The Effect of Splitting the Servus Place Mill Rate on Two St. Albert Businesses

An Example of the Effect of the Proposed Servus Place Tax Split
On Two St. Albert Businesses, Dec. 19, 2008

Introduction:
The following analysis is focused on the impact the three year phasing-in of the Servus Place split mill rate would have on two “representative” businesses – a warehouse and a restaurant. Please note the basic tax data used in this report was obtained from the City of St. Albert. This ensures that everyone participating in the Servus Place split mill rate policy debate has access to the same information.
Figure 1 shows the proposed phasing in of a split Servus Place mill rate over a three year period (2009 to 2011).






Between 2005 and 2008 a common mill rate (the rate of real property taxation expressed in terms of dollars per 100,000 dollars of assessed value) was levied on residential and non-residential properties.

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.

2. 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.

A Case Study: The Effect of the Proposal to Phase-in a Split Servus Place Mill Rate on St. Albert Businesses

The annual and total (cumulative effect) effects of the proposal to split the Servus Place mill rate and phase it in over a three year period are set out below.

A warehouse and a restaurant with an assessed value of $900,000 and $1,800,000 in 2008 respectively serve as the “representative” enterprises that are exposed to the split mill rate regime proposed in the budget document. The dollar value of the increase in taxes over the amount that would have been experienced if the common mill rate policy was left in place is shown for each property for each year in the 2009-2011 implementation time frame. The cumulative increase in taxes paid over the three year period in which the split mill rate is introduced is also shown.

Figures 2 and 3 illustrate the extent of the tax increase experienced by the warehouse and restaurant businesses as a result of the tax shifting resulting from raising the non-residential and lowering the residential Servus Place mill rate.


























Conclusion:
The split in the mill rate changes the rules of the game and as noted in the above case increases the portion of the taxes required to service the Servus Place debt paid by non-residential property owners.