City council's decision Monday to claw back some of the property tax exemptions it offers to local non-profit groups shows a profound disrespect for the work these groups do by slamming them with an unexpected tax bill.
After a lengthy debate, mayor and council agreed to cut the rate of tax exemptions for non-profits from 100 per cent, meaning they pay no tax, to 97 per cent, meaning many of them now have to scrape together the money from their already tight budgets. Some non-profits are already saying the only place to find that money is by cutting services because they're running so lean already..
Places of worship, private schools, non-profits, charities and other groups are normally exempt from having to pay property tax. The problem this year, however, is that the city sets aside a maximum of 1.5 per cent of the tax levy to fund the exemptions. When the 2012 assessment values came in and the tax rates were adjusted accordingly, there was more than $1.2 million worth of exemptions, coming in at 1.54 per cent of the levy.
The shortfall is about $36,000.
So council's finance and audit committee decided to bring in the three per cent cut across the entire non-profit sector, rather than picking and choosing, explained Coun. Cameron Stolz, the committee chair.
Clearly, some small administrative mistakes, innocent enough on their own, combined to add up to this mess.
New non-profits applied for the tax exemption and some of those applications were accepted, adding to the number of exemptions. When the assessment values came out, nobody made the connection between how the rise in tax rates would then affect the non-profit exemptions, pushing those exemptions over that 1.5 per cent limit. To be fair to city staff and council, it is a bit of a connect-the-dots quandary. In hindsight, it seems obvious but the issues aren't obviously connected until someone bothers to look at the tax exemptions and the tax rates at the same time.
It's dealing with the problem that's the problem.
With no warning, the city's non-profit sector is having to pay for a mistake that originated with the city. The city's accounting error, oversight, whatever you want to call it, has now become a fine for non-profits to pay.
It would be the equivalent of the city sending out a surprise bill to homeowners saying "sorry, we gave you too much of a break on your homeowner's grant - you owe us 'amount X' immediately."
Since city leaders like to preach so much about how municipal government should be run like a business, they should ask themselves what a business would do in this situation.
Choice A: Alienate your customers by making them pay for your lack of diligence.
Choice B: Eat the cost, learn from the mistake, keep the customers happy and find the savings somewhere else.
Businesses that like customers and like keeping customers definitely pick B but here's one of those situations where government works by different rules.
This situation exposes the bigger issue of whether the non-profit tax exemption of 1.5 per cent of the tax levy is reasonable.
As the city's financial planning manager, Kris Dalio, explained to council, Prince George is most generous in this area. Kelowna sets aside 0.99 per cent for the same exemption, Kamloops is at 0.89 per cent and the District of North Vancouver comes in at just 0.52 per cent. In other words, non-profits in Prince George enjoy a level of support from municipal taxpayers not seen anywhere else in the province.
It's clear the city needs to revisit two numbers - the percentage of the tax levy the city contributes to non-profits and the number of non-profits eligible for the exemption. Those numbers need to fit together more closely to avoid future October budget surprises.
That discussion will be difficult enough as non-profits struggle to serve the community but the city initiating the conversation with a money grab will set a poor tone going forward.