Tuesday, May 5, 2009

How The Provincial Budget Drove Up Taxes in GP

Last night at council we gave final reading to the 2009 property tax bylaw. Unfortunately we had to increase property taxes more than we had predicted back at budget time last fall. This unexpected increase wasn't something we were happy to do of course but it had to be done.

The crux of the issue is that the Provincial Government chopped money out of the Municipal Sustainability Initiative grant when they delivered their budget a few weeks ago. Even though it was distributed unfairly, when it was announced the MSI was supposed to be a program that would allow municipalities to make long term planning decisions. Listening to that direction here in GP we went ahead and put that money to use; it makes up a significant part of our funding strategy for the new aquatics centre and multiplex. So the unexpected reduction in the MSI is a big problem.

This is a problem for any municipality in Alberta that took the Province at it's word and made plans for the MSI money. Those rich municipalities who were just putting the MSI money away in reserves for "future projects" are probably ok but for those like Grande Prairie who used it to deliver on community priorities are scrambling.

See the city's media release below for more detailed info:

"Media Release
May 05, 2009

Reduced Provincial Funding Results in Higher Property Taxes

City Council gave third reading on a bylaw Monday that sets property tax levels for 2009.

Bylaw C-1225 raises taxes by 9.4% to cover a $2.5 million shortfall in Municipal Sustainability Initiative (MSI) funding. The City received $4.7 million of an anticipated $7.2 million in MSI dollars.

City Administration had projected a 7.5% property tax increase for 2009.

MSI funding was decreased by $200 million across the province. Grande Prairie’s share was allocated to the construction of the Aquatics and Wellness Multiplex.

Twenty-two per cent of total property taxes collected in Grande Prairie are remitted to the education system.

“It is unfortunate that Provincial budget changes have such an immediate effect on residents in the form of a larger than anticipated property tax rate increase,” says Mayor Dwight Logan. ”We are mindful of economic conditions in the community and had been hopeful for more MSI funding.”

Property taxes are calculated by yearly assessments, taking into consideration average growth and market increases or decreases. The growth increase for Grande Prairie in the 2009 tax year is estimated at 5.4% and the average market value has actually decreased by 5.8%.

The market value of properties within Grande Prairie has changed slightly. Houses or low density residential homes have dropped in value by 8.7%, apartments have decreased by 17.4% and non-residential properties have increased by 3.9%, based on July 1, 2008 assessments.

A mill rate is established by dividing the revenue requirements by the assessment base and multiplying that number by 1000.

For 2008, a home owner whose house in Grande Prairie assessed at $303,900 would have paid $2639 in property taxes. The same house will now be assessed at $277,500 and the property holder will pay $2887 at the new rate, an increase of $248. The difference is equal to the cost of approximately 23 litres of gasoline a month, over a year."

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