Tax RATES & Tax AMOUNTS

I’m seeing lots of conversation about how our taxes compare to other cities. Which is great! I love when people get interested in the work of Council. If you ever want to chat in depth: I’m always happy to meet for a coffee (or tea or other beverage of your choice).

But something I do want to contribute to the online discussion:

A reminder that tax RATE is very different than tax AMOUNT. And I’d suggest that RATE isn’t a great way to compare municipal finances since it is dependent on home values. To get math-classie:

Say you have two villages. Each requires $10,000 in tax revenue to operate and each have 10 houses of equal value. But Village A houses are cheaper than Village B houses.

Village A’s 10 houses are each worth $100,000. So the total value of houses in Village A is $1,000,000. To calculate its tax RATE, we take the total AMOUNT of taxes it needs ($10,000) and divide it by the total value of all houses ($1,000,000).

$10,000 / $1,000,000 = 0.01

So Village A needs a tax RATE of 0.01 to generate its needed revenue. 0.01 x $100,000 means each house is paying $1,000 in taxes.

Village B has 10 houses, each worth $110,000. So the total value of houses in Village B is $1,100,000. To calculate its tax RATE, we take the total AMOUNT of taxes it needs ($10,000) and divide it by the total value of all houses ($1,100,000)

$10,000 / $1,100,000 = 0.0091

So Village B needs a tax RATE of 0.0091 to generate its needed revenue. 0.0091 x $110,000 means each house is paying $1,001 in taxes.

In that example, houses in Village A and Village B are paying basically the exact same AMOUNTS of taxes despite their RATES being very different.

But Village A has a 10% higher tax RATE. That isn’t because it is inefficient or doing more than Village B. They are collecting the exact same AMOUNT of taxes. But their RATES are different because their home values are different.

Now, some people have the opinion that comparative tax AMOUNTS don’t matter. Both villages should have the same tax RATES. Which is an ok opinion to have. But we need to be clear about what that means.

Say that both villages adopt the lower tax RATE of 0.0091. That means that Village A will only be collecting $910 per house (0.0091 x $100,000) while Village B will be collecting $1001 per house ( 0.0091 x $110,000). Which is great for the tax payers of Village A if all they care about is lower taxes. But: it is important to note that that means their village has less money to deliver services with. So Village A should expect to get less snow plowing, less garbage removal, worse green spaces, or some other lower services than Village B gets.

What’s this mean for Grande Prairie?

We are fortunate enough to have low house prices here. Which makes this a very affordable place to be (especially combined with higher salaries!). But those low house prices mean that, if we want to collect the same AMOUNT of per-house revenue as other communities, we need to charge a higher RATE.

I’m seeing lots of people looking at lists of tax RATE across the province and noticing Grande Prairie seems out of line. Which isn’t surprising given our houses are lower priced than most of the province. If you look at the other end of the same lists, Canmore is always there as having the lowest RATE. But this isn’t because taxes are lower in Canmore than everywhere else. It is because Canmore houses are very expensive, so it gets to charge a lower RATE in order to collect the same AMOUNT as Grande Prairie.

I would suggest that looking at lists that just look at tax RATES is a very poor way to judge municipal finances.

That being said: we still SHOULD be examining municipal spending. We should be asking both “are we delivering services as efficiently as possible” and “are we appropriately balancing service levels with the amount of taxes they require.” That’s what Council does every budget cycle. And will be having especially tough conversations about this year as inflation and provincial cuts are catching up to our budget.

As we do that: I’d encourage you to share your feedback through the formal opportunities available to you. There are online surveys and an in-person open house Oct 3, 10am – 7pm, at the Eastlink Centre. More information at: https://engage.cityofgp.com/budget2025

And of course, I’m also always happy to meet up to talk more.



Additional RESOURCES

Here is an infographic looking at how Grande Prairie taxes have changed over recent years, what contributed to those taxes, and how we compare to other cities:

Here are a couple of graphs looking at both how our tax AMOUNTS and our tax changes compare to other cities.

Here are a few short videos I put together to explain how property tax RATES get calculated.

Dylan BresseyComment