municipal non-residential property tax increase, because the mitigation is taking place through a corresponding drop in the business tax. In 2018, the final 20 per cent of the business tax will be consolidated into the non-residential property tax, with non-residential property taxes expected to increase by approximately five per cent solely due to the effect of the consolidation.
9. What is the process for non-residential property owners to receive the PTP?
There will be no application process required. The tax effect of the phase-in will be applied to the 2018 non-residential property tax bill.
10. How much is the program expected to cost and how will it be funded?
The cost of this one-time program is estimated to be $41 million. Funding for the program was approved Nov. 30, 2017 in conjunction with the approval of the 2018 Budget Adjustments (approval of the 2018 operating and capital budgets), Council set aside $45 million from the Fiscal Stability Reserve to assist Calgary business affected by the economic downturn.
- Courtesy of Assessments (The City of Calgary)