After being among the fairest Saskatchewan cities in 2010 when it comes to municipal property taxes, Estevan is now considered the third least fair based on 2013 numbers.
That was the story told in a report by the Canadian Federation of Independent Business (CFIB) when the seventh annual edition of the Wanted: Property Tax Fairness in Saskatchewan study was published last week.
Among the cities, Estevan’s property tax gap ranks 13th out of 15, and among all studied municipalities with a population of more than 1,000, the Energy City ranks 53rd out of 69.
The property tax gap, as identified by CFIB, measures the difference between municipal property taxation of commercial and residential properties. CFIB identifies “fair” tax gaps as those that are narrow, where the commercial and residential tax rates are more similar.
Estevan’s property tax gap jumped to 2.82. In 2010 it was 2.27, and in both 2011 and 2012 it was 2.24. The average gap in 2013 was 2.48 among the cities, meaning that on average businesses paid $2.48 in property tax for every dollar paid by residential owners. In 2013, Estevan homeowners paid $992 in municipal taxes per $200,000 of assessed value, while commercial properties were taxed $2,797 for the same assessed value. The figures don’t include provincial and educational taxes or costs for utilities like water, electricity or gas.
Martensville was labeled as the most fair, with a property tax gap of 1.48. Residential taxes in that city were $1,558, per $200,000 assessment while businesses paid $2,310. CFIB said that makes Martensville the fairest city in the province, the fourth year in a row it has received the glowing label.
All those numbers, however, may not tell a complete story of Estevan’s tax fairness. CFIB is measuring what is fair by the difference in property tax share, and Estevan has the third largest difference among the cities.
But as part of Estevan’s “unfairness” the city has the third lowest residential tax rate among Saskatchewan cities, behind Swift Current, $845 per $200,000 of assessed value, and Saskatoon, $895.
When looking province-wide, Estevan sits seventh out of 15 cities when considering the $2,797 businesses pay in municipal property taxes, 13.4 per cent less than the average of $3,234.
Amber Smale, Estevan’s city manager, said the numbers themselves tell a very narrow story. The numbers don’t do a very good job of providing context or explaining economic significance.
“(The report) only focuses on property taxes, so it doesn’t have the fuller picture of the services the City has to deliver,” said Smale, who noted the report isn’t without its merits and that a lot of work goes into it. It’s a good document to have in the back of the mind as the City soon looks to deliberate on the 2015 budget.
The difference in tax rates comes from the mill rate factor. When the City sets its mill rate, the province provides a number of “tax tools” in relation to the mill rate, said Smale. One of those tools is a mill rate factor, which allows the City to shift the tax burden between different classes of property, among those includes residential and commercial rates.
As is shown in the report, all Saskatchewan cities shift the scale heavier toward the commercial side, and each city has its own reasons for doing so.
“Here in Estevan, the likely reason for that is simply the industry we’re dealing with,” said Smale. “Everybody has a different industry and economy, and here in Estevan, ours is heavy (industry of) oil and gas. The large equipment, vehicles, things like that, that impact our infrastructure differently than other centres, so we shift a higher burden onto the commercial.”
She said there is a balance that the City is always trying to find. Fair isn’t the term the city manager chooses to use when speaking about the differences in property taxation.
“The cities are legislated, and we’re provided with a limited ability to raise revenue. Property taxes is one of those things (we can do),” she noted. “We try to be fair, but we have to balance that out with the different groups. We have our parameters that we have to work in.”
The balance is imperfect and constantly in flux. It’s the mystery that may never be solved, though the City takes its best stab at the equation each year and is looking for more feedback from commercial stakeholders. She said the City doesn’t hear much, but is open to hearing more about whether or not the gap in Estevan is too significant.
“It’s about the cost of the City doing business, anywhere from our equipment to our supplies to the road construction that we do, all those things are factored differently for a city,” noted Smale, who said the municipal price index, not the consumer price index should be studied to see the actual costs the City incurs to do business.
One pitfall in Estevan is the frequent struggle with being presented with cost-competitive options. When the City issues tenders for various projects, oftentimes they’ll receive one bid, providing few options.
“Tenders are an issue. There are times we only get one, and if you only have one choice, then it’s usually a high one. But the work still needs to get done,” said Smale.
There are a number of factors that play into that. Estevan is a small rural city, and with the high rate of activity in the area local companies are often already stretched thin, particularly as the area continues to deal with a shortage in labour.
The CFIB report also pointed to some recommendations for how municipalities can cut costs. The recommendations are great if they can be done. Smale wasn’t so sure Estevan could capitalize on all the tips.
“The report speaks about cutting through attrition, but you can’t always do that. We’re not overstaffed as it is. We’re just doing the minimum that we can. As soon as you start cutting people, well, then you’re cutting services as well.”
Finding the balance is the key.
The report outlined other policy reminders, like limiting spending. Smale said that’s something they are reviewing with a complete study of the City’s programs and services.
“We’re trying to balance out the property tax thing. We realize that huge increases each year just aren’t going to work,” said Smale. “It’s good to see it from that perspective, but we also have to bring in what it costs us to do business, and if we’re going to do one thing, what’s the trade off? Those are the tough decisions council has to make.”
