It’s Groundhog Day at city hall— AKA municipal budget season. Every year, hundreds of interested parties wait hours if not days to have their voices heard by city councillors. For Calgary small businesses however, just like in the 1993 Bill Murray film, it’s getting repetitive. Just like every other year, property tax hikes are on the table and no reprieve is imminent.
Property taxes are the main revenue source for Albertan municipalities. They are divided into residential and non-residential classes. In Calgary, business properties pay a municipal tax rate 4.26 times higher than the residential tax rate. This means that Calgary’s tax rate ratio is the highest in the province and is projected to grow to 5.0 by 2027. If we’re being honest, the only reason it’s not projected to blow past the 5.0 marker at this point is because once it hits this cap, the provincial government steps in and prevents any rate increase.
The Canadian Federation of Independent Business has calculated an additional indicator, the property tax fairness ratio, which measures the difference between what business properties are assessed at versus the share of property taxes that business properties pay. In this regard, Calgary business properties’ pay 48 per cent of the property tax revenue while only representing 18 per cent of the city’s assessment value, ranking dead last in the province with a ratio of 2.68.
Over half of the province’s small businesses identify property taxes as the most harmful tax to their business. Given that property taxes are profit insensitive, businesses must pay them regardless of their revenue or profit. Right now, the city is proposing a 3.4 per cent increase for businesses costing them approximately $277 more per month or $3,324 more per year in 2024.
While it’s easy to say these increases are necessary to keep up with inflation and fund city services, 75 per cent of Calgary businesses say that they do not receive a fair value. Don’t believe me? Visit the community of Marda Loop. It’s bustling with heavy machinery, torn up sidewalks, and redirected traffic due to the Marda Loop Main Streets construction project. Many businesses, already struggling, have seen a lack of customers, leading to some businesses closing altogether. Now the city wants them to pay more for the privilege?
Let’s not forget, residential properties in the city have ability to receive financial assistance through the city’s Property Tax Assistance Program, something businesses do not have the luxury of qualifying for.
To be clear, small businesses are not abdicating their responsibility to pay property taxes. What they’re asking for is fairness. A property tax shift from non-residential to residential is on the table for this year’s budget debate. According to CFIB data, the one per cent shift the city is proposing from non-residential properties to residential, while increasing property taxes by five per cent over a three-year period, would cumulatively save a typical business ten of thousands of dollars while a residential property would see increases in the hundreds of dollars. While small businesses would prefer a full break from Calgary’s never-ending tax hike cycle, at minimum council needs to shift the burden to make it fair. If council wants to get it absolutely right, they’d freeze taxes and shift the burden.
While the city’s financial process is rife with problems – the way the taxes are collected, the lack of services for businesses – the city can afford the change. A quick jaunt down memory lane and we find that the City of Calgary posted a $105 million surplus in 2022 and is expected to post another $265 million surplus for 2023.
Businesses in the city have been through the ringer over the past three years of pandemic restrictions and changing consumer behaviour. Strong action on property taxes and the fair treatment of businesses must be a priority for Calgary councillors.
Otherwise, it is another year, another tax hike, another Groundhog Day.
Andrew Sennyah is the senior policy analyst, Alberta for the Canadian Federation Independent Business (CFIB.)