Montreal continues to impose the greatest burden on its commercial property tax base of any of the 11 major Canadian cities scrutinized in Altus Group’s annual breakdown of property tax rates and commercial-to-residential property tax ratios. In 2021, Montreal’s commercial ratepayers paid $36.24 per $1,000 of assessed value, representing a tax rate 4.17 times greater than that applied on the city’s residential properties.
That’s well above the average tax rate of $23.88 per $1,000 of assessed value across all 11 cities and the average commercial-to-residential tax ratio of 2.73-to-1, and dramatically higher than the rates and apportionments in Saskatoon and Regina at the low end of the scale. However, Montreal’s tax rate this year was slightly more moderate than in 2020, when commercial ratepayers were levied $36.99 per $1,000 of assessed value.
The decrease is due to a province-wide property tax freeze that the Quebec government invoked for 2021 as one of its pandemic relief measures. Commercial ratepayers in Quebec City also saw a nominal dip in the property tax rate, as did residential property taxpayers in both cities.
In contrast, Vancouver’s year-over-year commercial property tax rate spiked up considerably in 2021 when the provincial government withdrew pandemic-related concessions on education property tax that had been offered in 2020. The city still recorded the lowest commercial tax rate for 2021 among the 11 surveyed — at $9.97 per $1,000 of assessed value — but that was a 48 per cent increase from 2020.
Vancouver’s commercial ratepayers also carry one of the most disproportionate shares of the property tax burden, with a tax rate that is 3.41 times higher than that applied to the city’s residential properties. Vancouver homeowners and residential landlords experienced a 0.1 per cent dip in their property tax rate for 2021, nudging it down to $2.92 per $1,000 of assessed value.
“The COVID-19 pandemic has had a deep impact on municipal finances across Canada. A long period of government economic support programs and funding commitments have stretched budgets and will continue to do so possibly for years to come,” observes Michael Brooks, chief executive officer of REALPAC, which has had a long affiliation with the annual property tax report.” We continue to see the importance of competitive and fair property tax rates to the overall economic performance of cities and point to further reductions in tax ratios as a strong and progressive way to ‘build back better’.”
A small majority of the cities — 6 of 11 — exhibited year-over-year shrinkage in commercial-to-residential tax ratios, although eight still tax commercial properties at rates that are more than double the residential property tax rate, while the commercial rate is at least 1.5 times higher than the residential rate everywhere. A larger number of cities — 8 of 11 — adjusted the 2021 commercial property tax rate downward from 2020 levels.
Increasing commercial property tax rates in Edmonton and Calgary — at 8.7 per cent and 6.2 per cent respectively — are largely attributed to the pandemic’s negative impact on property values. A new assessment, pegged to values as of July 2020, trimmed away more than 7 per cent of the value of Edmonton’s commercial assessment base and about 5 per cent of commercial assessed value in Calgary. Upward adjustments in tax rates were then required for both cities to meet their budgets.
Tax shifts anticipated with reassessment
Altus analysts suggest that could be foreshadowing future tax shifts in cities where reassessments are not as timely as the annual exercises in Vancouver, Calgary, Edmonton and Halifax. There were already provincial differentiations in the length of assessment cycles and choice of base dates for valuation, but pandemic-related postponements of scheduled reassessments in Ottawa, Toronto and Winnipeg have intensified that discordance.
“It’s a big issue that some assessments are on track to be seven years outdated,” warns Terry Bishop, Altus Group’s president, property tax, in Canada.
That’s the case in Ottawa and Toronto as all Ontario municipalities and their ratepayers wait for the provincial government to set a date for the next reassessment. Prior to the COVID-19 pandemic, a new four-year assessment cycle had been scheduled to begin in January 2021, which would tie assessments to property values as of January 2019. That schedule was scrapped in the spring of 2020, and January 2023 is now the earliest possible start-date for the next assessment cycle.
Until that cycle begins, assessments in Ottawa and Toronto will still be pegged to property values as of January 2016. The lag-time is not as lengthy in Winnipeg, but assessments will be nearly five years out of date — based on property values as of April 2018 — by the time the current assessment cycle, which was extended an extra year for pandemic-related reasons, draws to a close.
“When assessments are allowed to become more outdated, inequities, or unfairness, in the distribution of taxes creeps into the system. The result is typically large shifts in relative assessments, between property tax classes and amongst properties within a tax class, when the next reassessment does occur,” the Altus report states. “Full marks to British Columbia, Alberta and Nova Scotia for keeping their assessments current.”
Commercial ratepayers in Ottawa and Toronto were beneficiaries of other provincial decisions related to property tax this year. A move to harmonize the business education tax (BET) rate at 0.88 per cent province-wide offset increases in the municipal portion of tax levy both cities. A 10.2 per cent decline in the BET rate for 2021 helped deliver a 0.6 per cent decrease in Ottawa’s total commercial property tax, while Toronto’s commercial property tax rate fell 3.2 per cent with the assistance of a 7.9 per cent year-over-year drop in the BET rate.
Without that assistance, Toronto would have interrupted a 13-year track record of lowering the commercial tax rate, which is aligned with the city’s longstanding goal to narrow the commercial-to-residential tax ratio to 2.5-to-1. As of 2021, that ratio is at 3.44-to-1.
Meanwhile, the timely flow-through of Halifax’s annual reassessment process can be seen in the city’s tax rates this year. At 2.78-to-1 the commercial-to-residential tax ratio is above the average for the 11 cities, but tax rates fell for both commercial and residential ratepayers in 2021.
“The municipality benefited from a booming residential sector fueled by out-of-province buyers and implemented austerity measures resulting in lower municipal expenses,” the Altus report notes.