Prince Rupert city council is now considering its options for what to do about the provincial cap on port property taxes that the provincial government recently made permanent in their last budget.
But exactly what action it will take – if any – will have to be discussed in the weeks to come.
Prince Rupert resident, David Russell, came to the council meeting on Monday and asked councillors why they weren't doing more to convince the province to have the cap repealed.
“Is there anything we can do about this? I can't imagine the Alberta government going to Fort McMurray and saying 'oh, you can't tax the oil companies on this land any more than this amount of money.' Why are we being limited,” says Russell.
The cap prevents the City from raising property taxes on port businesses any higher that $27.50 per every $1,000 the port property is assessed as being worth. (Note: in a past article on this issue, it was mistakenly said it was for every $100,000 which is the scale used for residential taxes. Sorry for the confusion.)
While the province does give the City a payment designed to make up for the tax they are not allowed to collect from port businesses, it is a fixed payment of $1,490,251 and is not adjusted regardless of whether the port's property values go up or down.
“The amount we get as a top-up from the provincial government is not what we believe that property is worth,” says councillor Joy Thorkelson.
The result has been that a six per cent drop in the 2012 market value of the city's heavy industry properties – most of which are port properties – cost the city $164,000 in tax revenue because they weren't allowed to increase the tax rate to make up for it. City Staff had to make up for the shortfall with cuts to this year's municipal budget in order to prevent raising taxes on residents.
This doesn't sit well with Russell who says he's seen the assessment on his property value fall by $16,000 over four years, but because of yearly tax rate increases, is still paying more property tax every year.
“I feel taxed to the hilt and everyone I talk to feels the same way; they cannot believe how overtaxed we are up here. Yet we have this fantastic natural resource in the port, but we seem to be limited in how much we can use it for our own benefit – for everyone's,” says Russell.
The cap on the port's taxes is not new. It has been in place in its current form since 2004 and before the province decided to make it permanent it wasn't slated to expire until 2018.
The province decided to make the cap permanent as a way to foster economic growth in industries connected to the Asia-Pacific Gateway. When the decision was announced the Prince Rupert Port Authority whole-heartedly supported it.
“The job growth associated with BC and Canada's export industries are reliant on the continued expansion of port capacity on the west coast. This move will have a positive effect on the private investment required to build that capacity, and will allow the Port of Prince Rupert to attract new partners who value sustainable approaches to development," said the port authority's CEO, Don Krusel at the time.
The Port Authority argues that the cap on port property taxes is a good decision for the long term development of the port, even if there are short-term problems like this year's tax shortfall.
If the tax cap is repealed, it stands to reason that port properties will be subjected to yearly tax increases of unpredictable sizes much like residents are today. The port authority argues that this would be a big problem for attracting new long-term investment in the port.
The main benefit of the cap, says the port authority, is that it provides a stable, predictable and long-term tax regime that allows prospective new industries to know with certainty what their tax obligations will be before they decide to invest millions of dollars into a new facility that will need to operate for decades.
With some industries working with razor-thin profit margins – especially when they are getting started – that certainty can be a deciding factor in whether they set up shop in Prince Rupert or not. So while repealing the cap may make it easier to balance the books, the City could be shooting itself in the foot by making it a riskier proposition to bring new industries here, depriving itself of much greater tax revenues in the future.
What exactly the City can do to fight to fight the cap remains an open question. Since it's a provincial law, the City has no power to change anything without the provincial government. Russell suggested that the council make a resolution at the upcoming meeting of the Union of BC Municipalities, or get MLA Gary Coons and even MP Nathan Cullen to bring the issue up at other levels of government.
“Is there any plan at all to see if we can work with the provincial government to get an increase? We need a new emergency response building,” says Russell.
Mayor Jack Mussallem says that the city has appealed the property value assessments of the community's heavy industry “to see if changes can't be made”. He also said that there has been some informal talk with the Prince Rupert Port Authority and even some informal discussion other port community's facing the same problem about banding together to address, but wouldn't say what communities he was referring to.
Gary Coons says that he too believes that the issue needs to be revisited by the provincial government and says he would be eager to take a letter from the City to the minister responsible. But he says that port communities should band together if they want to be heard in Victoria.
"I think there needs to be a lobbying effort on the part of all the port municipalities and I would encourage the City of Prince Rupert to get a hold of other communities that are being impacted by this property tax cap," says Coons.
Later in the meeting, after the public comment period was over, the council discussed where to go with the issue from here.
“I'm not interested in sitting idly by and just accepting this. I think [Russell] did a very good job of articulating the challenging situation that we are in,” says councillor Jennifer Rice.
The council decided to have city staff draw up an in-depth report about the situation for sometime this month and will discuss possible courses of action at another council meeting.