Halifax councillors budgeting for 1.9% increase to the average property tax bill

Regional councillors are budgeting for a staff-recommended increase of 1.9% to average residential and commercial property tax bills in the fiscal year ahead.

Council’s budget committee met Wednesday to consider the 2021-2022 fiscal framework recommended by municipal finance staff. That framework sets the parameters for councillors’ budget discussions, which will continue over the next few months before they approve the final operating and capital budgets sometime in April.

To bring in enough revenue to match the municipality’s planned spending for 2021-2022, about $827.2 million, municipal finance staff recommended an increase to the average tax bill of 1.9%.

“This, along with business unit reductions, will allow the necessary revenues to balance the municipal budget,” financial policy and planning manager Bruce Fisher and financial consultant Kenzie McNeil wrote in the staff report to councillors.

In real terms, that means the municipality’s share of the annual tax bill for a residential property assessed at $250,400 — the average single-family home assessment in HRM — would rise $38 to $2,053.

That number does not include mandatory provincial funding collected on property tax bills, supplementary education funding collected specifically for Halifax-area schools, or the fire protection rate to pay for hydrants, all adding up to another $1,000 or so. The 1.9% increase does take into account the assessment lift (last year, the average property was assessed at $247,200).

Properties assessed at less than the average — 60% of all single-family homes, according to chief financial officer Jane Fraser — would see their bill increase by less than $38. Properties assessed at more than the average would see their bills increase by more than $38.

The actual residential property tax rate used to calculate the bill would only rise 0.6%, from 0.815% to 0.820%.

The commercial property tax rate would actually decrease 0.7%, from 3.000% to 2.979%. The effect on the average bill is the same as the residential side: a 1.9% increase.

The average commercial property in HRM is assessed at $1,465,300, and the municipality’s share of the tax bill for that property would rise $817 to $43,651.

Commercial properties assessed at less than the average would see their tax bills rise by less than that, and vice versa.

Although councillors unanimously approved the recommendation from staff for a 1.9% increase, that doesn’t mean it’s set in stone. Through the process over the next few months, they could add to or cut from the budget or move money around to change that number.

During Wednesday’s meeting, Mayor Mike Savage said he’d prefer taxes didn’t rise at all, but he touted council’s record.

“Every year at budget it occurs to me how well we’ve managed the finances of this city the last six to eight years,” Savage said, joking that the timeframe coincides with his term in office.

“But we have. If you look at my colleagues in the Big City Mayors, 20-some cities, there isn’t a city, with the possible exception of Quebec City, which has held the line on taxes as we have.”

Savage rattled off a list of cities, including Edmonton, Vancouver, Toronto and Calgary, that have raised their taxes more than Halifax has in recent years.

Coun. Pam Lovelace suggested Savage wasn’t comparing apples to apples.

“Calgary is not a good example to use when we consider the tax rate, of what they’re doing there and what we’re doing here,” Lovelace, the councillor for District 13 — Hammonds Plains-St. Margaret’s, said.

“They also have a housing crisis, but they also have in-house social workers, they have a community service department, they have services we could only dream of at this point in our municipality.”

Lovelace also said she was alarmed at the amount of money the municipality collects on behalf of the province.

That was the second half of the motion before the budget committee on Wednesday, to direct staff “to establish an area rate of approximately $0.341 per $100 of assessed value for provincial mandatory contributions.”

That money, amounting to an estimated $173.8 million in 2021-2022, goes to the provincial government to pay for education, housing, prisons and the Property Valuation Services Corporation.

As Fisher and McNeil wrote in the staff report, “HRM has the fastest growing assessment base in the province, as a result it sees annual increases in mandatory provincial contributions in the 3% to 5% range.”

“HRM is not accountable for how this revenue is spent by provincial departments or agencies,” Fisher and McNeil wrote.

For 2021-2022, the provincial rate will mean $853.87 on that average residential property tax bill.

Several councillors brought up the need for commercial tax reform on Wednesday. As the Halifax Examiner reported in September:

There are currently two commercial tax rates based on location: urban/suburban and rural. The urban and suburban rate is currently $3 per $100 of assessed value, and the rural rate is $2.658 per $100 of assessed value. No matter the type, commercial properties pay the same rate as others within the same classification.

The problem with that system is that commercial properties in walkable areas of the peninsula or in downtown Dartmouth, where land is worth more, end up paying much more per square foot than big box stores in car-dependent places like Dartmouth Crossing.

Municipal staff are now working on a new system, detailed at the link above. It would introduce more classifications — big box; high density; small, medium enterprise; industrial; and rural — and tiered rates based on property values.

Fraser said the final recommendation on that new system would be back to council this spring for possible implementation over the next few years, but repeatedly warned that messing around with the tax system would create winners and losers.

Also in the report to councillors on Wednesday was an estimate of the cost of requiring contractors to pay their employees a living wage. Council approved that requirement in September, with staff anticipating an annual cost of $8 million.

The cost now estimated for 2021-2022 is a tiny fraction of that number: $123,040. It’s expected to rise to $161,091 by 2024-2025.

“It should be pointed out that this is a very preliminary estimate based on existing contracts,” Fisher and McNeil wrote in the report.