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Edmonton city council shifts tax break from homeowners to business

Edmonton city council approves property tax increase for homeowners, decrease for business
WATCH ABOVE: Edmonton city council voted to skew a rollback in property taxes to benefit business instead of splitting the difference evenly between businesses and homeowners. Vinesh Pratap explains.

Edmonton homeowners will see their property taxes go up while businesses will get a break on theirs as the result of a vote at a city council meeting on Wednesday.

Councillors voted 9-4 in favour of raising residential property taxes to 2.5 per cent and freezing property taxes for non-residential ratepayers. The justification for raising taxes on homeowners was to help out struggling businesses.

Overall though, when combined with the decrease in the provincial education portion, both homeowners and businesses will see a decrease: zero per cent for residential ratepayers (a $28 decrease for the average home worth $387,000) and a two per cent decrease for non-residential ratepayers.

“The 2020 budget absorbs financial impacts of the COVID-19 pandemic that could have meant a municipal tax levy increase of 7.6 per cent to address the impacts of the tax-supported revenue losses,” reads a City of Edmonton news release. “In addition, city council distributed the reduction in education property taxes announced by the Government of Alberta to provide relief for the business sector, in consideration of the impact of the COVID-19 crisis.

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“Each property owner will experience a unique tax change based on how their assessment value changes compared to the overall assessment change for the tax class. Generally, about half of property owners will see higher increases, while the other half will see lower increases or even decreases.”

City of Edmonton lays off hundreds; sets lower property tax
City of Edmonton lays off hundreds; sets lower property tax

Councillors Aaron Paquette, Mike Nickel, Andrew Knack and Moe Banga voted against the tax changes.

Coun. Paquette said he does not believe anybody’s taxes should go up right now.

“We can sit here and say $30 [or] $60 is not a lot of money, but if you’re living in poverty or you’ve suddenly lost your job, $30 is going to make a big difference to you at some point,” he said. “That’s just the facts.

“That’s just the reality of hard times.”

At a news conference Wednesday night, Mayor Don Iveson emphasized that the average homeowner will not be paying more even though the municipal portion of their property tax increased and that it was important to give a break to business.

“It sends the right signal to businesses that we understand how much they’re hurting,” he said, noting that feedback he’s had since the idea was first proposed indicated to him that most Edmontonians support shifting the tax break to help business during the pandemic.

“While we understand every household has been affected one way or another by this crisis… [and] though we’ve seen significant layoffs, most people still have a job,” Iveson added. “People who aren’t employed right now but are collecting pensions are still collecting pensions, or even if their investments have been impacted, their RRIFs and other mechanisms are still paying out for them.

“There’s still cashflow for most households and even in the most troubling circumstances, there are federal aid programs and provincial aid programs supporting household liquidity and people’s ability to pay their essential bills, including property taxes. The measures to support businesses are not as universal and the impact, I think, has been much deeper to business.”

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Coun. Ben Henderson also said he believes the changes were necessary to help the city begin an economic recovery.

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“I’m focused on the recovery piece of the puzzle,” he said. “With the limited tools we have on taxation, by doing this slight change and a slight revision, we’re making the choice that gives us the best opportunity from a recovery point of view.”

Coun. Sarah Hamilton agreed with Henderson.

“When you’re looking at a numbers, whether it’s from the Chamber of Commerce or Edmonton Global… we could potentially see very high business default rates,” she said. “I think it’s to our benefit to try and route that as best we can.”

The Edmonton Chamber of Commerce welcomed news of Wednesday’s vote.

“Given the unprecedented challenges posed by COVID-19, the city has done a good job of balancing the need to help struggling businesses with the need to continue delivering essential services that Edmontonians rely on,” said Janet Riopel, president and CEO of the business organization.

“We’re pleased to see city council recognize the incredible hardships businesses are experiencing.”

Riopel added while the tax break will help, she believes the city can do more to help businesses.

“City council must commit to the kind of transformational change that ensures our city’s long-term financial sustainability, and provides lower tax rates for businesses and residents alike.”

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Edmonton mayor on property tax break for businesses and steady rate for homeowners
Edmonton mayor on property tax break for businesses and steady rate for homeowners

Wednesday’s vote took place because earlier this week, Iveson put forward a motion – that was later passed – calling for the city’s administration to prepare two versions of the tax requisition bylaws for Wednesday’s council meeting. The motion was part of an effort to lower the previously approved 2.08 per cent tax increase for 2020 to accommodate citizens and businesses that are struggling during the COVID-19 pandemic.

READ MORE: City of Edmonton lays off nearly 900 workers amid COVID-19 budget shortfalls

“We happen to have some unprecedented education tax relief available that allows us to do that on a one-time basis,” Iveson said.

“Under these circumstances, half of businesses in Edmonton are uncertain whether they will reopen [after the COVID-19 crisis recedes]. This is one way we could get to zero for them, but without pretending that we don’t still have the expenditures and they have to come from somewhere.”

Henderson suggested Edmontonians need to keep the big picture in mind when it comes to the changes approved Wednesday.

“When you look at the pressures that are going to be on even the residential taxpayer from the full effect of property tax, which is both the education portion and our portion, there is no increase this year,” he said.

“The average homeowner is not going to see an increase in the cheque they have to cut.”

The city said property tax notices will be mailed on May 21 and are due in June. However, this year, late payment penalties on unpaid taxes will not be charged until Sept. 1, 2020, and that applies to both the education and municipal portions of the tax bill for both residential and non-residential properties.

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“We believe that this is an important option to offer to those who have been financially affected by the pandemic crisis,” said interim city manager Adam Laughlin.

“But I ask all property owners who can pay their taxes on time to please do so to help keep city services running.”

City council also made adjustments intended to offset “the net impact of lost revenue and increased expenses due to the COVID-19 pandemic,” which the city projects will total $164 million by the middle of September.

“That shortfall is primarily balanced by reducing expenses and reducing transfers from the operating budget to the capital budget,” the city said, noting that city council also reduced their office budgets by $695,000.

The expense reductions are being made through temporary layoffs, deferring projects, cutting spending on consultants and training as well as through a number of other measures.

“The city’s capital construction program will proceed as originally planned from 2020 to 2022, which will mitigate the impact of further economic slowdown in Edmonton and prevent job losses in the construction sector,” said the city, adding that other major projects will be delayed until next year.

–With files from 630 CHED’s Scott Johnston and Global News’ Vinesh Pratap