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Sidney homeowners to pay more; gap between residential, commercial tax rates to shrink

Gap between commercial and residential tax rates to shrink over next decade
Sidney council narrowly approved a recommendation to further close the gap between commercial and residential property tax rates at Monday’s meeting. (Black Press Media file photo)

Starting next year, residential property owners in Sidney will shoulder more of the tax burden, as the town shifts the load away from commercial taxpayers.

Mayor Cliff McNeil-Smith, Coun. Sara Duncan, Scott Garnett and Peter Wainwright supported a committee-of-the-whole recommendation Monday to gradually reduce the difference in tax rates between the residential and commercial property classes over the next 10 years, using what staff describe as a hybrid rate setting method. Couns. Barbara Fallot, Terri O’Keeffe and Chad Rintoul were opposed. Votes were cast the same way at the committee table.

“For example, if business and light industrial properties constitute 10 per cent of our tax base, the (municipality) would collect 20 per cent of its taxes from those properties,” explained Andrew Hicik, Sidney’s director of corporate services and chief financial officer in a statement to Black Press Media prior to Monday’s meeting. “Currently, this percentage is closer to 25 per cent.”

Phrased differently, the proposed policy change would lessen commercial property owners’ historic subsidizing of residential taxpayers.

It would also mark the latest readjustment in the tax burden between property classes, with supporters expressing hope it would bring consistency and predictability. Current and past councils have a history of having to lower the share paid by businesses, with perhaps the most notable intervention coming in 2020, when council passed a 10-per-cent reduction for business properties to help them weather the COVID-19 pandemic.

RELATED: Council set to review businesses’ share of tax load in Sidney

Sidney then carried that 10 reduction for businesses into 2021 and 2022 with money coming from COVID-relief funding courtesy of seniors spheres of government.

Hicik said during an April 4 presentation to council sitting as committee of the whole that the 10-per-cent reduction has gone a long way to bring commercial tax rates closer to residential rates. The municipality has two choices for creating a more level playing field, he said, shift the burden to the residential base or reduce spending (with benefits accruing to business) and services.

“Looking at the phase in, no one wants to pay more taxes, but there are very, very modest shifts to the residential class,” he said. “We are talking $30 a year. I hate to say it, but that is nothing. That’s $2.50 a month to make a difference for the business class.”

These arguments narrowly carried the day during committee discussions, but not after generating opposition from those who have historically spoken in favour of business.

O’Keeffe feared the readjustment would be the third and final financial strike against residents, the others being higher housing assessments and having to absorb the previous tax cut for businesses once COVID relief runs out. With housing affordability already a problem, residents would have to absorb additional costs, she said.

RELATED: 2022 budget for Sidney increases revenue from property taxes by 3.76 per cent

Like Rintoul, who argued that future councils should deal with tax policy, O’Keeffe said the town is not hearing concerns about the issue from the business community. It is appropriate for commercial property owners to pay more than homeowners, she said, because they use more infrastructure and benefit from non-infrastructure investments.

Wainwright, perhaps the most vocal supporter of the new policy because of its prospect to create certainty, disagreed.

Residents do not face a “triple-whammy,” he said, borrowing from O’Keeffe’s phrase, noting that higher assessments do not automatically lead to higher property taxes. Council’s decision to cut business rates in recent years is the reason business owners have not been more vocal, he added.

“I know that the business community has been lobbying for lower taxes in the past – they just haven’t been for the last couple of years,” Wainwright said.

Ultimately, he acknowledged the imperfection of the proposed solution while expressing confidence in staff. Council, he added, could also always review, revise or even roll back the policy.

Duncan questioned O’Keeffe’s argument the shift will hurt affordability. Large, globalized investments into real estate, not $30, will impact housing affordability, Duncan said.

Looking ahead, Hicik said in his statement that the ratio of taxes collected from businesses versus the total proportion of the tax base represented by business is currently 2.29 to 1. “The best current estimate for where we would be in five years, if this approach is approved by council, is halfway between those two (about 2.144 to 1).”

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Hicik pointed to another possible advantage. “While (Sidney) is already well positioned in the region in terms of its tax treatment of commercial properties, this reduction could make Sidney a more attractive place to do business,” he said.

No other regional municipality in the region currently uses a similar method of adjusting tax rates, Hicik said, suggesting Sidney could be a trendsetter with larger consequences.

“Because we are already so low on the regional front, if this caught traction and others started to follow, I think there are other governments that would see fairly large shifts to residential and that could force a bit of a look at spending and not just raising taxes, and maybe that is not a bad thing,” he said.

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Wolf Depner

About the Author: Wolf Depner

I joined the national team with Black Press Media in 2023 from the Peninsula News Review, where I had reported on Vancouver Island's Saanich Peninsula since 2019.
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