Council Report: 2020 TAX RATE OPTIONS

2020 TAX RATE OPTIONS

RECOMMENDATION:

THAT Council determine the municipal tax rates to be implemented for 2020 and direct that a bylaw be prepared to implement the tax rates accordingly.

CHIEF ADMINISTRATIVE OFFICER’S COMMENTS:

I concur with the recommendation.

PURPOSE OF REPORT:

To consider various tax rate options for 2020 that will achieve the Financial Plan’s revenue target for municipal taxation.

TIME CRITICAL:

Legislation requires the municipality to adopt a tax rates bylaw after adoption of the financial plan but before May 15 each year. After receiving direction from Council, staff will prepare the tax rates bylaw for consideration at the April 21, 2020 meeting with adoption on May 12, 2020. This schedule will allow sufficient staff time to prepare tax notices for mailing mid-May.

BACKGROUND:

The Community Charter requires Council to consider the tax rates proposed for each property class in conjunction with the objectives and policies in its financial plan, as outlined below:

Objectives

1. To ensure property value taxes remain affordable and reasonable for services provided.
2. To maintain consistent tax increases for average property values in all property classes.

Policies

1. Regularly review the affordability of property value taxes for each property class relative to other classes.
2. Regularly review and compare the Town of View Royal's distributions of tax burden relative to other municipalities in British Columbia.

Schedule D – Comparative Tax Ratios 2015-2019 (attached) compare key business and recreation class tax ratios for the Province and municipalities in the Capital Regional District for 2015-2019.

DISCUSSION:

The following schedules are attached to this report to assist Council in determining tax rates for 2020:

• Schedule A: 2020 Municipal Tax Rates Analysis – Scenario A, even increase across tax classes with no change to tax ratios
• Schedule B: 2020 Tax Rate Scenarios – Summary of impact per $100,000 assessment
• Schedule C: 2020 Tax Rates Analysis – Sample properties

Given the current COVID-19 pandemic and related financial crises we currently are facing, the following scenarios include three options that if implemented would result in a budget revenue shortfall. A separate report (2020-2024 Financial Plan Approval) to be considered by Council in conjunction with this report provides options for funding this shortfall.

• Scenario A: Even increase across tax classes with no change to tax ratios
• Scenario B1: 0% increase to total tax revenue ($488,300 revenue shortfall)
• Scenario B2: 0% increase to average residential taxes ($256,900 revenue shortfall)
• Scenario B3: 0% increase to prior year tax base ($301,200 revenue shortfall)
• Scenario C: Decrease Class 5 and Class 6 ratios to 3.1 and 3.3 respectively

Note that while information is provided for subsets of assessments within the residential class (single family, strata), legislation allows only one rate for the residential property class.

BUDGET IMPLICATIONS:

The tax rate scenarios presented in Scenarios A and C are based on raising enough tax revenue to meet the financial plan’s 2020 target of $9,227,574. At its budget workshops in February, Council considered the financial plan based on an estimated 2.9% overall tax increase, excluding additional revenue from new construction. Since that time, BC Assessment issued its revised roll, on which final tax rates are based. The revised assessment roll includes a small reduction ($36,000) in new construction estimates. The attached tax calculations have compensated for this by increasing the overall tax increase accordingly, going from 2.9% to 3.4% for Scenario A (even increase across all tax classes with no change to tax ratios).

Scenarios B1, B2 and B3 are based on different interpretations of a 0% increase and all result in a tax revenue shortfall. If one of these scenarios is supported, there is a risk that taxpayers will expect to pay the same property tax amount as they did in 2019. In fact, the amount a taxpayer will pay is dependent on multiple factors such as the individual property’s assessment in relation to others within the class, shifts in assessments between classes and the effect of new construction on each class. Council may wish to consider additional communication with taxpayers to help manage these expectations.

Specific properties owners will experience changes in tax rates differently to the extent that the change in their property assessed value differs from the average change in total assessments.

RECOMMENDATION:

THAT Council determine the municipal tax rates to be implemented for 2020 and direct that a bylaw be prepared to implement the tax rates accordingly.

SUBMITTED BY: D. Christenson, Director of Finance

REVIEWED BY: K. Anema, Chief Administrative Officer