PROPERTY TAXES

to see a series of videos I’VE created about How property taxes are calculated, checkout this youtube playlist.

This page was last update in December, 2021.

In Grande Prairie, residential taxes are high compared to other cities.

Addressing this has been a priority of Council. There’s been a lot of focus on running City services more efficiently and on downsizing services that have minimal community impacts. This focus has allowed Council to lower municipal taxes, despite adding some services (for example, the Outdoor Pool and Mobile Outreach Program) and facing huge cost cuts and price increases from the provincial and federal governments. Here is a look at how taxes have changed this Council term:

ON THIS PAGE

Following is more information about property taxes and the City’s budget.

Any mistakes or opinions expressed here belong to me and me alone.

If you don’t want to read this whole page, you can click on section links below:

Tax Changes this Council Term

• Finding Savings

• Held Line on Taxes

• Priority Spending is Up

Comparing Taxes and Finances Between Municipalities

• City/County Tax Rates

• Average Tax Amounts

• Per Capita Spending

• Non-Tax Revenue Sources

• Taxes by Property Class

• Residential : Non-Residential Rates

How Property Taxes are Calculated

• Provincial Requirements

• Setting the City’s Overall Budget

• Calculating Taxes for Each Property

• How Assessments Impact Taxes

My Take on the City’s Taxes and Budgets

• My General Approach

• What COVID-19 Changes

Have Your Say

• Talk to Council and Staff

• Let me Know What You Think

Council has made it a priority to lower the tax burden on local residents and businesses. For an average property, taxes are the same now as they were five years ago.

At the same time, Council hasn’t wanted to lessen services that are important contributors to residents’ quality of life. Council has also seen a need to increase spending in some core services, such as road rehabilitation and policing.

This has led Council to task City Administration with finding ways to operate more efficiently and better target funding to community priorities. Two major initiatives are underway in the City:

• Lean Improvements: training, tasking, and enabling staff to find process improvements to deliver services more efficiently

• Priority Based Budgeting (PBB): evaluating every program the City delivers by how many community priorities it contributes to, and making funding decisions based on where programs rank.

You can get more information about Lean and PBB here.

These initiatives have worked. Taxes are the same now as they were five years ago..

Here’s what that looks like in a graph. The blue line represents the total impact of tax changes over this Council term. The grey line represents what 0% changes throughout the term would’ve looked like.

To enable this decrease, significant reforms have been made to City operations this term. If changes hadn’t been made and the City had continued operation as usual, taxes would’ve gone up by 14.5%. Why is that? Because of inflation and decisions made by senior government.

In the long-term, City revenue needs to go up to keep pace with inflation. As the costs of delivering programs see inflationary increases, the City needs to either generate more revenue or deliver less services. This creates a challenge to keeping tax rates low. Over the course of this term, if taxes had kept up with the Alberta Consumer Price Index, they would’ve been raised by a total of 8.5%.

The City had an additional challenge in 2020. The provincial government slashed some municipal revenues while also increasing costs passed onto municipalities. Additionally, the federal government increased the City’s RCMP contract costs by about 20%. These changes meant that the City’s budget had to absorb ~$4,000,000. Additional impacts on the City budget were created by senior government in 2021. If this had been passed directly onto tax payers, it would’ve led to an additional increase of 6%. You can see more about these changes here.

This graph takes a look at how inflation and government changes would’ve impacted tax payers if the City had continued business as usual during the current term.

To accomplish this tax decrease, significant savings had to be found. However, they have not come at the expense of quality of life for residents. Savings have been achieved by finding efficiencies and reducing low priority programs. This has allowed the City’s most important services to see increased investment, even as taxes have decreased.

For example, roads and police are the two service areas I hear about the most from residents. Even while taxes have gone down, the Road Rehabilitation program has received 39% more funding and 30% more money is going towards the RCMP.

There can be value in comparing how different municipalities charge taxes. However, what gets compared is important.

Many people just compare tax rates. For example, they just look at “how big would the tax bill be for a $300,000 home be in different cities?” But there is a big problem with this:

Real estate markets are very different municipality-to-municipality, and the prices of houses aren’t tied to the costs of delivering municipal services. For example, a house in Vancouver might cost 4 times more than an identical house in Grande Prairie. But that doesn't mean that the City of Grande Prairie is able to provide police, fire, roads, recreation, and other services at 1/4 the price that Vancouver does.

I don’t see any value in comparing tax rates across different real estate markets.

However, most County of Grande Prairie development exists in the same real estate market as the City of Grande Prairie. So it can make sense to compare their tax rates. And many people are often surprised by this comparison. They know there is a big spread between residential rates. But they often don’t know that non-residential rates are much closer together.

Here is what each municipality charges different property classes for each $1000 of value.

The County charges a residential property $5.50 less per $1000 of value than the City charges. That’s a 43% difference!

However, many people are unaware that this tax difference is a lot smaller when comparing non-residential properties. For these properties, the County charges $2.3 less per $1000 of value. That’s a much smaller difference: 14%.

It’s also interesting to note the average rate charged by the City and the County. We can get an average tax rate by taking the total tax revenue a municipality collects, and dividing it by the value of its taxable property. When we do this, the difference between the City and County is $2.10, or 18%.

When looked at in their entirety, City and County taxes are a lot closer than when only residential taxes are considered. But the County is still able to charge less. Why is that?

There are a lot of reasons. But I’d suggest the following are the biggest factors:

• The County receives much more Machinery and Equipment revenue. The County generates 43% of its tax revenue from Machinery and Equipment while the City only generates 1%. Often this type of property is very cheap for a municipality to host: a well site or pipeline doesn’t require nearly as much spending in municipal services as a house does. Having lots of low-cost-to-service property helps the County keep its taxes low.

• The County doesn’t pay for general policing. The City’s biggest budget item is RCMP: close to 20% of City taxes go toward policing. However, the province covers over 70% of the County’s cost for policing.

• The City hosts large, non-taxable, regional facilities. Some of the biggest properties in town are owned by the province to serve the entire region. These include the hospitals, GPRC, the courthouse, the provincial building, and health care facilities. These properties require expensive municipal services such as roads, fire, and police. But they don’t pay property taxes. This means that City residents need to pay to subsidize the provincial services accessed by County and other Peace Country residents.

• Many County residents receive lower levels of municipal services than City residents. There are County residents that live in rural areas far away from most municipal services. They receive far less municipal services than a City resident receives. So not as much tax revenue is needed to serve them.

• Many County residents access subsidized City services. There are many County residents who live in urban developments right outside of City limits. Many of these “rur-ban” residents access City facilities and services without paying taxes towards them. This allows the County to offer less services itself, thereby lowering its tax rates.
  
  
  

I don’t see a lot of value in comparing tax rates between different property markets. However, there is value in comparing tax amounts by looking at an average property tax bill. And in Grande Prairie, we do pay more taxes than many other municipalities. Although the disparity isn’t as big as many people seem to think. Here are some comparisons:

A lot of residents have expressed a desire to see our tax bills brought more in line with other municipalities. Which is a worthwhile goal. However, if we are going to do that, we need to look at why our residential taxes are higher than elsewhere. Following is some more contextual information about municipal budgets.

There are useful comparisons other than tax rates to be made between municipalities. And for these comparisons, looking not just at the County but also at other Alberta mid-sized cities is useful.

Since municipal spending is one big driver of taxes, it makes sense to look at how much different municipalities spend per resident.

Benchmarking our spending against other Alberta municipalities, this is what we find:

Of the cities compared, the average spent per resident was $2,590. The City of Grande Prairie actually spends BELOW this average amount: just $2437 per resident.

So this leads to an important question: if our spending is low, why are our taxes high? That’s because, compared to other Alberta municipalities, we over rely on residential property taxes to generate our revenue.

Often, only taxes get compared between municipalities. However, looking at other sources of revenue is also useful to get a full picture of municipal spending. How other sources of revenue get treated has a big bearing on where residential taxes land.

First, it’s worth looking at how much municipal revenue comes from non-tax sources. This includes user fees, development levies, utility franchise fees, investment returns, fines, and grants from senior levels of government. The more a municipality collects from these other revenues, the less it needs to collect from taxes.

When Alberta mid-sized cities are compared, the average municipality collected 43% of its revenue from taxes. Conversely, Grande Prairie collected 64%. Compared to other cities, we are over reliant on tax revenue to deliver municipal services. However, the City is less reliant on taxes than the County, which has 76% of its revenue coming from taxes.

A big decision that local Council’s have to make is how to distribute their taxes between residential and non-residential properties. It is worthwhile comparing what proportion of their taxes municipalities collect from various property classes.

In this graph, the blue represents what percentage of a municipality’s taxes come from residential properties. Grey represents non-residential taxes, and orange represents taxes from machinery and equipment.

Grande Prairie generates 56% of its tax revenue from residential properties. This is lower than the average of 68% found in other cities. But it is also higher than the County’s 19%, which is kept low due to the County’s ability to tax Machinery and Equipment.

Of course, looking at how many taxes a municipality collects from each property class only tells part of the story. We should also look at what proportion of the property in a municipality is represented by each class. After all, a municipality with more residential properties can generate more overall residential taxes without charging individual properties more.

Compared to other cities, Grande Prairie has a higher proportion of non-residential properties. They make up 32% of the value of all taxable property in the City, compared to an average of 22%.

It’s also interesting to compare the City of Grande Prairie with the County of Grande Prairie. They have about the same proportion of Residential to Non-residential assessment. But the County has 30% of its assessment base coming from Machinery & Equipment, while the City has less than 1%.

Something you’ll notice in the above two graphs: the numbers don’t carry over. If all property classes shared the same tax rates, these two graphs would look identical. However, most municipalities (including all the ones compared above) charge non-residential property a higher rate of taxes than they charge residential property.

It’s important to note by what degree municipalities separate residential from non-residential rates.

In our community, some of the tax burden carried by commercial properties elsewhere is being carried by homes. This is a good incentive for companies to invest in Grande Prairie to deliver services, create jobs, and generate taxes. However, it also means that our residential taxes are higher than they would be otherwise.

Here’s what this looks like:

Comparing mid-sized cities, on average the residential rate is 54% of the non-residential rate. This means that if you owned a $300,000 home and a $300,000 commercial property, you’d pay 46% less taxes on your home, despite both properties having the same value.

In the County, there is an even bigger difference between property classes: residential rates are only 30% of non-residential rates.

The City of Grande Prairie charges residential properties at 60% the rate of non-residential property. Compared to other municipalities, Grande Prairie has a smaller spread between tax rates.

In my opinion, this is likely to become a VERY big topic of conversation in the coming years. If our priority is to get residential taxes in line with comparative municipalities, then that likely means shifting some of our residential taxes to non-residential properties. Doing so has some big pros and some big cons.

It’s important to know that, in Alberta, municipal finances are heavily regulated by the province.

The Municipal Government Act sets the general framework of how budgets are set and taxes get calculated. Provincial regulations (such as Matters Relating to Assessment and Taxation) provide further instructions about how budgets and taxes are required to work. The province regularly audits municipalities to make sure that these rules are being followed

There are some challenges with the system of property taxation in Alberta. For example, Council has no way to set its budget and tax rates in such a way that every property sees an equal percentage change in their taxes. This is why we talk about how tax impacts will impact “an average” property rather than “every property.”

Council doesn’t get to determine what system of tax calculation it uses. It needs to work in the framework created by the province.

Following is a quick glance at that framework.

The first step to calculating taxes is for the City to set its budget and tax requisition. Here’s a short video that explains this process:

Council first sets the expected level of service for various programs. It creates expectations about how often fields should be mowed, how quickly the fire department should be able to respond to any call, to what degree streets should be plowed, etc….

The cost of meeting these service levels is added up to create the City’s total revenue need.

From this revenue need, non-tax sources of revenue are subtracted. This includes things like like money collected from user fees (permits, recreation facility fees, etc…) and grants from other levels of government. This determines how much money the City needs to requisition in municipal taxes to deliver municipal services.

Here’s a quick look at what the City’s tax requisitions, other revenue, and expenses looked like in 2019:

The province also requires municipalities to collect property tax on its behalf. In Grande Prairie, provincial taxes make up about one quarter of the total money collected. This provincial tax requisition is added the Municipal Tax Requisition.

This determines how much money the City needs to collect from all taxable properties.

After the total Tax Requisition is determined, the City needs to figure out how much each property will contribute towards it. Here’s a video explaining how that process works:

Data from property sales in the community is used to build a statistical model. Information about each property is fed into this model to determine what price each property would likely get if it was sold on the free market. This gives each property an Assessed Value.

The values of all properties in the City are added together. This gives the City its Assessment Base.

The Total Tax Requisition gets divided by the Assessment Base to figure out the Tax Rate.

Finally, every property has its Assessment Value multiplied by the Tax Rate. This determines how much each property owes in taxes.

Something that is important to note: the City determines its tax requisition prior to setting a tax rate. This means that if Assessment Values change across the City, that will change the Tax Rate, but it will not change the taxes actually collected. If everyone’s assessment goes up, the Tax Rate will drop to keep the total taxes collected level.

However, it’s important to remember that provincial legislation doesn’t allow Council to give everyone the same proportionate change on their taxes. We can’t say “everyone’s property will change by X amount.” Instead, we can only say “an average property will change by X amount.”

So if everyone’s Assessment Value goes up: that doesn’t mean taxes go up. It has no impact on an average property. So if your Assessment Value went up, but it went up by the same amount as an average property’s Assessment Value: that won’t impact your taxes.

However, if your Assessment Value went up more than the average increase: your taxes could go up. But if it went down by less than the average, then your taxes could go down.

Here is a video with examples of how changing assessments impact tax rates:

For a lot of residents, ensuring that Grande Prairie residential property taxes are in line with other municipalities is a top priority. And I’m supportive of this goal.

But how we go about achieving it is important.

I certainly support continued efforts to be more efficient with our spending. And we need to continue with Priority Based Budgeting to ensure that we’re only funding programs that have big community impact. But I don’t think our community would be well served by slashing City services, especially in our biggest budget areas: roads and policing.

And, as shown above, our per capita spending is very in line with other municipalities.

I don’t support making big reductions to City programs just to lower taxes. I also don’t support reducing City programs to keep what is spent on services level even while inflation drives up costs.

However, Grande Prairie relies on tax revenue more than comparative municipalities. I’m supportive of us growing non-tax revenue sources. As we do this, new revenues should be applied to tax relief.

I’m supportive of us working to lower our taxes. But there is better opportunity to do that on the revenue side of our balance sheet than the expense side.

Over the last two years, our world and economy have changed. Many businesses are struggling to survive, and lots of families are barely keeping afloat. This needs to be considered in our budget conversations.

On one hand, financial struggles provide a compelling case to limit taxes. The more money the City generates from revenues, the less money businesses and residents have in their pockets.

On the other hand, many City services are more important now than ever. Businesses are asking the City to provide recovery support. And families that have less money and less ability to travel are more in need of affordable, local services. It’s not the time to be slashing programs.

I am not supportive of just slashing taxes as a strategy to address COVID recovery. A big reason for that: tax reductions aren’t targeted. They help the family that has lost most of its income just as much as the family that has had its income go up. And they help a large, national company that has actually seen its revenue increase just as much as the small, local business that has had its revenue reduced to nothing.

Instead of losing money on a tax decrease, I’ve supported the following Council initiatives:

• Holding the line on taxes: Council worked to make sure that taxes did not go up in 2021. In 2020, it also offered a one-time rebate of 1.25% of taxes.

• Striking tax penalties: Council has extended tax deadlines and lowered tax penalties to give families and businesses room in their cashflow.

• Emergency funding to frontline organisations: Council made Emergency Funding available for groups delivering vital services to residents who needed help.

• Targeted business support: work with the Chamber of Commerce and industry representatives was done to offer targeted supports and grant programs to industries and businesses which needed them the most.

I’ve written extensively about my approach to the City budget and taxes going into past Council conversations. If you want to see where I’ve stood, here are some of my posts:

• Election 2017

  • My policy position on taxes

• Budget 2018

  • Pre-budget writing

    • Sneak peak

    • Downtown Rehabilitation

  • Post-budget writing:

    • Firehall sale

• Budget 2019

  • Pre-budget writing:

    • My priorities going into the budget cycle

    • Being more efficient, better targeting spending

    • What it would take to get to a 0% change budget

    • Options to increase revenue and cashflow

    • Debt Strategies

    • Downtown Rehabilitation

  • Post-budget writing

    • Highlights of the budget

    • My opposition to debt refinancing

    • A look at how taxes went down

    • Changes to Transit

    • Financing our Stormwater Systems

    • A look at Police Funding

    • Grande Prairie Storm

• Budget 2020

  • Pre-budget writing:

    • Public Feedback

    • Impacts of Provincial and Federal decisions

    • My priorities

  • Post-budget writing:

    • Highlights of the budget

    • Aquatera Revenue Sharing Agreement

As Council sets budgets and property taxes, it’s important for us to hear from the community.

While forming Budget 2020, the City hosted a series of online budget surveys. It also held an open house where the community could come talk to Council and department managers (you can see what was heard here). There will be similar opportunities to give your input into next year’s budget. I hope you will take part.

Something important to note: Council sets its property tax bylaw in the spring. However, this is mid-way through the year. By this time, Council has limited ability to change course (this is one of the shortcomings of the provincially mandated system for municipal finances).

The most important time to provide your input is in the fall. This is when Council sets its budget for the upcoming year.

I’d also love to hear from you directly. Let me know if you have any questions, thoughts, or ideas.

To see the latest about what is being discussed at Council, you can follow me on Facebook. You can also give me a call at 780-402-4166 or email me at dbressey@cityofgp.com.

Thanks for taking the time to read this page!

-Dylan