SUPPORTS ITEM NO. 3
CS&B C0MMITTEE AGENDA
APRIL 24, 1997
POLICY REPORT
PROPERTY TAXATION
Date: April 8, 1997
C.C. File No. 1551-1
TO: Standing Committee on City Services and Budgets
FROM: Director of Finance
SUBJECT: Additional Taxation Policy Considerations for 1997
RECOMMENDATIONS
A. THAT Council instruct the Director of Finance to implement a
1997 Property Tax Limitation Program for Class 6 (business)
properties, along the lines and with the qualification
criteria discussed in this report. The Limitation Program
would be enabled under Section 173 of the Vancouver Charter
and would require that Council pass a requisite by-law with a
t w o - t h i r d s m a j o r i t y .
B. THAT Council instruct the Director of Legal Services to
prepare a 1997 Property Tax Limitation by-law applicable to
Class 6 (business) properties, containing the tax capping
parameters outlined in this report, for submission to Council
for approval May 13, 1997.
C. THAT 1997 be the final year of the tax capping program for
Class 6 (business) properties, and that this be indicated on
the tax bills.
CONSIDERATION
The Director of Finance submits the following for CONSIDERATION.
D. THAT Council approve a 3.0% increase to the tax levies of
Class 2 (utilities), Class 4 (major industry), Class 5 (light
industry) and Class 6 (business/other), and a 6.6% increase to
the Class 1 (residential), Class 8 (seasonal/recreational) and
Class 9 (farm) tax levies, representing an increase to the
overall tax levy of 4.5%.
The Citizens Advisory Group on Property Taxation submits the following
recommendations for CONSIDERATION. The Chair and other members of the
group may wish to address Council on this issue. An accompanying letter
from the Chair (see Appendix E) elaborates on their position.
E. THAT as an alternative to the differential tax increase
described in Recommendation D, Council approve an
across-the-board 4.5% tax increase, combined with a one
percent tax burden shift from the non-residential to the
residential classes.
F. THAT Council approve a blended single tax rate to be applied
to Class 5 (light industrial) and Class 6 (business)
properties, and that this blended rate be phased in over a
period of five years.
GENERAL MANAGER S COMMENTS
The General Manager of Corporate Services RECOMMENDS approval of A,
B and C, and submits D for CONSIDERATION.
Consideration items E and F are submitted by the Citizens Advisory
Group on Property Taxation and are included in this present report
in order to consolidate our presentation on additional taxation
policy considerations for the 1997 taxation year. Item E is an
alternative to item D and advances the premise outlined in the KPMG
Consumption Report of gradually shifting the tax burden from
non-residential properties to the residential class through an
annual 1% shift over a five-year period. In tandem with the 1%
shift, the Group is recommending a 4.5% across-the-board tax
increase. I note for Council that the tax distribution curves
produced by E are almost identical to the result produced by D, as
shown in Charts 2 and 4 of Appendix D of this report. Given that
Council did not approve a similar 1% burden shift recommendation
last year, and if Council is disposed to approve a burden shift
this year, I RECOMMEND approval of D.
Item F deals with the notion of blending the tax rate for Class 6
(business and other) and Class 5 (light industrial) properties. The
discussion later in this report develops the rationale for this
position. Based on relative consumption of City services, a blended
tax rate for the two classes of non-residential properties makes
sense, especially after the City implements its sewer utility and
the proposed TSS/BOD charge on sewerage at the regional level.
Given that the Group is recommending a phase-in period of five
years, my suggestion is for Council to defer action on this item
until the sewer utility is in place (likely 1998) and instruct
staff to report back on the tax burden impacts associated with the
utility implementation alongside a staged phase-in of a blended tax
rate. The dynamics of those initiatives may allow for a shorter
phase-in period than is recommended.
COUNCIL POLICY
Council policy has been to keep property taxes at affordable levels by holding year-over-year tax increases to
inflationary levels. In 1996, there was a 0.1% increase to the general tax levy. Given the recent provincial budget
cutbacks in revenue-sharing, Council has made a decision to increase the City s general tax levy by 4.5% for 1997. On
February 4, 1997, Council recommended that ... the Director of Finance be instructed to report back to Council with
policy options around the implication of the 1997 property tax increase approved by Council this day, including an
exploration of weighting the tax increase a little more on the residential sector.
From 1983 to 1994, Council maintained the share of the taxation burden
between property classes at the levels which existed in 1983, allowing
for adjustments to the burden levels resulting from reclassification,
new construction or zoning changes. In 1994, Council altered the burden
proportions slightly by shifting approximately one percent of total
taxes from the business class to the residential class. In 1995,
Council again shifted approximately one percent of the total tax burden,
proportionately from the utilities, major industry, light industry and
business classes to the residential class. The rationale for these
shifts was based on the allocation of garbage collection and disposal
costs to the appropriate customers.
In 1996, the Citizens Advisory Group on Property Taxation recommended
that Council shift an additional $3.2 million of the general tax burden
proportionately from the non-residential classes to the residential
class. Council, however, decided not to undertake a further shift in
the tax burden for the 1996 taxation year.
Since 1992, the residential, recreational and farm classes have been
grouped together in order to establish a common tax rate for billing
purposes. Since 1993, Council has used three-year averaged land values
in the calculation of residential and business property taxes, as a
means of buffering the tax impacts of large year-over-year changes in
land values for individual properties. In February 1997, City Council
recommended that land averaging be used to calculate taxable values in
Class 1 and Class 6 for the 1997 taxation year.
PURPOSE
The purpose of this report is to recommend additional taxation policy
considerations to Council for implementation in the 1997 taxation year.
SUMMARY
This report presents Council with several tax calculation options for
the 1997 taxation year. Impacts of the following taxation options are
analysed in this report:
1. a differential tax increase among property classes,
2. a single blended tax rate for the light industrial class and
the business class,
3. a differential tax increase among property classes combined
with a single blended tax rate for the light industrial class
and the business class, and
4. a tax capping program for the business class (Class 6).
While there are several options to choose from, none of the options
drastically changes the tax rates for the business or the residential
class. The largest impact of any of the options modelled for either of
these classes is a two percent increase to the residential tax rate.
Note that Option #1 is the only option that impacts residential
properties.
TABLE 1. Summary of 1997 Taxation Options for the Business Class (Class
6)
Council- Blended Total
Directed Rate Class 6 Average
Increase Class 5 Tax Levy Class 6 General
Scenario to Class & Class ($ Tax Rate Tax
6 Levy 6 millions Increase
)
4.5% No $185.8 $14.740 6.5% Base Case
Option #1 - No $183.1 $14.529 5.0%
Differential 3.0%
Increase
Option #2 -
Blended Tax 4.5% Yes $188.0 $14.920 7.8%
Rates
Option #3 -
Differential 3.0% $185.3 $14.706 6.3% Yes
Increase &
Blended Tax
Rate
Option #4 -
Tax 4.5% $185.8 $14.762 6.7%
No Capping/Base
Case
TABLE 2. Summary of 1997 Taxation Options for the Residential Class
(Class 1)
Council-Direct Total Blended Rate
ed Increase to Class 1 Average Class 5 &
Class 1 Levy Tax Levy Class 1 General Tax Class 6
Scenario ($ millions) Tax Rate Increase
Base Scenario 4.5% n/a $146.4 $2.747 4.2%
Option #1 -
Differential Increase 6.6% n/a $149.3 $2.802 6.3%
BACKGROUND
In recent years, increases to the City of Vancouver tax levy have been
equal to or lower than the rate of inflation. In spite of this, taxes
on some individual properties have fluctuated greatly due to marked
year-over-year changes in assessed values. In order to provide
temporary relief from the biggest increases, City Council chose to limit
tax increases in 1989. In each year from 1989 to 1995, tax increases
were capped within the business and/or residential classes (see Appendix
A for a history of tax capping). In 1995, tax capping for residential
properties was eliminated, and a phase out program for commercial
properties was implemented.
This year s option for a differential tax increase has arisen out of the
public consultation process undertaken by City Council to address the
budget shortfall, which has resulted from sudden cutbacks in provincial
revenue sharing. The option of creating a single tax rate for the light
industrial and business classes has been proposed by the Citizens
Advisory Group on Property Taxation.
The Citizens Advisory Group on Property Taxation
The Citizens Advisory Group on Property Taxation (CAGPT) was formed in
March 1996. The mandate of this group is to provide Council with
community input on taxation issues, by commenting on taxation matters as
they appear before Council. The group is comprised of a balanced mix of
business, residential and academic representatives, and all members are
residents of Vancouver. The CAGPT is the successor to two earlier
groups with similar mandates: the Property Tax Task Force (1993/1994)
and the Property Tax Advisory Panel (1994/1995).
The Property Tax Task Force submitted a report to Council in April 1994,
which contained fourteen recommendations regarding the property taxation
and assessment systems. Among these recommendations was one that a
study of consumption of residential and non-residential consumption of
city services be undertaken. Council commissioned such a study, and in
April 1995 KPMG Management Consulting submitted its report to Council,
entitled Study of Consumption of Tax-Supported City Services.
At that time, Council instructed the Director of Finance to report back
on a longer-term taxation policy that would take into account the
findings of this report, and the related recommendations of the Property
Tax Advisory Panel. The formulation of a longer term taxation policy
was to include the following considerations: taxation policy based on
benefits, services and the ability to pay; tax write-off opportunities;
and, differential tax rates within classes of property. These issues
are among those now being considered by the CAGPT. Both the Property
Tax Task Force report and the KPMG Consumption study are on file with
the City Clerk.
The CAGPT has made some recommendations relating to the issues contained
in this present report. A letter from the Chairman of the group is
circulated with this report, indicating the group s position on the
issues of tax capping, blending light industrial and business class tax
rates and, a differential tax increase among classes.
The 1996 Taxation Year
A summary of last year s taxation policies is provided here as
background. In 1996, taxes for residential properties (Class 1) were
based on three-year land averaged values (1996 improvement value plus
average of 1994, 1995 and 1996 land values). No tax capping was applied
to this class. Taxes for business properties (Class 6) were also based
on three-year land averaged values, and a 20% cap was applied to
year-over-year overall tax increases, under a phasing out methodology.
A maximum credit of $7,500 was allowed. There was no shift in the tax
burden among classes in 1996.
DISCUSSION
The impacts of statistical modelling of the following taxation options
are presented in this report: (1) a differential (unequal) tax increase
among the property classes, (2) a blended tax rate for the business and
light industrial classes, (3) these first two options combined, and (4)
a 25% tax cap for business class properties.
Interpreting the Results
In assessing the various taxation options, it should be noted that an
option that is good for the class as a whole will not necessarily
benefit an individual property. For example, capping large tax
increases will result in less properties having extremely high
year-over-year increases, but, those properties not receiving a tax cap
will pay slightly higher taxes as a consequence. This is because the
total tax levy collected from a class is the same with and without tax
capping.
Also, the various taxation options may have opposing impacts on an
individual property. For example, tax capping can lower the total taxes
paid by an individual business property, while at the same time blending
the Class 5 and Class 6 tax rates will increase the taxes paid by that
same property.
Note that a Council-directed tax increase is the percentage increase
by which Council chooses to increase the tax levy for each class. This
is distinct from the average tax increase for each class, which is the
mean change in year-over-year taxes for all properties in a class.
While the first is a decision, the second is an outcome. Year-over-year
changes in taxes paid by a property are a function of two variables: (i)
the change in taxable value of that property, and (ii) the
Council-directed tax increase for that property s class. For this
reason, the Council-directed tax increase is not likely to be the same
as the average tax increase for each class.
All analyses are done on sub-samples of Class 1 and Class 6 properties,
screened for those that have been transferred into the class in the last
year, those that are exempt from taxation, and those that did not pay
taxes in 1996. Properties are included in the sample, but are not
eligible for a tax cap, if they have new construction or if they are
vacant. A large proportion of both residential and business properties
with the greatest year-over-year tax increases have at least one of these characteristics.
OPTION #1: DIFFERENTIAL TAX INCREASE
On February 20, 1997, Council approved a 4.5% increase to the general
tax levy, and directed staff to explore weighting the tax increase
slightly more on the residential sector. Historically, any increase to
the general tax levy has been spread evenly across all classes. The
option of a differential tax increase arose out of the City Choices
public consultation process, the Mayor's Forum, and the Angus Reid
survey of both residents and businesses. Angus Reid reported that
...68% of business community members surveyed believe the current level
of property taxes they pay are too high , a full 22% more than for
residents. Further, Angus Reid reported that over 60% of residents
surveyed supported paying an additional eight percent in property taxes,
to help maintain the level of services they currently receive. This
compares to only one-third of all business respondents supporting a 4%
tax increase.
As an alternative to an evenly apportioned tax increase, the option
considered here applies a 3.0% increase to each class, representing
inflation and service growth factors in the budget. The remainder of
the tax increase, representing Council s alternative to deeper service
cuts, is applied proportionately to the residential,
seasonal/recreational and farm classes. The effect of this is a three
percent increase to the levy of each class except for the residential
classes, which incur a 6.6% increase.
Impacts of a Differential Tax Increase
The application of a differential tax increase is essentially the
equivalent of a moderate shift in the tax burden from all other classes
onto the residential class, of $2.9 million. With a differential tax
increase, a tax increase of $9.2 million is added to the residential tax
levy, as compared to $6.3 million with an across-the-board increase.
Correspondingly, with a differential increase, the increase to the
business class levy is $5.3 million, as compared to an increase of $8.0
million with an across-the-board increase. The business class pays $2.7
million less than it otherwise would. Under this option, the other
property classes collectively pay approximately $200,000 less than they
otherwise would.
The following tables show the impact of this option on overall tax
levies and tax rates.
TABLE 3. Implications of a Differential Tax Increase Among Property
Classes, Tax Levy
Tax Levy with Tax Levy with
Across-the Board Differential
Increase Increase Difference
($ millions) ($ millions) in Tax Levy
Residential (1),
Recreational (8) & Farm
(9) $146.7 $149.6 + $2,900,000
Utilities (2) $7.1 $7.0 - $102,000
Major Industry (4) $4.1 $4.1 - $60,000
Light Industry (5) $5.0 $4.9 - $72,000
Business (6) $185.8 $183.1 - $2,666,000
Total $348.7 $348.7 $0
TABLE 4. Implications of a Differential Tax Increase
Among Property Classes, Tax Rates
Tax Rate Tax Rate
Across-the-Board Differential Difference
Increase Increase to Tax Rate
Residential (1) $2.747 $2.802 + $0.06
Utilities (2) $31.826 $31.369 - $0.46
Major Industry (4) $31.444 $30.993 - $0.45
Light Industry (5) $27.127 $26.738 - $0.39
Business (6) $14.740 $14.529 - $0.21
Recreational (8) & Farm
(9) $2.714 $2.767 +$0.05
Chart 1 of Appendix D shows the distribution of tax
increases in the business class with an across-the-board
4.5% increase. Chart 2 compares this distribution to
that resulting from a 3.0% increase to the Class 6 levy.
The tax rate for Class 6 drops by 21 cents (1.4%) if the
levy is increased by 3.0% rather than by 4.5%. The
average increase in general taxes paid for Class 6
properties decreases to 5.0% with a differential
increase, compared to 6.5% with an across-the-board
increase.
Chart 3 shows the distribution of tax increases in the
residential class with an across-the-board 4.5% increase.
Chart 4 compares this distribution to that resulting from
a 6.6% increase to the Class 1 levy. The tax rate for
Class 1 increases by 6 cents (2.0%) if the levy is
increased by 6.6% rather than by 4.5%. The average
increase in general taxes paid for Class 1 properties
increases to 6.3% with a differential increase, compared
to 4.3% with an across-the-board increase.
Residential tax distributions are shown in the following
table. It is noted that the large majority
(approximately 90%) of those properties with a tax
increase of over 20% are either vacant or have increased
in value due to new construction.
TABLE 5. Class 1 Tax Distribution, General Taxes
# Properties # Properties
Across-the-Boa Differential
Overall Tax rd % of Increase % of
Increase, Increase Sample (6.6%) Sample
1997/1996 (4.5%)
<= 0% 13,526 11% 7,071 6%
0% - 2% 19,884 17% 6,137 5%
2% - 5% 48,794 41% 37,911 32%
5% - 7% 16,547 14% 30,118 25%
7% - 10% 12,173 10% 22,301 19%
10% - 20% 5,568 5% 12,581 11%
20% - 30% 737 1% 1,023 1%
30% - 50% 465 < 1% 501 < 1%
> 50% 726 < 1% 777 < 1%
118,420 100% 118,420 100%
OPTION #2: BLENDED TAX RATES FOR BUSINESS & LIGHT
INDUSTRIAL CLASS
A majority of the members of the Citizens Advisory Group
on Property Taxation feel that there is not a good
rationale for a discrepancy in the tax rates for light
industrial and business properties, and has recommended
that the rates for the two classes be blended to a single
rate, through a multi-year phasing plan (see accompanying
letter from the Chairman of the CAGPT). The rationale
for this recommendation is based on the fact that there
is very little distinction between properties classified
as either business or light industrial. Properties in
both classes are assessed at market value, and both are
compatible with mixed use developments.
In 1996, the general tax rate for the light industrial
class (Class 5) was $25.9979 per $1,000 of taxable
property value, and for the business class (Class 6) was
$14.5581. The rate for the light industrial class was
about 1.8 times higher than that for the business class.
There are only 129 properties in Class 5, and the total
assessed value of this class accounts for under one half
of one percent of the total roll value. In 1996, the
Class 5 share of the total tax levy was just under one
percent. Appendix B contains a listing of properties in
this class, and Appendix C contains the legal definition
of Class 5 property that is used by the BC Assessment
Authority.
Impacts of Blending the Tax Rates for the Light
Industrial and Business Classes
Blending Class 5 and Class 6 tax rates to a single rate
is essentially the same as a shift in the tax burden from
light industrial properties to business properties, of
approximately $2.3 million. This represents an increase
of about 18 cents (+1.2%) to the business class tax rate.
Correspondingly, the light industrial tax rate would be
decreased by $12.32 (-45%).
Chart 5 of Appendix D compares the Class 6 tax
distribution, comparing separate versus blended tax rates
for the business and light industrial classes.
TABLE 6: Impacts of Blending Tax Rates for the Light
Industrial and the Business Class
Class 5 Class 6
Light Industrial Class Business Class
SEPARATE RATES
Est. 1997 General Tax Rate1 $27.1270 $14.7404
Est. 1997 General Tax Levy $5.0 million $185.8 million
BLENDED RATE
Est. 1997 Blended Tax Rate2 $14.8093 $14.9199
Est. 1997 General Tax Levy $2.7 million $188.0 million
IMPACTS
Change in Tax Rate - 45.4% + 1.2%
Tax Burden Shift - $2.3 million + $2.3 million
1 Assuming a 4.5% increase to the Class 5 and to
the Class 6 levy; Class 6 rate based upon land
averaged assessments.
2 Projected blended tax rates are different
because Class 6 rate is based upon three-year
land averaged taxable values, and Class 5 rate
is based on unaveraged taxable values. Rates
are first blended to calculate appropriate levy
for each class, then Class 6 rate is adjusted
for averaged taxable values.
Council has the option of phasing the change from two separate
tax rates for the light industrial and business class to a
blended single tax rate for the two classes, which would
moderate the year-over-year impact of this change on the
business class.
OPTION #3: COMBINED DIFFERENTIAL TAX INCREASE & BLENDED TAX
RATES
This option combines Option #1 and Option #2, each examined
individually above. While a differential tax increase lowers
the Class 6 tax burden, blending business and light industrial
tax rates increases the Class 6 burden. Together, the effects
of each almost negate each other. The decrease to the
business class tax rate under this option is under 4 cents:
$14.706 versus $14.747 with no intervention. Chart 6 of
Appendix D shows that the base case tax distribution is almost
identical to the one resulting from Option #3.
OPTION #4: TAX CAPPING IN THE BUSINESS CLASS
In 1994, the Property Tax Task Force reached a consensus that
capping taxes to a determined percentage increase limit was
appealing in the short term, in that this prevented taxes on
individual properties from undergoing dramatic changes from
year to year. The Task Force also recognized that capping
taxes masks the real changes in market values that underlie
tax increases and that once tax capping is lifted the
adjustment back to market level taxation would be very
difficult and painful. Given the foregoing, the Task Force
concluded that: "Tax capping is not a tool that should be used
by City Council on an ongoing basis to mask tax increases that
are due to jumps in actual market values."
The Task Force recommended that a plan to phase out the use of
tax capping should be part of the proposed consumption study,
leading to a new tax policy for the City. In response to this,
in their report to Council entitled Study of Consumption of
Tax-Supported City Services, KPMG Management Consulting
recommended that Council confirm and implement an approach for
phasing out tax capping. A phase-out program has been in
place for the business class for the past two years, with an
increasing cutoff for the cap each year, and a decreasing
maximum credit value. There has been no tax capping in the
residential class since 1994, and no capping is modelled or
recommended for the residential class in this present report.
Impacts of Tax Capping
For 1997, tax capping has relatively minor implications for
Class 6 properties. A small number of properties receive a
cap, and the tax rate for the class is only slightly higher
than it would be with no capping.
As opposed to the first three options discussed above, the
impacts of tax capping are assessed using total taxes as
opposed to general taxes only. The City of Vancouver levy
comprises only half of the taxes collected on the City of
Vancouver property tax bill. Provincial school taxes account
for most of the remainder, about 42% of the total. The other
8% is collected by the City of Vancouver on behalf of the
following agencies: Greater Vancouver Hospital District, BC
Assessment Authority, Municipal Finance Authority, GVRD and BC
Transit.
As with the other options, the modelling for tax capping is
done using three-year land averaged values for calculating
1997 taxes. All non-City of Vancouver property tax levies are
assumed to increase by 3% over 1996.
The capping mechanism that is being recommended to Council
this year for Class 6 is based on increasing the
year-over-year bottom line tax increase hurdle rate from 20%
to 25%, and reducing the maximum amount of tax credit from
$7,500 to $5,000. This would increase the Class 6 tax rate by
approximately two cents or 0.1% to $14.762 per thousand
dollars of taxable value. The number of properties in this
class that would benefit from capping this year (about 230
properties) is reduced from the approximately 760 properties
that received a benefit in 1996.
The essential features of the proposed tax capping program
are:
i. A 25% cap on each property s year-over-year bottom
line tax increase.
ii. A $5,000 limit on the tax credit to an
individual property.
iii. Exclusion from capping for an individual
property if:
™ the property does not qualify for land assessment
averaging in 1997 pursuant to By-law No. 7712, or
™ the property did not have an assessed value for
improvements in both the 1996 and 1997 taxation
years, or
™ the property was exempt from real property taxation
in 1996, or
™ the 1997 assessed improvement value of the property
has increased by more than 10% over its 1996
improvement assessment and such increase is, according to the records of the BC Assessment
Authority, attributable to a change in the physical
characteristics of the improvement.
iv. Capping does not apply to sewer, water, local
improvement or other charges.
This tax capping option is consistent with the phase-out
approach recommended by KPMG Management Consulting, and
recommend that this be the last year of tax capping in the
business class to complete the phase-out program that was
implemented three years ago.
The following table shows the effect of a 25% tax cap on the
tax distribution for the business class. After capping, 650
properties incur a tax increase of over 20%, but less than
half of those properties are eligible for a tax cap. Only six
of the 193 properties with an increase over 30% are eligible
for a cap. Chart 7 of Appendix D shows the Class 6 base
distribution of year-over-year increases to all taxes (that
is, not just general taxes). Chart 8 compares this
distribution to that produced with the application of a 25%
tax cap.
TABLE 7. Class 6 Tax Distribution, All Property Taxes
Overall Tax No % of 25% Cap % of
Increase, 1997/1996 Capping Sample # Sample
# Propertie
Propertie s
s
<= 0% 1,827 24% 1,810 24%
0% - 2% 2,669 35% 2,645 35%
2% - 5% 989 13% 1,019 13%
5% - 7% 354 5% 354 5%
7% - 10% 425 6% 432 6%
10% - 20% 711 9% 710 9%
20% - 30% 315 4% 457 6%
30% - 50% 207 3% 123 1%
> 50% 123 1% 70 1%
7,620 100% 7,620 100%
Tax Capping and Other Taxation Options
The tax capping analysis shown in Option #4 applies to
existing taxation policy. Neither a differential tax rate nor
blended Class 5 and Class 6 tax rates are assumed. Tax
capping can also be applied in conjunction with any of the
first three taxation options presented in this report. In the
case of a differential tax increase, which lowers the Class 6
tax rate, fewer properties would receive a cap than shown
here. In the case of blending the Class 5 and Class 6 tax
rates, the business class tax rate is increased, and more
properties would receive a cap. However, because neither
Option #1, Option #2 nor Option #3 change the business class
tax rate significantly, the impacts of capping combined with
any of these options will not vary greatly from those shown
here.
SOCIAL IMPLICATIONS
Property taxation policy has a direct impact on children and
families. In order to make owned and rented housing as
affordable as possible, Council has attempted to dampen large
year-over-year tax increases, which are driven by real estate
market conditions in the city, since 1989. Council action to
date has also capped the growth of business taxes with a view
to preserving the business/residential character of
Vancouver s neighbourhoods.
CONCLUSION
This report outlines additional taxation policy options for
Council consideration before appropriate 1997 tax rates are
struck to reflect a balanced operating budget. In continuing
to phase out the tax cap in the business class, a 25% tax cap
with a $5,000 tax credit limit is recommended. The impacts of
a tax cap are moderate, with under 300 properties receiving a
cap, and the tax rate is increased by only two cents.
The impact of a differential tax increase is presented for
consideration, applying a 6.6% increase to the residential
class levies, and a 3.0% increase to non-residential class
levies. This results in a 4.5% increase to the overall tax
levy, and is consistent with the results of the public
consultation process Council undertook earlier this year.
Such a differential tax increase adds two percent to the
general taxes paid by each Class 1 property. The adoption of
Consideration E submitted by the Citizens Advisory Group on
Property Taxation would produce a similar result.
At the request of the Citizens Advisory Group on Property
Taxation, the option of blending the tax rates for the light
industrial and business classes to a single rate is presented
for consideration. This change would result in a $2.3
million burden shift onto Class 6, which would be phased in
over a period of up to five years.
* * * * *