The City of Yellowknife conducted public consultation on mill rate ratio. The following was the YK Chamber's formal written submission:
Mill Rate Ratio and Property Tax Distribution
We would like to recognize and thank the City of Yellowknife for adopting our past recommendations to ensure that consultation with stakeholders occurs prior to changing mill rate ratios. We value this opportunity to provide feedback in advance of and during council’s discussions.
Our members remain concerned because more of our community’s tax burden has been gradually, but continuously, placed on Yellowknife businesses. In this year’s mill rate ratio discussions, we urge Council to consider the devastation wrought by the COVID-19 pandemic on the Yellowknife business community and to keep this front of mind when considering how property taxation responsibility should be distributed among property owners. Increasing the mill rate ratio will only further to increase this burden on the relatively small business community.
We have several recommendations and considerations we would like to see included in this year’s and in future years’ discussions about mill rates and property tax distribution.
Preparing for the Next General Assessment
In the past, changes to the ratio between commercial and residential mill rates have occurred every five to seven years, in conjunction with citywide general assessments. Although we recognize that 2022 is not a general assessment year, we urge Council to make changes now and to enshrine them in budget policies and budget documentation so that future Councils, when dealing with the larger shifts in assessment values experienced because of a general assessment, do not have to start from scratch in learning the complexities of mill rate ratios and other related issues.
Timing of Discussions
We are resolute in our belief that mill rate discussions, including the philosophy that council adopts with respect to the ratio, should happen in December, at the same time as budget consultations. It is during budget consultations that taxpayers and stakeholder groups are most engaged, and the extra vigilance demanded by splitting up budget and mill rate discussions creates an unfair burden on often under-resourced stakeholder groups.
We understand that due to prescriptive legislation surrounding the Property Assessment and Taxation Act that the final approval of mill rates cannot take place until the Final Revision of the Assessment Roll is completed in May after property owners have been given opportunity to make any complaints and a Board of Revision Hearing held. But this does not prevent Council from making a commitment in December, whether through a motion of Council or a formal budget policy, to maintaining mill rate ratios fixed at the previous year’s levels. Consideration of the final assessment values in April or May of each year is only a factor if a change to mill rate ratios is contemplated.
Even if a commitment is not made to keeping mill rate ratios fixed, in years without a general assessment or rapid and unexpected assessment growth, changes to the assessment roll are generally miniscule; therefore, Council should be able to commit to mill rate philosophy in December of most years, including implications for all six mill rate categories, even if it requires very slight adjustment the following spring. Any property tax discussions including those prior to the budget’s approval need to include the nuance of mill rate so that all property owners know what to expect come April/May not just the residential property taxpayers.
Property Taxation Policy
To take the timing discussion one step further, we encourage council to develop and publish a policy about the mill rate ratio and the philosophical approach to property tax distribution council would like to adopt. This policy would allow council to clearly set out their intentions and the strategy behind mill rate ratios and the way in which the property tax burden is distributed. Whether this document delineates a priority toward reducing the tax burden for residential property owners or whether this policy includes a desire to encourage small business growth, or whether its essence lies somewhere in between is the work of council. If the city craves predictability above all else a mill rate ratio policy would serve this end.
The ‘Stability and Predictability’ Argument
It needs to be emphasized that changing the mill rate ratio in the name of maintaining the relative proportion of taxation between residential and non-residential property classes, does not achieve the stated goal of providing “stability and predictability” in real taxation levels for individual ratepayers. As outlined in the City’s public presentation, in the past these changes have resulted in disproportionate increases in taxation of businesses. For the business community, taxation has been anything but stable and predictable. If Council were to state that their goal is to keep tax increases for residents as low as possible by raising them higher for the business community, this would more closely reflect the reality of past mill rate changes, and it should be debated and clearly articulated in a formal budget policy.
Discussions of stability should also consider the fact that the business community has been shrinking for the past twenty years relative to residential property classes. This has had a multiplier effect on changes to mill rate ratios, because fewer and fewer business owners have been asked to carry heavier and heavier shares of the tax burden. Effects are further multiplied because most small business owners already pay residential property taxes.
Comparisons to Other Jurisdictions
Comparing our mill rate ratios to other cities should not be undertaken lightly. Every jurisdiction has a unique value proposition that it uses to justify commercial property taxation. Bigger, less isolated cities can offer among other things larger populations, greater tourist traffic and tourism infrastructure, access to ports and railways, conference facilities and more extensive suites of municipal services. Yellowknife’s only true comparator city is Yellowknife itself, so increases in the commercial mill rate ratio should be accompanied by explanations of what has changed – what has been done to improve Yellowknife’s value proposition that might justify commercial tax increases that are not also being applied to residential taxpayers?
Furthermore, there are substantive differences in how property tax is calculated in the jurisdictions referenced in the city’s mill rate ratio presentation to the public. The comparator cities all base their property tax assessments on the market value of property while Yellowknife uses depreciated replacement cost. Cities that experience rapidly rising residential real estate values or rapid growth of the residential tax base can reduce residential mill rates without unfairly placing burdens on the business community. Mill rates are just one of several factors that impacts the distribution of tax burden, so if comparisons are to be made to cities like Montreal or Vancouver in a responsible manner, these other factors must be considered.
Small Business Property Tax Classification
We are supportive of the City of Yellowknife taking the necessary steps to explore the creation of an additional property tax classification for small business. We understand this will involve some work in terms of exploring what the end goal of such a classification is (are small businesses the ones who will benefit from it?), establishing the criteria that needs to be met in order for a business to be classified as ‘small’, determining what the mill rate should be for this new classification, and putting in place ways to measure the effectiveness off such a change (does it meet the goals outlined?). We believe this work is warranted and the Yellowknife Chamber of Commerce is happy to support any individuals or committees established to further explore these issues.
While the Chamber understands that a reversion to past mill rate ratios would result in a greater than expected increase to residential ratepayers, it should be emphasized that this is exactly what commercial taxpayers have been subjected to after every general assessment for the last twenty years. It is also worth pointing out that a rebalancing of mill rates with no impact on residential ratepayers could have been achieved had the property tax windfall from the new hospital development been harnessed in the effort. Future growth in the residential or institutional tax bases may present similar opportunities, and we encourage Council to take advantage of them to bring about a fairer distribution of the tax burden.
Above all else, the Chamber asks that this current Council takes the time to formally articulate a taxation philosophy, to assist future Councils and the business community in understanding why small businesses should experience accelerated tax increases relative to other property classes.
For our presentation to the Governance and Priorities Committee visit: https://growthzonesitesprod.azureedge.net/wp-content/uploads/sites/1245/2022/04/Mill-Rate-Ratio-Presentation-to-GPC_April-25_YK-Chamber.pptx