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City sets tax policy for 2010

Yorkton Council reviewed its 2010 tax policy at its regular Committee-of-the-Whole meeting Monday. The policy will see a slight shift from commercial to residential, primarily through a significant tax increase to multi-unit apartment buildings.

Yorkton Council reviewed its 2010 tax policy at its regular Committee-of-the-Whole meeting Monday.

The policy will see a slight shift from commercial to residential, primarily through a significant tax increase to multi-unit apartment buildings.

Information circulated to Council from Lonnie Kaal, Director of Finance with the City explained, "the budget provides for a 3.7 per cent tax increase in 2010. New construction (growth) in 2009 is providing 1.6 per cent in new revenues. Virtually all of the growth can be contributed to the residential sector and is essentially offset by the cost of providing services to the new areas. There was some growth in the commercial sector but this was offset by assessment/appeal decreases."

Residential properties will see the 3.7 per cent increase on their taxes.

Kaal explained all cities draw more of their tax revenue from residential properties than from the commercial sector.

"Residential taxable assessment is at 70 per cent compared to commercial at 100 per cent so even with a uniform mill rate - same tax rate for all classes of property - commercial would pay 1.43 X more than residential. Since all cities have a commercial tax rate higher than residential, the effective tax difference was 2.21 X in 2009 for Yorkton," detailed her information to Council. " Prior to the assessment and school tax changes in 2009, Yorkton's effective tax difference between commercial and residential was 2.0X. The change to 2.21X in 2009 transpired because of the significant decrease in education taxes on the residential side."

"Since all cities now have the same education tax rates; 10.08 mills residential and a tiering of rates on commercial 12.25 then 15.75 - on assessment greater than $500,000 and 18.55 on assessment greater than $6,000,000 - a better comparison would be to take the education side out and compare only City effective tax rate differences.

"The average of 12 Cities (excluding schools) is 2.3X compared to Yorkton's 2.5X. In order to get to the Saskatchewan City's average, reversing some of last year's shift would be required. One of the ways to do this would be to change the multi-unit tax policy."

Multi-unit buildings have been dealt with as commercial properties rather than residential in terms of Yorkton's base tax.

"Multi-units include apartments and 4-plex but not condominiums. Condo's are residential and attract the base tax whereas multi-units do not," noted Kaal.

"In 2009 the tax policy decision was to treat multi-units the same as commercial and they paid the same tax rate. Even so, the effective tax rate is less than commercial because of the 70 per cent assessment and the lower school tax rate."

Administration recommended multi-units be treated the same as condominium units in the 2010 tax policy. That decision would have "the fire/police/garbage base tax of $695 be applied on all residential self-contained dwellings or units, and the Gallagher Centre base tax of $100 be applied on all residential self-contained dwellings or units."

"The Capital works base tax of $100 be applied per building same as was in 2009."

In addition, the mill rate be reduced from the commercial rate of 29.0 mills down to 5.2 mills which is consistent with other residential properties who pay the base tax.

Kaal said the rationalization is that a residence is a residence regardless of ownership and the same tax policy should apply. With two identical buildings, one an 18 suite apartment and another 18 suite condo, both would attract the same base tax and the same mill rate per suite/unit.

There are currently 57 buildings representing 1356 units in this category. Of this, 342 units are provided by a public housing organization and 158 units relate to assisted living buildings. This leaves 856 units in the private sector. All multi-units except for one will see an increase from 2009 with the implementation of the base tax from 2009. That is because the average assessed full value per multi-unit is $25,000 and the base tax will only benefit those multi-units valued greater than $42,000. However, some of the larger multi-units enjoyed significant decreases in taxes in 2009 such that the addition of a base tax in 2010 will still result in an overall decrease when comparing to 2008, explained Kael's report.

"Given that some of the increases are significant, a solution may be to phase-in the significant increases over two years. A suggestion is to use the highest of either 2008 or 2009 taxes as the benchmark. If proposed 2010 taxes are higher than they have been in the two previous years, the increase will be phased in such that 50 per cent of the increase is implemented in 2010 and the balance of the increase will be implemented in 2011.

"Once fully implemented, the total taxes (City and School) paid by the multi-unit sector would be 12.1 per cent more than they were in 2008. The net effect is the decrease of school taxes will have been offset by increases in City taxes and, in so doing; the multi-unit sector would be treated equitably with their counterparts, the condominiums."

Commercial properties will see no tax increase in 2010.

"Considering the reduction in education taxes were primarily allocated to the residential sector in 2009, the commercial effective tax rate is now more than 2X residential," explained Kaal's report.

As a result, "the commercial sector will not be subject to the 3.7 per cent tax increase for 2010.""Further, that since the multi-unit class is treated the same as condominiums and by so doing will contribute more than the 3.7 per cent tax increase required from commercial, that the commercial mill rate for 2010 will actually be less than it was in 2009."

Councillor Larry Pearen liked the Tax Policy as presented.

"I'm pleased to see this recommendation," he said, noting it makes the City's commercial property taxes lower, an asset in attracting business, noting "small business drives the economy."

Coun. Ross Fisher liked the shift from commercial properties as well, suggesting it moves the city "onto a better playing field," in terms of being competitive with some other cities.

As for the impact on apartment buildings Pearen said a three-year phase in might be more palatable than just two years,

Kaal said, "three years is doable."

Coun. Les Arnelien was also thinking three years. He said he believed "tax increases should be fair and equitable," noting the level of increase on some apartment properties was too large over two years to be seen as "fair or equitable."

Mayor James Wilson said the removal of the health levy at $110 per door in 2007, and property tax relieve from the province in 2009 help offset the increase.

Fisher said the shift was one he was comfortable with."I think that just makes sense," he offered.

Coun. Richard Okrainec said no tax increase is popular."All we can do is make it as fair as we can (with) everybody paying for the same services," he said.

The recommendation passed with only Arnelien opposed.