The Economic and Political-Economic Implications of the Proposed Servus Place Tax Split
Introduction:
The following statement is included in the City of St. Albert’s 2009-2011 budget under the heading Servus Credit Union Place Capital Tax Levy Changes.
“…As part of the Servus Place Review in early 2008, it was decided to change the facility's operating philosophy from that of an enterprise model to a City departmental model. As the facility is now treated as such, the City's split mill rate has been applied to Servus Place to ensure consistency in how taxes are collected for all City operated facilities. This taxing model shows a differential rate between residential and non-residential ratepayers that, if applied all in one year, would see a non-residential increase of 13.55%. To gradually introduce the application of this consistent rate model, Administration is suggesting a three-year phased approach, which is reflected in the projections for 2009-11.
The introduction of this rate model results in a tax revenue balance of 84/16 for residential and non-residential properties…..”
The three year plan for phasing in the tax increase is as follows:
Year 1 Budget 2009:
“…..The annual adjustment to the Servus Credit Union Place Tax Levy will see it move from $33 to $32 per $100,000 of residential assessment and to $37 per $100,000 of non-residential assessment…”
Year 2 Budget 2010:
“….the Servus Place Capital Tax Levy will change to $30 per $100,000 of residential assessment and $50 per $100,000 of non-residential assessment….”
Year 3 Budget 2011:
“…the Servus Place Capital Tax Levy moves to $29 per $100,000 of residential assessment and $55 per $100,000 of non-residential assessment….”
The following points should be noted:
(1) If the proposed splitting of the Servus Place mill rate is approved by Council the special Servus Place rate of taxation on residential property in St. Albert will fall from 0.33 mills ($33 per $100,000 of assessed real estate value) in 2008 to 0.29 mills in 2011 – a decline of 12.4 percent. (Refer to Figure 1.)
(2) Figure 1 also shows that over the same time period the property tax rate paid by non-residential rate payers will rise by 66.7 percent ( 0.33 to 0.55 mills) in order to facilitate the reduction in the residential tax burden enjoyed by residential property owners.
(3)The spread between residential and non-residential Servus Place mill rates was zero in 2008. By 2011 the non-residential mill rate will be almost 90 percent higher than the residential rate. (0.55 versus 0.29 mills).
(4)If the current council approves the splitting of the Servus Place mill rate it will have broken the commitment the City of St. Albert Council and its Administration made to its businesses and residents in 2004 regarding the way the costs of servicing the Servus Centre debt would be apportioned.
(5)The original commitment Council made to its Citizens is a matter of record. In a document entitled “ Your Leisure Needs, Your Choice” that urged citizens to get out and vote in the Oct. 18, 2004 election the City of St. Albert indicated that a separate mill rate of “… approximately $74 per $100,000 of 2004 assessed value...” would be added to the annual property tax notices sent to City property owners.
(6)No mention was made of any plan to shift a greater portion of the Servus Place debt servicing costs onto the St. Albert business community. All property owners were to be treated equally and charged the same amount of taxes per $100,000 worth of the assessed value of their real estate.
(7)It is important to note the original agreement between the electorate and the City was honoured for four years. Different mill rates were applied each year between 2005 and 2008; however, the mill rate applied to each property class for Servus Place purposes within each year was the same.
(8)It is reasonable to assume the Servus Place vote would have been affected in 2004 if St. Albert ratepayers had been told the City administration and future Councils were reserving the right to tinker with future mill rates and shift the amount of payments made by future residential and non-residential ratepayers in ways that differed from the terms set out when the Servus Place plebiscite was held. Uncertainty over who would pay for the future multi-purpose leisure facility might well have generated sufficient controversy to sink the Leisure Centre at the polls.
(9)The explanation in the 2009-11 Budget (refer to the introduction on page 1 of this document.) argues that changes in the way Servus place is structured and operated is the basis for splitting the Servus Place mill rate. The claim is made that the Servus Place mill rate must be split in order to maintain consistency in the way properties are taxed.
This is quite puzzling. The retirement of the Capital debt incurred in constructing Servus Place is not affected by changing the multi-purpose leisure centres mode of operation from an enterprise model to a regular City department. Such a choice may affect the operating costs and the way life cycle costs are handled but not the financing of the $43M plus capital project. St. Albert taxpayers agreed to pick-up the entire costs of servicing the capital costs incurred in building the multi-purpose facility regardless of how the Servus Place was administered.
Request of City Council:
(1) Honour the agreement the City made with the St. Albert electorate when the Servus Place plebiscite was held and reject the proposal included in Budget 2009-11 to split the Servus Place Mill Rate and impose a higher property tax rate on non-residential property owners.
