City rates low in tax ratio

Prince George is at the bottom of the property tax fairness heap but that's a good thing.

"This is a list you want to be at the bottom of," said Prince George Chamber of Commerce CEO Jennifer Brandle-McCall.

According to a recently released study by the Canadian Federation of Independent Business, the city ranks among the bottom 20th percentile in the province for the ratio between the commercial tax rate and residential tax rate (also known as the mill rate).

The federation's annual report suggests than on average in BC, small business owners face payments that are 2.78 times the rate of tax residential owners pay for the same value property.

In Prince George, that 2011 gap falls at 2.13, which is up from the 2.05 gap reported in 2010.

What that means is that the average small business owner paid almost $3,450 in property tax while the average homeowner paid just over $1,000.

This puts the city at 131 out of 161 municipalities on the federation's list, with number one North Saanich being the worst offender at tax gap of 6.02.

By the time the federation's report comes out next year, Prince George will be able to record a modest decrease for the first time since at least 2009, as city council approved a business tax rate of 2.11 times that of the residential rate in April.

"I think holding that line is very important. We'd love to see a reduction to a two to one ration, but of course, we'll take what we can get at this point," Brandle-McCall said. "And really, for our city, it's a pretty positive position to be in."

Property taxes are due tomorrow.

But despite the position on the list, the issue of property tax continues to be a tricky situation for business owners.

Property taxes are profit-insensitive, meaning it doesn't matter how much revenue a business brings in, they still have to pay the prescribed levy.

Every year, the tax levy - which accounts for the lion's share of the city's operating budget - is paid to a different rate by each class of property.

These are residential, utilities, major industry, light industry, business, recreational and farm.

According to city financial planning head Kris Dalio, the residential tax rate becomes the base and all other classes are multiples of that.

In April, city council approved a residential property tax rate where the homeowner would pay $7.79 per $1,000 of their home's assessed value. This puts this business rate at $16.42.

These rates are set by council, with help from administration, and are informed by what happened in the previous year as well as what other municipalities are doing.

Although residential properties make up more than 75 per cent of the assessed property wealth in the city, they pay a little more than half of the entire tax load, with the rest falling to the other classes.

The small business argument is that seeing as they consume less municipal services, that tax gap should be smaller as an issue of fairness.

"Businesses recognize the importance of the essential services property taxes pay for. But they aren't seeing real value for the extra dollars they're sending to city hall," said Shachi Kurl, director of provincial affairs for the Canadian Federation of Independent Business. "This is money they ought to be investing in job growth, training and innovation instead."

These taxes affect small businesses in a big way, Brandle-McCall said, and the reality is that owners aren't rolling around in big piles of money.

"We have come through what has been a very difficult period of economic activity," she said. "And if a small business has survived through the last five years up until now, we as a community should celebrate this and look for opportunities to help their continued success and survival."

But there's no real room for fairness in the process of putting together the annual tax rate.

"It's more of an art than a science," said the city's director of corporate services Kathleen Soltis.

In January, the Supreme Court of Canada dismissed an appeal by Catalyst Paper Corp. to challenge the District of North Cowichan's taxation bylaw.

In their Vancouver Island location, the mill is subject to one of the province's highest tax rates for major industry, on the hook for 20.3 times the residential rate in 2009.

While the court agreed the rate was harsh, it ultimately decided it was not wholly unreasonable given the dramatic rise in the residential rate that would have to be imposed to make the rates more equitable.

In Prince George, the city has a policy to bring down its own major industry rate - currently at six times that of the residential rate - down to the provincial average over 10 years. In 2011, the average rate was $37.93 per $1,000 of assessed value.

"If you're going to reduce somebody's multiple, someone else has to pick up the slack," Dalio said.