CITY OF KAMLOOPS Council Budget Meeting Agenda April 17, 2018, at 10:30 am in Council Chambers at 7 Victoria Street West, Kamloops, BC Page PRESENTATION 1. 2018-2022 BUDGET Budget PowerPoint Presentation - April 17, 2018 1.1 Review of Assessment Class Tax Rates Attachment Tax Rate Calculations Spreadsheet 2-7 Recommendation: That Council provide direction to staff to establish tax rates to be included in the Financial Plan Bylaw and Tax Rates Bylaw. Page 1 of 7
April 13, 2018 REPORT TO THE CHIEF ADMINISTRATIVE OFFICER FROM THE CORPORATE SERVICES DEPARTMENT ON REVIEW OF ASSESSMENT CLASS TAX RATES PURPOSE To provide Council the proposed property tax mill rates for 2018 based on the approved tax requirements and application of Council Policy No. GGL-27, Class 4, Major Industry Tax Rates. COUNCIL STRATEGIC PLAN This report supports Council s goals and objectives regarding: Economy - diversify, strengthen, and fortify our economy through partnerships and effective land use planning by reviewing industrial tax rates as part of the budget cycle. SUMMARY Setting the property tax mill rates for each class is the last step in preparing Financial Plan Bylaw No. 16-317 and Tax Rates Bylaw No. 22-1-113. Based on the provisional budget and supplemental items approved by Council earlier this year, the property tax requirement for 2018 is $107.3 million (a 2.08% increase over 2017). BC Assessment is responsible for establishing the assessed value of properties in BC. It places each property in one or more of nine classes, and this placement is typically based on the property s type or use. Municipal zoning does not determine property class; however, it may be a factor in some cases. Kamloops assessments include the following classes, as defined by BC Assessment: Class 1, Residential - single-family residences, multiple-family residences, duplexes, apartments, condominiums, nursing homes, seasonal dwellings, manufactured homes, some vacant land, farm buildings, and daycare facilities. Class 2, Utilities - structures and land used for railway transportation, pipelines, electrical generation, transmission utilities, or telecommunications transmitters. This property class does not include gathering pipelines, offices, or sales outlets. Class 4, Major Industry - land and improvements (buildings and structures) of prescribed types of industrial plants, including lumber and pulp mills, mines, smelters, large manufacturers of specified products, ship building, and loading terminals for sea-going ships. Class 5, Light Industry - property used or held for extracting, processing, manufacturing, or transporting products, including ancillary storage. Scrap metal yards, wineries, and boat-building operations fall within this category. Exceptions include properties used for the production or storage of food, non-alcoholic beverages, and retail sales outlets, which fall into Class 6. Page 2 of 7
REVIEW OF ASSESSMENT CLASS TAX RATES April 13, 2018 Page 2 Class 6, Business Other - property used for offices, retail, warehousing, hotels, and motels. This class includes properties that do not fall into other classes. Class 8, Recreational Property, Non-profit Organization - includes two very different categories: Recreational Land land used solely as an outdoor recreational facility for specific activities, such as golf, skiing, tennis, public swimming pools, waterslides, amusement parks, marinas, and hang gliding (improvements on the land, such as a clubhouse, fall into Class 6) land in a rural area that is part of a parcel used for overnight commercial accommodation that exists predominantly to facilitate specific outdoor recreational activities, such as hunting, fishing, and kayaking (improvements on the land most likely fall within Class 6 [e.g. a hotel]) Non-profit Organization Land and Improvements property used or set aside for at least 150 days per year as a place of public worship or as a meeting hall by a non-profit, fraternal organization; the 150 days cannot include activities with paid admission or the sale/consumption of alcohol the 150 days need to be in the year ending on June 30 of the calendar year preceding the calendar year for which the assessment roll is being prepared Class 9, Farm - to qualify as farm for assessment purposes, the land must produce a prescribed amount of qualifying primary agricultural products for sale, such as crops or livestock (farm buildings come within Class 1). The tax rates are set based on the final assessed values ( completed roll ) received from BC Assessment in early April. This completed roll reflects the resolution of various appeals and adjustments since the numbers provided in the early budget planning. For 2018, the budget estimated $950,000 in new growth or non-market change (NMC) in the Kamloops roll. NMC reflects additions in all classes added to the roll, not including increases in value of existing properties. It is reflective of a growing and healthy community. The historical budgeted rate for NMC is 1% (approximately $1 million); however, for 2018, the provisional budget and actual roll reflects a lower amount due to reductions in the value of the industrial classes. The completed roll resulted in NMC of approximately $900,000, which is factored into the 2018 mill rates. In 2017, Council established a Council policy setting out a plan to reduce the mill rate for major industrial (Class 4) properties with the goal of bringing the major industry rate in line with the provincial average. By setting a maximum value for both the tax rate and the taxes collected, there is an incentive for industries to modernize and update their facilities without a corresponding increase in taxes as their assessed values increase. Page 3 of 7
REVIEW OF ASSESSMENT CLASS TAX RATES April 13, 2018 Page 3 This policy (Attachment A ) sets the following formulas to be used in calculating the maximum rate for Class 4 each year. The rate shall not exceed the 2016 tax rate of 74.00. The maximum taxation revenue collected from Class 4 shall not exceed $6.2 million. This includes any increases in market or non-market growth within in this class. New growth shall have the effect of reducing the tax rate. In subsequent years, all growth (market and non-market) from Class 4 and Class 2 shall be applied to reduce the tax rate for Class 4, Major Industry. The average Class 4 rate for 2017 for other municipalities is 24.17, while the Kamloops rate was 73.34. With this year s loss of assessed value in Class 4 properties and the delay in the expected value increase of Class 2, there is very little shift required this year to meet the stated objectives of the policy. Following the above policy, the 2018 tax rate for Class 4 would remain the same as the 2017 rate of 73.34 since the net change in this class is negative (a loss of $8.5 million in value), reflecting the closure of Lafarge Canada Inc. This tax rate of 73.34 will collect $5.57 million in Class 4 taxes, but not increase the amount of taxes paid for the remaining two industries in Class 4. The impact of this is a shift of approximately $215,000, which will be reallocated to other classes. RECOMMENDATION: That Council provide direction to staff to establish tax rates to be included in the Financial Plan Bylaw and Tax Rates Bylaw. COUNCIL POLICY There is no applicable Council policy. FINANCIAL IMPLICATIONS By setting the tax rates based on Council Policy No. GGL-27, the Class 4 municipal tax rate will gradually be reduced by adjusting the percentage of tax paid by the other classes. In addition, finalizing the other tax rates completes the budgeting process and allows Council to collect property taxes, which are allocated to fund various operations and projects in the 2018-2022 Five-year Financial Plan. Page 4 of 7
REVIEW OF ASSESSMENT CLASS TAX RATES April 13, 2018 Page 4 K. Humphrey, CPA, CA Corporate Services Director Approved for Council KH/ts/kjm Attachment Page 5 of 7
Attachment "A" City of Kamloops COUNCIL POLICY SUBJECT: CLASS 4, MAJOR INDUSTRY TAX RATES NO. GGL-27 FUNCTION: GENERAL GOVERNMENT - LEGISLATIVE DATE: MARCH 14, 2017 The intent of this policy is to set up a strategy to set the tax rates for Class 4 with the goal of bringing the major industry (Class 4) municipal tax rate in Kamloops in line with the provincial average*. This policy recommends that the tax rate and amount of municipal property tax collected from Class 4, major industry do not exceed the 2016 levels and, over time, that the rate be decreased until it is at least at the provincial average rate. To facilitate this reduction, it is recommended that any growth in assessed value in Class 4 (Major Industry) or in Class 2 (Utilities) be applied specifically to Class 4 rates, rather than to the overall tax rate. The policy is as follows: To reduce the tax rate for Class 4, Major Industry to the average rate, the following formulas shall be used to calculate the maximum rate for Class 4 each year. 1. The rate shall not exceed the 2016 tax rate of 74.00. 2. The maximum taxation revenue collected from Class 4 shall not exceed $6.2 million. This includes any increases in market or non-market growth within this class. New growth shall have the effect of reducing the tax rate. 3. In subsequent years, all growth (market and non- market) growth from Class 4 and Class 2 shall be applied to reduce the tax rate for Class 4, Major Industry. *Average is calculated using the 12 municipalities identified for comparison in the Council Remuneration Policy, No. GGL-3 (Delta, Langley, Victoria, Maple Ridge, Saanich, Port Coquitlam, Nanaimo, Chilliwack, Prince George, Coquitlam, Kelowna, Kamloops). S:\DCS\Jobs - LEGS (cp)\265146_council_pol\266299_ggl-27_pol.docx March 8, 2017 Page 6 of 7
CLASS Tax Rate Adjustment Calculations for 2018 2017 Assessment Roll - (as of Market Growth Non-market 2018 Assessment Roll - (Revised Roll) Completed Roll) Growth - Occurrences Assessment Amount % Change Regular Occurrences Assessment 1 RESIDENTIAL 34,295 11,882,893,531 990,200,352 8.33% 200,515,142 34,763 13,073,609,025 2 UTILITIES 169 73,058,515-29,619-0.04% -563,900 168 72,464,996 3 Supportive Housing 11 18 0 0.00% 4 11 22 4 MAJOR INDUSTRY 16 84,547,400-1,428,300-1.69% -7,272,000 13 75,847,100 5 LIGHT INDUSTRY 84 78,366,100 2,523,000 3.22% 14,153,800 85 95,042,900 6 BUSINESS 1,859 2,051,217,930 112,053,651 5.46% 13,492,164 1,847 2,176,763,745 8 REC/NON-PROFIT 289 13,597,700 496,800 3.65% -43,500 290 14,051,000 9 FARM 333 5,807,690 155,525 2.68% -69,235 328 5,893,980 37,056 $14,189,488,884 $1,103,971,409 7.78% 220,212,475 37,505 $15,513,672,768 CLASS Rate Revenue 2.08% Revenue Rate Revenue Change 1 RESIDENTIAL 5.08 66,413,934 5.17 67,590,559 5.19 67,852,031 261,472 2 UTILITIES 40.02 2,900,049 40.86 2,960,920 40.00 2,898,600-62,320 4 MAJOR INDUSTRY 74.61 5,658,952 76.17 5,777,274 73.34 5,562,626-214,648 5 LIGHT INDUSTRY 20.34 1,933,172 20.77 1,974,041 20.77 1,974,041 0 6 BUSINESS 12.94 28,167,323 13.21 28,755,049 13.21 28,755,049 0 8 REC/NON-PROFIT 13.60 191,093 13.89 195,168 13.89 195,168 0 9 FARM 13.18 77,682 13.46 79,333 13.46 79,333 0 CLASS Share of taxes in 2017 Tax Rate Shifts for 2018 Adjusted 2017 Rate Tax Rate Increase Tax Rate Shifts $105,342,205 $107,332,344 $107,316,848 ($15,496) Share of taxes in 2018 Share of 2018 Assessment Value 1 cent mill rate on average household 377,000 $60,881 107,255,967 Tax requirement 1 cent mill rate equivalent on overall taxes collected 1 RESIDENTIAL 62.62% 63.23% 84.27% $ 3.77 Residential 130,736 2 UTILITIES 2.80% 2.70% 0.47% Utilities 725 4 MAJOR INDUSTRY 5.94% 5.18% 0.49% Major Industry 758 5 LIGHT INDUSTRY 1.58% 1.84% 0.61% Light Industry 950 6 BUSINESS 26.81% 26.79% 14.03% Business 21,768 8 REC/NON-PROFIT 0.18% 0.18% 0.09% Rec/Non-profit 141 9 FARM 0.08% 0.07% 0.04% Farm 59 Page 7 of 7