City reduces this years tax increase despite $85K tax revenue shortfall

The City of Prince Rupert managed to shave an extra percentage of this year's tax increase, despite a large tax shortfall.

This year’s residential tax increase is now going to be less than previously expected. Prince Rupert home owners can now expect a 3.6 per cent increase to their property taxes for 2012; down from the original estimate of a 4.56 per cent increase.

“We are trying to limit expenditures wherever we can, Mr. Rodin and I went through the budget and made some fiscal changes and minor operational changes and we’ve picked up another percentage point,” says City Manager Gord Howie.

While this may bring some relief to the home owners who are frustrated by yearly tax increases, it’s still a far cry from the Mayor Jack Mussallem’s goal of having an increase no higher than the rate of inflation: 2.2 per cent.

But the fact that city staff have managed to shave a percentage off of the tax increase – equivalent to reducing this year’s deficit by $100,000 – is no small feat. Especially when you consider that the City’s non-residential tax revenues are going to be $85,000 short of what they were expecting.

BC Assessment has lowered the market value of Prince Rupert’s major industry properties by six per cent.

“That’s going to reduce the amount of taxes that we are going to receive from that heavy industry category by about $164,000,” says the city’s Chief Financial Officer, Dan Rodin.

The majority of what qualifies as major industry in Prince Rupert are mostly heavy industrial companies located on port property such as Ridley Terminals, Prince Rupert Grain, and Houston Pellet. Under normal circumstances, the city would be able to increase the tax rate to ensure that they get the same amount of taxes regardless of a fall in market value. But that’s not the case here.

The tax rate for major industry on port property is capped by the provincial government at $27.50 per every $100,000 of assessed value. Because of the cap, the city cannot raise the tax rate to make up for the the shortfall. The provincial government announced in the recent budget that it will make this cap permanent; a move that was touted as beneficial for the community by the Prince Rupert Port Authority.

The Prince Rupert Northern View has asked BC Assessment for an explanation for why major industry properties in Prince Rupert have received decrease in their assessments, but they have yet to get back to us.

Revenues from business property taxes are also expected to fall this year because of a non-market change of -1.2 per cent. Since the city doesn’t adjust the tax rate to compensate for non-market changes, this means that revenues will be an additional $52,000 less than expected.

On the flip-side, market values for light industry businesses jumped on average by a whopping 21.5 per cent, but the city doesn’t plan to profit from this in any great way.

The city will be adjusting the tax rate rate so that business owners don’t get stung by a wild increase in their property tax costs. So, a light industry business that saw their property value go up by exactly 21.5 per cent will not have to pay a penny more than they did last year.

“If we had a property that was worth $500 and the tax rate was 10 per cent and the it became worth $1000 simply because of market change, we would reduce the tax rate down to 5 per cent so we would still get the same $500,” explains Rodin.

BC Assessment has explained in the past that the jump in market values was a result of light industry properties in Prince Rupert being undervalued for several years, and a price correction was needed. Some business owners have successfully appealed their assessments since then.

But there was a non-market value increase in light industry properties of 6 per cent, which will bring in an extra $58,000 into the city’s coffers.

New construction and improvements to homes has also created a non market change of 1.1 per cent which will bring in an extra $70,000 without having to raise taxes for it.

When all is said and done, the city is still getting $85,000 less in taxes than they were expecting and city staff still managed to pare back this year’s tax increase.

The savings were found from a number of areas. The city managed to save an unexpected $40,000 on its employee benefits package.

“We’ve trimmed some supplies and services, some positions haven’t been filled yet so there’s going to be some small savings there. We’ve scaled a few things back, but there isn’t any one great big thing that we’ve done to accomplish this; just trimming and cutting,” says Rodin.