Calgary council could spend savings to soften business tax hikes, again

On Tuesday, a city council committee will once again debate whether to dip into its savings to limit business tax hikes outside the downtown Calgary core.

This year, administration proposes to take $44 million from savings to help limit tax hikes to no more than 10 per cent.

If approved, it would be the third year in a row Calgary has dug into its rainy day fund to alleviate the tax burden, bringing the tally to more than $120 million.

In the past two years, council kept the tax hike at no more than five per cent.

At issue is the sharp decline in tax coming from the core, where vacancies in the downtown office towers have led to a $14 billion write down in property value and left a $250 million hole in the city's tax revenue.

That reduction in tax revenue means businesses outside the core have to pick up the slack.

Other options

In addition to digging into savings, administration has provided other options for dealing with the ongoing tax troubles, including shifting more of the burden onto residential taxes.

Currently, the ratio of business tax to residential tax is skirting the 5:1 upper limitallowed under legislation at4.47:1. Administration says it could get that down to 4.07:1 by 2022 if anticipated budget savings and a higher residential rate come into play.

"We have to remember that hidden behind this language of 'shifting the ratio' means increasing residential property taxes and we also have to be very thoughtful about the impacts that that is going to have on businesses," said Mayor Naheed Nenshi.

Other short term solutions proposed by administration include the creation of a new small business sub-class for taxes, capping residential tax decreases at 10 per cent, and budget cuts.

Mid- and long-term solutions include trying to encourage capital investments in renovating and re-purposing downtown office buildings andfocusing efforts on developing city-owned lands to increase the tax base.