Review and Analysis of Municipal Property Tax Tools

Transcription

1 Review and Analysis of Municipal Property Tax Tools Prepared by March 2012

2 Table of Contents 1. Executive Summary...1 Conclusions Background...17 Municipal Property Tax Tools...19 Subclasses...19 Mill Rate Factors...20 Minimum Tax...20 Base Tax...21 Property Tax Phase-in...21 Data and Analysis Subclass Authority...23 Cities...24 Other Urban, Northern and Rural Municipalities Mill Rate Factors...28 City Mill Rate Factors...29 General Application...33 Ranges by Property Class...34 Ranges by Municipality Type and Ratio Analysis...37 Other Tax Tools Used...59 Effect of Other Tax Tools...60 Sample Limitations on Mill Rate Factors Minimum Tax...67 General Application...68 Application by Municipality Type...72 Property Tax Distribution Effect of Minimum Tax...84 Minimum Tax on a Province Wide Basis Base Tax...86 General Application...87 Application by Municipality Type...89 Property Tax Distribution Effect of Base Tax...99 Base Tax on a Province Wide Basis Property Tax Phase-in Tax Levy Analysis Effective Mill Rate by Property Class Defined Effective Mill Rate by Property Class Comparison Effective Total Mill Rate Ratios Analysis by Municipality Type No Tax Tools RM Effective Mill Rate Ratios Maps 1, 2 and Conclusions...132

3 Table of Contents 9. Appendix Oil and Gas Industry Concerns Appendix Glossary of Terms 145

4 1. Executive Summary Page 1

5 Executive Summary Executive Summary Saskatchewan municipal governments enjoy considerable authority, autonomy and flexibility in establishing property tax policies that reflect local circumstances. This extensive authority carries with it the expectation of even greater accountability and responsibility to the public that municipal councils serve and to the provincial government. Over the years, various sectors have raised concerns about unlevel playing fields for various property classes and the amount of property taxes being paid relative to other property types and other municipalities. This report reviews and analyzes the use of municipal property tax tools for the year The following chart shows the number of municipalities using tax tools by municipality type and for each tax tool. Some municipalities use more than one tax tool. Overall, only 21% do not use any tax tools. This indicates a substantial reliance on tax tools by all municipal types Tax Tool Use by Municipality Type Tax Tools Municipal Type Total Municipalities Base Tax Minimum Tax Mill Rate Factor No Tax Tools City Percentage of City Total 53% 27% 100% 0% Town Percentage of Town Total 59% 52% 58% 0.69% Village and Resort Village Percentage of Village Total 46% 56% 22% 10% Total Urban Percentage of Urban Total 50% 53% 36% 7% Rural Municipality Percentage of Rural Municipality Total 13% 29% 45% 38% Northern Town,Village,Hamlet Percentage of Northern (Towns,Villages,Hamlets) 17% 38% 17% 38% NSAD Percentage of NSAD Total 0% 64% 55% 36% Total Percentage of Total 33% 45% 40% 21% Page 2

6 Executive Summary The municipal property tax tools reviewed include subclasses (cities only), mill rate factors, minimum tax, base tax and property tax phase-in (cities only). Provincial legislation/regulations establish three property classes for municipalities to which the various local tax tools may be applied. These property classes are Agriculture,, and Commercial and. The following are summary findings for each of the tax tools and overall tax analysis reviewed in this report. Subclass Authority Cities Provincial legislation/regulations authorize cities to further divide the established property classes, if they choose. Various property tax tools may be applied to different subclasses to change the relative incidence of municipal property tax among them. The review showed that while a few similar property subclasses were created among the cities, there were also substantially different property subclasses among the cities. Where similar property subclasses were created, there was some inconsistency in tax treatment among the cities. This, in addition to the other property subclasses created, is a reflection of the different priorities facing each municipality. Where mill rate factors among similar property classes are substantially different, there may also be other tax tools applied to varying degrees. The extensive use of subclasses suggests that this tool is important to cities. The tables on the following pages show the property classes and subclasses set by the cities with corresponding mill rate factors shown in parentheses. The table also shows the average mill rate factors, where used, for each property class and subclass. In general, the agriculture (rural municipalities) and residential (urban municipalities) property classes are treated more favourably. industrial property typically compensates for these tax shifts. In some cases, railway, pipeline, and elevator subclasses have higher mill rate factors which may be to offset the lower percentage of value (75%) in comparison to the general commercial/industrial property class (100%). Page 3

7 Executive Summary 2010 City Property Classes/Subclasses, Mill Rate Factors Estevan Humboldt Lloydminster Martensville Meadow Lake Melfort Melville Moose Jaw Property Class (Mill Rate Factor) Agriculture (0.1935) (0.5826) (0.9258) Agriculture (0.8450) (0.6350) (1.6830) Agriculture (2.0000) (1.0000) (2.0000) Agriculture (1.0000) (1.0000) (1.4229) Agriculture (1.4500) (0.9000) (1.4500) Agriculture (0.7900) (0.7900) (1.5100) Agriculture (1.0000) (0.4566) (1.2727) Agriculture (0.2783) (0.7948) (1.1734) Agriculture (Non-Arable) (0.2234) Agriculture (Non-Arable) (0.8450) (Apartments) (1.143) Condominium (0.5236) Condominium (.6350) Condominium (0.7900) Condominium (0.7153) Property Subclass (Mill Rate Factor) Multi-Unit (4-11 units) (0.8126) Multi-Unit (>11 units) (0.9258) Railway and Pipeline (1.5839) Multi-Unit (>3 units) (1.1430) Railway and Pipeline (1.6830) Multi-Unit (Family) (1.0000) Railway and Pipeline (2.0000) Multi-Unit (Family) (0.9000) Railway and Pipeline (1.4500) Multi-Unit (Family) (1.5100) Railway and Pipeline (1.5100) Multi-Unit (<3 units & <$100,000 assessment) (0.4566) Multi-Unit (3 & over & <$100,000 assessment) (0.4566) Multi-Unit (>3 & >100,000 assessment) (1.2727) Railway and Pipeline (1.2727) Multi-Unit (Family) (0.7948) Railway and Pipeline (1.4900) (Mall) (1.1923) (Motels) (0.8243) Elevators (1.6830) (Hotel/Motel /Mall) (1.4290) (Machinery/ Equipment) (2.0000) Elevators (1.6836) (Hotel/Motel) (0.7023) (Halls) (1.0000) Elevators (1.4900) (Golf Course) (0.3300) Page 4

8 Executive Summary 2010 City Property Classes/Subclasses, Mill Rate Factors (con t) North Battleford Prince Albert Regina Saskatoon Swift Current Weyburn Yorkton Average MRF Property Class (Mill Rate Factor) Agriculture (3.2680) (0.5570) (1.8120) Agriculture (1.0750) (0.8440) (1.4000) Agriculture (1.2295) (0.9006) (1.2295) Agriculture (1.1612) (0.9456) (1.1612) Agriculture (1.2700) (0.3625) (1.7470) Agriculture (0.6401) (0.4120) (1.4699) Agriculture (0.5474) (0.2190) (1.2000) Agriculture (1.1345) (0.6461) (1.4305) Agriculture (Non-Arable) (1.0750) (Vacant Land) (2.6140) (Vacant Land) (0.7250) (Vacant Land) (0.7084) (Personal Care Home) (0.7085) (Vacant Land) (0.8842) Condominium (0.5570) Condominium (0.7620) Condominium (0.9006) Condominium (0.9456) Condominium (0.6401) Condominium (0.2190) Property Subclass (Mill Rate Factor) Multi-Unit (Family) (1.5830) Railway and Pipeline (1.8120) Elevators (1.8120) Multi-Unit (Family) (1.2680) Railway and Pipeline (1.8530) Multi-Unit (Family) (0.9006) Railway and Pipeline (1.2295) Multi-Unit (Family) (0.9623) Railway and Pipeline (1.1612) Elevators (1.1612) Multi-Unit (Family) (1.8100) Multi-Unit (4-6 units) (1.1460) Elevators (1.7470) Multi-Unit (4-11 units) (1.1179) Multi-Unit (12 & over) (1.0196) Multi-Unit (Trailer Court) (2.0827) Multi-Unit (Family) (0.2190) Railway and Pipeline (1.2000) Elevators (1.2000) (Golf Courses) (0.9219) (Aircraft Hangars) (0.6619) (Non Profit Halls) (1.8000) (Motel) (0.6855) (Hotel) (0.8138) (Mall) (1.1779) (Hall) (0.9937) (Mall) (0.8842) Page 5

9 Executive Summary Towns, Villages and Resort Villages In 1998, the authority to establish residential condominium subclasses was introduced to towns, villages and resort villages. 41 of those municipalities chose to create a residential condominium subclass. In 2001, coinciding with the 2001 revaluation and the provincial decision to treat all residential property classes the same (percentage of value), the number of towns, villages and resort villages that chose to create a residential condominium subclass decreased to 16. The declining use of the residential condominium subclass authority outside of the cities, the 2001 provincial decision to treat all residential property types the same and the similar application of tax tools among the residential condominium and single family residential property classes suggested this authority may no longer be required. Accordingly, in 2006 residential condominium subclass authority for Towns, Villages and Resort Villages was removed. Towns, villages and rural municipalities were given the authority to create a local tax tool subclass for hotel/motels to provide for a two year phase-in as a result of the substantial increase in hotel/motel assessments in comparison to other property types with the 2009 revaluation. This authority was in effect for the years 2009 and 2010 only as new property assessments were prepared and used for hotels/motels in the 2011 taxation year. Mill Rate Factors Mill rate factors are set by municipal councils. Mill rate factors may be applied to municipal mill rates. Mill rate factors adjust the incidence of property tax among property classes. This tax tool applies only to municipal property taxes. In 2010, mill rate factors were applied to 334 (39.67%) out of 842 municipalities, including the Northern Saskatchewan Administration District (NSAD) comprised of 11 northern settlements, 14 recreational subdivisions and 31 resource districts. In 2010, the commercial property class generally had higher mill rate factors, and therefore generally higher tax rates, than all other property classes. As the table (below) shows, this is significantly higher than the factor applied to most other property classes Average Mill Rate Factors (where used) by Property Class Municipality Type Agriculture Commercial & City Town Village/Resort Village Rural Municipality Northern Town & Village Northern Hamlet, Settlement, Subdivision Northern District Page 6

10 Executive Summary The table below compares the average mill rate factors, where used, for property subclasses implemented by the city sector Average Mill Rate Factors (where used) by Property Subclasses Municipality Type Other Agriculture Other Condo Multi-Unit Railway and Pipeline Elevator Other Commercial City The multi-unit residential average mill rate factor (1.0545), where used by cities, is higher than the residential average mill rate factor (0.6461). The residential condo average mill rate factor (.6688) is slightly higher than the residential average mill rate factor (.6461). Where subclasses are established for railway and pipeline and elevators the average mill rate factor is higher than the commercial and industrial average mill rate factor. This is probably associated with the differing percentage of values for commercial and industrial at 100% and railway and pipeline and elevators at 75%. In most cases, the higher mill rate factor applied to the commercial property class benefits the agricultural or residential property classes. The higher average commercial mill rate factor should not be viewed in isolation. The relative tax difference within each municipality is a function of not only mill rate factors but also other tax tools utilized by those municipalities. This provides a clearer picture of the relative tax levels for the different property classes. The graph below shows mill rate factor policies for cities by property class. The commercial property class has typically higher mill rates compared to residential and agricultural. Even so, North Battleford has an agricultural mill rate factor of At the lower end of the agricultural mill rate factor scale are Estevan (.1935), Moose Jaw (.2783) and Yorkton (.5474). Both Lloydminster and Martensville have not established residential mill rate factor policies. The next top three cities with residential mill rate factors are Saskatoon (.9456), Regina (.9006) and Meadow Lake (.9000). The lowest residential mill rate factors include Yorkton (.2190), Swift Current (.3625), Weyburn (.4120) and Melville (.4566). Commercially, Lloydminster (2.000), North Battleford (1.812), Swift Current (1.747) and Humboldt (1.6830) have the highest commercial mill rate factor policies and Estevan (.9258), Saskatoon (1.1612), Moose Jaw (1.1734) and Yorkton (1.200) have the lowest commercial mill rate factor policies. Page 7

11 Executive Summary Number of Policies Cities Mill Rate Factor Policies Mill Rate Factor Ranges Agriculture The following graph shows the commercial to residential mill rate factor ratios for cities. Number of Cities Cities Mill Rate Factor Ratios 0 Mill Rate Factor Ratio Ranges Cities Minimum Tax A minimum tax is either a specific amount of tax or a method of calculating a specific amount of tax (such as a rate per front foot for each lot or a rate per acre of land) applied to all properties of a certain type. This tax tool applies only to municipal taxes. The basic application of the minimum tax is: Taxable assessment x municipal mill rate = municipal property tax: - if the calculated municipal property tax is less than or equal to the minimum tax set by council, then the minimum tax would apply; or Page 8

12 Executive Summary - if the calculated municipal property tax is greater than the minimum tax set by council, then the greater amount applies. Minimum tax tends to shift property tax to lower assessed value properties. Minimum taxes were applied in 381 (45.25%) municipalities. Minimum tax as a percentage of the total municipal property tax levy was approximately 14.04%, where used. In 2010, 108 municipalities (28.4% of those using a minimum tax) had a minimum tax levy that was greater than 50% of the total municipal property tax levy. Base Tax Introduced in 2001, the base tax is a specific amount of property tax levied, regardless of the assessed value of a property. This tax tool applies only to municipal taxes. A different amount of base tax may be set for different property classes, for lands or improvements or both. A levy equal to the taxable assessed value of the property multiplied by the mill rate may be added to the amount of base tax, to determine the total municipal tax levy. For example, a municipal council may determine that the basic costs of operating the municipality (garbage collection, snow removal, street maintenance, administration, etc.) are $500 per residential and commercial property with improvements. Council could apply a $500 base tax to all commercial and residential improvements to cover these basic costs. This is similar to a user pay system. The base tax, which has a similar effect as the minimum tax, was added to provide an easier to administer tax tool compared to the minimum tax. Like minimum tax, base tax shifts property tax to lower assessed value properties. Base taxes were applied in 274 (32.54%) municipalities. Base tax as a percentage of the total municipal property tax levy was about 31.15% on average, where used. In 2010, 131 municipalities (47.81% of those that used a base tax) had a base tax levy that was greater than 50% of the total municipal property tax levy. Property Tax Phase-in (Cities only) Property tax phase-in sets a limit on property tax increases or decreases resulting from property revaluation. An assessed owner of property may receive a gradual property tax change over a maximum of four years as a result of a phase-in plan. Council may establish a phase-in plan that sets maximum dollar amounts or percentages of tax increases or decreases for each year of the plan. This applies only to the municipal portion; however, it may apply to other taxing authorities but only if agreed upon with the other taxing authority. Recent uses of phase-in as a result of the 2009 revaluation include the cities of Moose Jaw, Regina, and Saskatoon. Yorkton chose to phase-in tax changes resulting from implementing a base tax. Moose Jaw phased-in commercial property tax changes over 3 years from 2009 to Regina also phased-in commercial property tax changes over 3 years commencing in Page 9

13 Executive Summary Saskatoon phased-in agriculture/commercial/multi-unit residential over four years from 2009 to 2012 on a percentage basis of 15%, 20%, 30% and 35%. For residential and condominium property classes, the phase-in covered a two year period being 2009 and 2010 with equal portions each year. The city of Yorkton implemented a base tax for multi-unit residential in 2010 and implemented a 2 year phase-in for the multi-unit residential class. This tax tool could become redundant if `a shorter revaluation cycle were adopted in the future, although Yorkton s phase-in was not linked to revaluation. Tax Analysis - Combined Effects of Tax Tools The effective (average) mill rate for each property class is determined by taking the total municipal property tax levy for a given property class and dividing it by the taxable assessment for that property class within a municipality. Since the total property tax levy by property class takes into account all local tax tools, the effective mill rates show the overall relative tax rates among property classes. This report measures the relative tax rates among property classes within a municipality by dividing the effective (average) municipal mill rate for a property class by the total effective (average) mill rate. For example, if the effective mill rate, which took into account all tax tools, for the commercial property class was 50 and the total effective mill rate for the municipality was 25, the effective mill rate ratio for that property class would be 2 (50 divided by 25). In this manner, the relative levels of taxation among local property classes, taking into account all local tax tools, may be determined. The following graph shows the effective mill rates by range for each municipal type. For example, there are 19 villages and resort villages with effective mill rates in the 0 to 10 range and 36 in the range over 65. This compares the wide range of effective mill rates employed by and within the various municipality types. Rural municipalities have the tightest effective mill rate. It is interesting to find the significant variances of some of the other municipal types. Number of Municipalities Effective Mill Rates by Municipality Type Effective Mill Rate Ranges Cities Towns Villages/Resort Villages Rural Municipalities Northern Page 10

14 Executive Summary The following graph shows a comparison of the effective (or average) mill rates for cities. There is a wide variance of effective mill rates starting from Lloydminster in the 0 to 5 range at 4.15 to Melville in the over 28 range at Number of Cities Cities Effective Mill Rates Effective Mill Rate Ranges Cities Effective Mill Rates The following graph shows the city commercial and industrial sector pays a higher rate of property taxes than other property types. The effective mill rate ratios in excess of 1.00 indicate a higher tax incidence in comparison to the total effective mill rate ratio. and residential condo effective mill rate ratios are 1.00 and under and all commercial and industrial property class effective mill rate ratios are higher than The agriculture and multi-unit residential property classes are varied with some less and some more than Number of Cities Cities Effective Mill Rates by Property Class as Function of Total Effective Mill Rate Effective Mill Rate Ratio Ranges Agriculture Condo Multi-Unit Commercial and Page 11

15 Executive Summary The following graph shows effective mill rate ratios for each property class for all municipalities, including NSAD. Multi-unit residential and residential condo property classes are specific to cities. There are 577 (68.69%) out of 840 residential effective mill rate ratios in the 0.9 to 1.10 ranges. For the commercial and industrial property class there are 344 (43.32%) out of 794 commercial and industrial effective mill rate ratios in the 0.9 to 1.10 ranges. For agriculture, there are 305 (43.14%) effective mill rate ratios out of 707 in the 0.0 to 0.9 ranges. There are 40 villages and resort villages and 31 towns for a total of 71 (91.02%) out of 78 with an agriculture effective mill rate ratio greater than 1.5 Number of Municipalities All Municipalities Effective Mill Rate Ratios by Property Class as Function of Total Effective Mill Rate Effective Mill Rate Ratio Range Agriculture Condo Multi-Unit Commercial and The following three graphs show the effective mill rate ratios by property class for each municipality type. The first is a comparison of effective mill rate ratios for the agriculture property class by municipal type. There is a wide distribution of effective mill rate ratios with the majority falling in the 1.0 and under ranges. Assessments for agriculture land in an urban setting are typically small and the higher effective mill rate ratios may reflect a local tax policy to reflect the services provided. Page 12

16 Executive Summary 2010 Agriculture Effective Mill Rate as a Function of Total Effective Mill Rate by Municipality Type Number of Municipalities Effective Mill Rate Ratio Ranges Cities Villages/Resort Villages Northern Towns, Villages, and NSAD Towns Rural Municipalities The next graph shows a comparison of residential effective mill rate ratios by municipal type. This graph does not include residential condo and multi-unit residential for cities. The majority of effective mill rate ratios for all municipal types fall in the ranges from 0.80 to Cities have 14, towns 144, villages and resort village 282, rural municipalities 195 and northern municipalities have 61 for a total of 624 (74.28%) out of a total of 840. Page 13

17 Executive Summary 2010 Effective Mill Rate as a Function of Total Effective Mill Rate by Municipality Type 140 Number of Municipalities Effective Mill Rate Ratio Ranges Cities Villages/Resort Villages Northern Towns, Villages, and NSAD Towns Rural Municipalities The final of the three graphs shows the effective mill rate ratios for the commercial and residential property class by municipality type. All 15 cities have effective mill rate ratios for the commercial and industrial property class in the ranges above Towns have 121 (83.45%) out of 145 commercial and industrial effective mill rate ratios in the ranges from 0.70 to Villages and Resort Villages have 225 (79.22%) out of 284 in the ranges from 0.60 to Rural municipalities have 288 (97.96%) out of 294 in the ranges from 0.90 and over. For northern municipalities and NSAD, there are 30 out of 56 in the 0.90 to 1.10 range and 19 in the range over 1.5. Page 14

18 2010 Commercial and Effective Mill Rate as a Function of Total Effective Mill Rate by Municipality Type Executive Summary Number of Municipalities Effective Mill Rate Ratio Ranges Cities Towns Villages/Resort Villages Rural Municipalities Northern Towns, Villages, and NSAD The table below presents a summary of the effects of removing all local tax tools. In other words, the table below shows what would happen if Saskatchewan returned to a property tax system based solely on uniform mill rates for municipalities. The chart shows the net municipal property tax shift for each property class for each municipality type and the percentage of total for all municipality types. For example, cities have a commercial and industrial decrease in the amount of $24,435,811 which represents 50.64% ($24,435,811/$48,255,176) of the net commercial and industrial property class shift. Page 15

19 Executive Summary All Municipal Types-Net Municipal Property Tax Shift if No Tax Tools-Summary Agriculture ($) Agriculture % of Total ($) % of Total Commercial and ($) Commercial and % of Total City (10,268) % 24,446, % (24,435,811) 50.64% Town (9,878) % 1,475, % (1,466,019) 3.04% Village/Resort Village 54, % (434,211) -1.41% 379, % Rural Municipality 17,360, % 5,202, % (22,563,284) 46.76% Northern Town and Village % 101, % (101,981) 0.21% Northern Hamlet % (11) 0.00% % NSAD % 67, % (67,906) 0.14% Total - Municipalities 17,395, % 30,859,981 (48,255,176) Organized Hamlet * (1,067) (27,160) * Included in Rural Municipalities Conclusions There are many considerations that must be addressed in evaluating local tax tools. Property taxes have significant financial effects on property taxpayers, the municipalities, school divisions and provincial social and economic goals. The province balances the need for communities to have autonomy to meet the unique and changing needs of Saskatchewan people with the public interest and provincial objectives. To effectively control municipal property tax tool application could require legislated limits well below and/or above the current practice in some instances. The shifts in taxation resulting from legislated limits, primarily from the commercial and industrial sector to the residential and agricultural property classes would need to be carefully considered. Based on the detailed results of this review and analysis, government will want to decide: whether in its view municipal tax policy decisions line up with provincial economic and social policies, whether there are instances where municipal property tax tool use is inconsistent with the province s own objectives, and whether such instances, if any, warrant legislative attention, such as setting limits on the application of the tax tools, possibly removing certain tax tool authorities, or implementing new alternatives. Local governments may also wish to reevaluate the overall impacts of their collective decisions relating to property tax tool use. Page 16

20 2. Background Page 17

21 Background Background Saskatchewan municipal governments enjoy considerable authority, autonomy and flexibility in establishing property tax policies that reflect local circumstances. This extensive authority carries with it the expectation of even greater accountability and responsibility to the public that municipal councils serve and the provincial government. Since the 1997 implementation of the municipal authority to use a variety of tax tools, which coincided with a revaluation that updated property assessment values by 29 years, various organizations, businesses and individuals have expressed concerns with the level of freedom to set local tax policy offered to municipalities. Some of these parties feel singled out by municipal councils and see their levels of taxation as unfair and inequitable. As part of its role of ensuring fairness and equity in the property taxation system, the provincial government conducted this review of the application of the tax tools available to municipal governments. The guiding principle in this review was to balance the mandate of MA to strengthen communities by providing them with the legal framework and relative independence to meet the unique and changing needs of Saskatchewan people, with the public interest and provincial economic and social objectives. The Northern Saskatchewan Administration District (NSAD) is one municipality operated by the provincial government. The 56 individual entities comprising the NSAD are Northern Settlements (11), Recreational (effective January 1, 2011 changed to Resort ) Subdivisions (14), and Resource Districts (31). Even though the NSAD is one municipality all entities are listed in this report. The provincial property tax system is based on a balance between the ad valorem concept and the use of both provincial and local tax tools to manage property tax incidence. The Ministry of sets property classes and percentages of value that are applied to assessed values by assessment service providers to calculate taxable assessments. With each revaluation, property assessment values change and municipal and school tax shifts occur. The next revaluation is The provincial percentages of value are: Provincial Property Tax Classes Percentages of Value Non arable (range) land 40% Other agricultural land and improvements 55% land and improvements 70% industrial land and improvements 100% Other industrial land and improvements (elevator, pipeline, railway) 75% The property tax system is an important source of financing both municipal services and the education system and needs to accommodate different taxation philosophies in the municipal and education sectors. Percentages of value can have an impact on local municipal tax tools as some municipalities will make adjustments to reverse (or enhance) provincial distribution decisions. Page 18

22 Background Municipal Property Tax Tools The tax tools available to municipal governments and the subject of this review are: the authority to establish property subclasses for taxation purposes (cities only) mill rate factors; minimum tax; base tax; and property tax phase-in (cities only). Municipal property tax tools apply only to the municipal portion of the property tax. A brief summary of each tax tool follows. Subclasses Cities The province sets three property classes for use by municipalities in conjunction with their property tax tools. These are Agriculture, and. Cities may establish property subclasses within these three property classes. In 2010, it was common, for example, for cities to establish subclasses for multi-unit residential (e.g., apartments) and residential condominiums within the property class. Different subclasses among the cities were often created to reflect local circumstances. For example, one city may have decided that motels, within the property class, required special consideration in local property tax policy decision making and opted to create a property subclass for motels; other cities felt this special treatment was not necessary. In 2001, the requirement for cities to obtain provincial approval for the establishment of subclasses was removed from legislation, providing cities with greater discretion and autonomy. As a result, no statutory limitations currently exist regarding the establishment of these subclasses. Other Urban, Northern and Rural Municipalities There currently is no authority for other urban, northern and rural municipalities to establish property subclasses. While this authority was extended to other urban municipalities (towns, villages and resort villages) in 1998 due to the difference in assessment values among residential condominium properties and others within the class, it was subsequently removed in Towns, villages and rural municipalities were given the authority to create a local tax tool subclass for hotel/motels to provide for a two year phase-in as a result of the substantial increase in hotel/motel assessments in comparison to other property types with the 2009 revaluation. This authority was in effect for the years 2009 and 2010 only as new property assessments were used for hotels/motels in the 2011 taxation year. Page 19

23 Background Mill Rate Factors Mill rate factors allow municipalities to effectively vary the mill rate applied to taxable assessments among the three local property classes (Agricultural,, and ) or subclasses, as applicable. This tax tool applies only to municipal taxes. To exercise this option, a uniform mill rate is set by a municipal council and multiplied by a mill rate factor to determine the factored mill rate applicable to each property class. For example, a council may decide to levy taxes at a higher rate on commercial properties. It could set a mill rate factor of 1.5 on commercial properties. If the uniform tax rate is 10 mills, then the factored mill rate on commercial property is 15 (10 x 1.5). In this case, other property types would pay taxes based on the uniform mill rate of 10, while commercial property would pay taxes based on the factored mill rate of 15. Mill rate factors can be used to: manage the tax shifts among the local property classes; and control the distribution of taxes among property classes within the municipality. Currently, there are no limitations on the actual mill rate factors set by a municipality. Provincial limits on mill rate factors that may be set by municipal councils could be prescribed in regulations but have not been. For example, mill rate factors set by municipal councils could be limited to a range of 0.75 to 1.25; no mill rate factor could be lower than 0.75 or higher than 1.25 for any given property class. Minimum Tax A minimum tax is either a specific amount of tax or a method of calculating a specific amount of tax (such as a rate per front foot for each lot or a rate per acre of land) that will apply to all properties of a certain type. A minimum tax may be established for land or improvements within each of the three local property classes (Agricultural,, and Commercial and ) or subclasses, as applicable. Minimum taxes apply only to municipal taxes. Council may apply a different amount of minimum tax or provide for different methods of calculating minimum tax for different property classes of land or improvements. The basic application of the minimum tax is: Taxable assessment x municipal mill rate = municipal property tax: if the calculated municipal property tax is less than or equal to the minimum tax set by council, then the minimum tax would apply; or if the calculated municipal property tax is greater than the minimum tax set by council, then the greater amount applies. Municipal councils are free to determine the criteria used in establishing a minimum tax and no statutory limitations exist regarding its application. Municipal statutes would require amendments to enable the province to set limits on minimum tax use. Page 20

24 Background Base Tax The base tax is a specific amount of property tax levied, regardless of the assessed value of a property. This tax tool applies only to municipal taxes. Council may set a specific amount as a base tax that may be applied to land or improvements within each of the local property classes (Agricultural,, and Commercial and ) or subclasses, as applicable. A different amount of base tax may be set for different property classes of lands or improvements. A levy equal to the taxable assessed value of the property multiplied by the mill rate may be added to the base amount of tax, to determine the total municipal tax levy. For example, a municipal council may determine the basic costs of operating the municipality (garbage collection, snow removal, street maintenance, administration, etc.) are $500 per residential and commercial property with improvements. Council could apply a $500 base tax to all commercial and residential improvements to cover these basic costs. Municipal councils are free to determine the criteria used in establishing a base tax and no statutory limitations exist regarding its application. Municipal statutes would require amendments to enable the province to set limits on base tax use. The base tax, which has a similar effect as the minimum tax, was added in 2001 to provide an easier to administer tax tool compared to the minimum tax. Property Tax Phase-in (cities only) Property tax phase-in sets a limit on property tax increases or decreases resulting from property revaluation. An assessed owner of property may receive a gradual property tax change over a maximum of four years as a result of a phase-in plan. Council may establish a phase-in plan that sets maximum dollar amounts or percentages of tax increases or decreases for each year of the plan. Phase-in may be applied to properties within three local property classes (Agricultural,, and Commercial and ) or subclasses, as applicable. Council may choose to implement a phase-in plan that applies to one, a combination of or all local property classes and the plan may differ among property classes. The only statutory restrictions on the phase-in authority one cities only and the maximum number of years allowed is four, as mentioned above. Property tax phase-in may be extended to school divisions by agreement. This is the only tax tool that can be extended to the education property tax. Page 21

25 Background Data and Analysis This report relies on the annual mill rate surveys prepared by municipalities and submitted to Grants and Financial Management Branch (GAFM), Ministry of Relations (MA), as the primary source of data. These surveys include information on taxable assessments, municipal, school and library tax (in only two cities) levies, and the application of local tax tools by property class for each municipality. The reliability of these surveys is subject to the accuracy of the responses by municipalities, and their review and the proper data entry by GAFM. The results of these surveys are available to the public on MA s website. The graphs, tables and charts contained within this document were prepared using information compiled through the application of sort features and various formulas found in any computerized spreadsheet program. Page 22

26 3. Subclass Authority Page 23

27 Subclass Authority Subclass Authority Cities Saskatchewan cities have the authority to establish property subclasses for taxation purposes. This portion of the report will focus on the cities subclasses implemented in Table A below illustrates property subclasses established by the cities. Other than Condominium and Multi-Unit property subclasses that were used by nearly all cities, the remaining subclasses reflected the unique considerations and priorities of each city. For example, the City of Saskatoon established a subclass for private aircraft hangars and the City of Weyburn established a multi-unit residential subclass for trailer courts. Multi-Unit residential subclasses were split further in some cities (i.e. Estevan and Weyburn) based on the number of units and/or size (assessment) of the multi-unit residential property. Other subclasses established provided for hotels, motels, malls, personal care homes, residential/vacant land and golf courses. The variation of subclass tax policies demonstrates the flexibility provided to cities to take into consideration local circumstances and priorities when deciding local tax policy. Details on the use of city subclasses with other tax tools will be provided in other portions of this report. Page 24

28 Table A: 2010 City Property Class/Subclass Comparison Subclass Authority Estevan Humboldt Lloydminster Martensville Meadow Lake Melfort Melville Moose Jaw Property Class Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture1 (Non Arable) Agriculture1 (Annexed) 1 (Apartments) Property Subclass Condominium Condominium Condominium Condominium Multi-Unit (4-11 units) Multi-Unit (>3 units) Multi-Unit (Family) Multi-Unit (Family) Multi-Unit (<3 units & <$100,000 assessment) Multi-Unit (Family) Multi-Unit (>11 units) Multi-Unit (>3 units & <$100,000 assessment) Multi-Unit (>3 & >$100,000 assessment) Railway and Pipeline Railway and Pipeline Railway and Pipeline Railway and Pipeline Railway and Pipeline Railway and Pipeline Railway and Pipeline (Mall) (Motel) Elevators Elevators Elevators (Hotel/Motel/ (Machinery/ Mall) Equipment) (Hotel/Motel) (Golf Course) (Halls) Page 25

29 Subclass Authority Table A: 2010 City Property Class/Subclass Comparison (continued) N.B Prince Albert Regina Saskatoon Swift Current Weyburn Yorkton Property Class Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture Agriculture1 (Non Arable) 1 (Vacant Land) 1 (Vacant Land) 1 (Vacant Land) 2 (Personal Care Home) 1 (Vacant Land) Condominium Condominium Condominium Condominium Condominium Condominium Property Subclass Multi-Unit (Family) Multi-Unit (Family) Multi-Unit (Family) Multi-Unit (Family) Multi-Unit (Family) Multi-Unit (4-6 units) Multi-Unit (4-11 units) Multi-Unit (>12 units) Multi-Unit (Trailer Court) Multi-Unit (Family) Railway and Pipeline Railway and Pipeline Railway and Pipeline Railway and Pipeline Railway and Pipeline Railway and Pipeline Elevators Elevators Elevators Elevators (Golf Course) (Aircraft Hangars) (Non Profit Halls) (Motel) (Hall) (Hotel) (Mall) (Mall) Page 26

30 Other Urban, Northern and Rural Municipalities Subclass Authority Other Saskatchewan urban (i.e. towns, villages and resort villages), northern and rural municipalities do not have the authority to establish a subclass for taxation purposes. In light of the decline in the use of the residential condominium subclass authority by urban municipalities outside the cities, and the fact that the residential condominium property subclass provincially had the same tax rates applied as the single family residential property class, this authority was removed in The primary reason for the decline in use of a residential condominium subclass was likely the reduction in the provincial percentage of value applied to the residential condominium property class for the 2001 revaluation from 85% to 70%. The province decided to apply the same provincial percentage of value to all residential property. Since the same percentage of value (70%) was applied to all residential property types in the 2001 revaluation, municipal councils may have decided that special treatment of residential condominiums was not required and the use of this subclass declined. Towns, villages and rural municipalities were given the temporary authority to create a local tax tool subclass for hotel/motels to provide for a two year phase-in as a result of the substantial increase in hotel/motel assessments in comparison to other property types in the 2009 revaluation. This authority was in effect for the years 2009 and 2010 only. New property assessments were used for hotels/motels in the 2011 taxation year. Page 27

31 4. Mill Rate Factors Page 28

32 Mill Rate Factors Mill Rate Factors All Saskatchewan municipalities have the option of establishing mill rate factors when considering local property tax policy. Table B displays mill rate factors used by municipality type. The use of mill rate factors is quite popular. In terms of percentage usage per municipality type, all 15 (100%) cities, 84 (57.93%) of 145 towns, and 31 (55.36%) out of 56 northern settlements, recreational subdivisions and resource districts (of the NSAD) have mill rate factor policies. For rural municipalities, 132 (44.59%) out of 296 have mill rate factor policies, while 68 (22.22%) villages/resort villages and 4 (16.67%) out of 24 northern towns, villages and hamlets had mill rate factor policies in Many towns and villages have preferred to use base tax or minimum tax rather than mill rate factors. Table B: 2010 Mill Rate Factor Use by Municipality Type Northern Cities Towns Villages/ Resort Villages Rural Municipalities Towns, Villages, Hamlets NSAD Total Municipalities Using MRF Total Municipal Type Percentage % 57.93% 22.22% 44.59% 16.67% 55.36% 39.67% City Mill Rate Factors Table C on the following pages shows the use of mill rate factors by the city sector. The cities may create property subclasses in forming local tax policy. Table C illustrates the property classes and subclasses utilized by the cities with the mill rate factors applied to each in parentheses. Some cities chose to apply the same mill rate factor to the residential condominium property subclass as was set for the single family residential class. This was likely a reflection of the provincial decision to set the same percentage of value for all residential property types for the 2001 revaluation. Prior to 2001, reflecting a difference in tax shifts in the 1997 revaluation, the percentage of value applied to condominiums was higher than that applied to single family residential types, therefore the general trend among cities was to apply a lower mill rate factor to condominiums to effectively levy taxes at a rate more comparable to single family residential property types. The average mill rate factor for the residential condo subclass is , slightly higher than the average mill rate factor for the residential property class at In regards to multi-unit residential, some cities have a higher mill rate factor than for residential single family property types. In other words, some cities chose higher mill rate factors on multi-unit residential units in order to tax them more, even though the provincial percentages of value, set at the same level for all residential properties, would indicate similar treatment for all residential property types as a provincial policy. Multiunit residential properties in most cities had a higher mill rate factor of , on average, compared to residential at and residential condo at The multiunit residential property class includes Saskatchewan Housing Corporation units. Page 29

33 Mill Rate Factors In all instances, the cities set a higher mill rate factor for commercial property, , on average than other property types. For cities, the mill rate factor ranges from a low of to a high of 2.0. Where other property subclasses were created, the cities generally chose to apply lower mill rate factors to golf courses, non-profit halls, motels/hotels and vacant residential land. The railway and pipeline property subclasses, however, had higher mill rate factors applied. This may be a result of the lower provincial percentage of value applied to railway and pipeline (75%) compared to the commercial and industrial (100%) property class. Mill rate factors should not be analyzed on their own. Using the city of Yorkton as an example, the residential mill rate factor of is the lowest but this is caused by the base tax applied to residential property generating a significant amount of revenue and effectively lowering the uniform mill rate to the advantage of the other property classes. This will be discussed in more detail later in the paper. The city of North Battleford has a comparatively high mill rate factor on agriculture property class and on vacant land. The overall agriculture assessment is low for many parcels. A higher mill rate factor is applied to address, in part, service delivery costs. The high mill rate factor for vacant residential land is used in part to address service delivery costs and to encourage development. The extreme range of mill rate factors among property classes within some of the cities is noted. However, the fact that similar property classes among the cities were treated very differently with respect to mill rate factors demonstrates the flexibility used by municipal councils in creating local tax policy that reflects the priorities of the community. Page 30

34 Mill Rate Factors Table C: 2010 City Property Classes/Subclasses, Mill Rate Factors Estevan Humboldt Lloydminster Martensville Meadow Lake Melfort Melville Moose Jaw Property Class (Mill Rate Factor) Agriculture (0.1935) (0.5826) (0.9258) Agriculture (0.8450) (0.6350) (1.6830) Agriculture (2.0000) (1.0000) (2.0000) Agriculture (1.0000) (1.0000) (1.4229) Agriculture (1.4500) (0.9000) (1.4500) Agriculture (0.7900) (0.7900) (1.5100) Agriculture (1.000) (0.4566) (1.2727) Agriculture (0.2783) (0.7948) (1.1734) Agriculture (Non Arable) (0.2234) Agriculture (Annexed) (0.8450) (Apartments) (1.143) Property Subclass (Mill Rate Factor) Condominium (0.5236) Multi-Unit1 (4-11 units) (0.8126) Multi-Unit (>11 units) (0.9258) Railway and Pipeline (1.5839) (Mall) (1.1923) (Motel) (0.8243) Condominium (0.6350) Multi-Unit (>3 units) (1.1430) Railway and Pipeline (1.6830) Elevators (1.6830) (Hotel/Motel/ Mall) (1.4290) Multi-Unit (Family) (1.0000) Railway and Pipeline (2.0000) (Machinery/ Equipment) (2.0000) Multi-Unit (Family) (0.9000) Railway and Pipeline (1.4500) Condominium (0.7900) Multi-Unit (Family) (1.5100) Railway and Pipeline (1.5100) Multi-Unit (<3 units) (0.4566) Multi-Unit (>3 units) (0.4566) Multi-Unit (>3 units, Assessment over 100,000) (1.2727) Railway and Pipeline (1.2727) Elevators (1.6836) (Hotel/Motel) (0.7023) (Halls) (1.0000) Condominium (0.7153) Multi-Unit (Family) (0.7948) Railway and Pipeline (1.4900) Elevators (1.4900) (Golf Course) (0.3300) Page 31

35 Mill Rate Factors Table C: 2010 City Property Classes/Subclasses, Mill Rate Factors (con t) North Battleford Prince Albert Regina Saskatoon Swift Current Weyburn Yorkton Average MRF Property Class (Mill Rate Factor) Agriculture (3.2680) (0.5570) (1.8120) Agriculture (1.0750) (0.8440) (1.4000) Agriculture (1.2295) (0.9006) (1.2295) Agriculture (1.1612) (0.9456) (1.1612) Agriculture (1.2700) (0.3625) (1.7470) Agriculture (0.6401) (0.4120) (1.4699) Agriculture (0.5474) (0.2190) (1.2000) Agriculture (1.1345) (0.6461) (1.4305) Agriculture (Non Arable) (1.0750) (Vacant Land) (2.6140) (Vacant Land) (0.7250) (Vacant Land) (0.7084) (Personal Care Home) (0.7085) (Vacant Land) (0.8842) Condominium (0.5570) Condominium (0.7620) Condominium (0.9006) Condominium (0.9456) Condominium (0.6401) Condominium (0.2190) Property Subclass (Mill Rate Factor) Multi-Unit (Family) (1.5830) Railway and Pipeline (1.8120) Elevators (1.8120) Multi-Unit (Family) (1.2680) Railway and Pipeline (1.8530) Multi-Unit (Family) (0.9006) Railway and Pipeline (1.2295) Multi-Unit (Family) (0.9623) Railway and Pipeline (1.1612) Elevators (1.1612) Multi-Unit (Family) (1.8100) Multi-Unit (4-6 units) (1.1460) Elevators (1.7470) Multi-Unit (4-11 units) (1.1179) Multi-Unit (12 units & over) (1.0196) Multi-Unit (Trailer Court) (2.0827) Multi-Unit (Family) (0.2190) Railway and Pipeline (1.2000) Elevators (1.2000) (Golf Courses) (0.9219) (Aircraft Hangars) (0.6619) (Non Profit Halls) (1.8000) (Motel) (0.6855) (Hotel) (0.8138) (Mall) (1.1779) (Hall) (0.9937) (Mall) (0.8842) Page 32