City of Powell River council will consider putting a $400,000 cap on permissive tax exemptions for 2022 and will be examining methods of assessing permissive tax exemptions more broadly in 2023.
At the August 26 finance committee meeting, chief financial officer Adam Langenmaier outlined permissive tax exemption policy considerations for city councillors. A permissive tax exemption is a municipal tax exemption granted to organizations by council, which is done on an annual basis through a bylaw.
According to a report to councillors from Langenmaier, the city has received 79 applications for permissive tax exemptions for 2022, which is an increase of eight applications over 2021. The total 2022 permissive tax exemptions are expected to be $421,675, up from the 2021 total of $377,941, according to Langenmaier’s report.
Langenmaier reminded the committee that he had been directed to look at examples of what other municipalities do and compare those methods to what Powell River is doing and what is proposed to be done. Langenmaier surveyed nine other communities, and with exception of Sooke, all of the communities’ permissive tax exemptions were less than two per cent of the total tax bill. In 2022, permissive tax exemptions in Powell River are forecast to by 2.09 per cent of the total tax bill, according to Langenmaier’s figures.
Langenmaier said when limiting permissive tax exemptions, the method really has to be tailored to the city’s requirements.
One of the areas that Langenmaier looked at for setting a cap is a financial needs test. He said no comparable community had such a test in place.
“All organizations that qualify for a permissive tax exemption must be a not-for-profit or a society,” said Langenmaier. “All of these organizations must present financial statements to the provincial government under the Societies Act. We know the information is out there and we know these organizations have to have a financial framework.”
Langenmaier said, however, that financial needs are not a pass or fail test. He said he had created five different tests, with each weighted a five per cent discount on property taxes, that could be used as part of the assessment. He said, for example, if an organization passed three of the five tests, the organization would qualify for a 15-per-cent discount. If an organization passed none, there would be no financial need.
Langenmaier, in his report, stated that a reasonable approach would provide a gradual transition for impacted organizations over a few years if a change occurs. He said that the city could use three different classifications to limit permissive tax exemptions, such as a straight cap, a levy for specific organization categories, or financial needs tests.
“We want to see what makes sense, how to share this benefit and burden,” said Langenmaier.
He said the impact of how council chooses a cap or how focused they make their category methods will guide the distribution of the permissive tax exemption.
“The recommendation that I have this year is a cap of $400,000, and that council direct staff to update the policy and use the category and financial needs method to be implemented for 2023,” said Langenmaier.
Councillor CaroleAnn Leishman said she agrees with a lot of the ideas behind this direction, but she is a bit uncomfortable heading in this direction without getting more feedback from community organizations.
“There are a few flaws in that some of the organizations may have skewed financials because they are in the middle of constructing new buildings, so the current financial needs assessment is a little bit out of whack with what is going to be the reality once the new construction is in place,” said Leishman. “It will totally shift the equity and assets that are available. I want to make sure that we let all the organizations know if council is going to consider a change like this and how that will affect some of these organizations. Some of these organizations may not be able to continue operating without the permissive tax exemptions.”
Chief administrative officer Russell Brewer said the city has heard from organizations that would like lead time on any consideration of changes and that is the intent with the direction for implementing policy changes in 2023.
“That gives us lots of time to do a proper public engagement,” said Brewer. “We would want to get feedback before it came in a report.”
Councillor Maggie Hathaway said she thought the needs assessment was fair and equitable for everyone. She said to alleviate Leishman’s concerns, she would hope there would be an appeal process.
Councillor Jim Palm said there are more organizations coming each year asking for relief, and the city has to stem the tide in some fashion. He said Powell River’s permissive tax exemption was higher than comparable municipalities, so he’s satisfied with reducing it to $400,000 this year, and there is plenty of time to be proactive with community organizations about changes being proposed.
Finance committee chair George Doubt said it was a great report. He said what the comparison to other communities shows is that Powell River is contributing a larger share of its taxation to permissive tax exemptions than anyone else on the table, and the city should think about that.
Doubt said there was a recommendation to council from the community finance advisory committee for a cap. He said that committee’s recommendation was that if categories or a financial needs test were to be implemented, that input would be needed from community organizations that benefit from permissive tax exemptions.
“I support the recommendations in the report,” said Doubt. “We need to move slowly and make sure everyone in the community has a chance to be heard.”
The finance committee gave unanimous consent to send the permissive tax exemption considerations to the city council meeting on September 2.