The city will be turning a sow’s ear of permissive tax exemptions into a silk purse of affordable housing as it charts a course on a new financial policy.
City staff will be digging deep during the 2022 budget planning process to find some funding alternatives to allow permissive tax exemptions (PTE) to operate as a tool to support the supply of affordable housing in Nelson, noted city chief financial officer Colin McClure in his report to council at the last regular council business meeting.
He said the city will be looking at whether there are alternative ways to direct funding to better target the increasing cost of living in the community.
“(Council’s) goal for the 2022 budget is to look at what might have been a tax savings, and/or tax that we didn’t expect to get, and try to put that into a sustainability fund or in some other manner to assist housing projects that they might see,” he said.
“That would allow them to be proactive in helping other buildings that might need support.”
Last year council approved one-year permissive tax exemptions for non-city owned properties, where typically a four-year PTE would have been provided.
The three large social housing projects nearing completion in Nelson did not receive further consideration for tax exemptions, after a cloudy year in 2020 when their tax status was uncertain.
McClure said some consideration was given on new estimates of taxable values and property classification for the social housing projects — Herridge Lane, Front Street and Nelson Avenue — as well as any operating grants to be received by the applicants.
“Last year there were questions about some of the properties (since) they were in the construction phase,” said McClure.
“The reasons at the time were to allow time for a better understanding of the assessed values and long-term tax implications of the new social housing projects that were under development, and to allow for a comprehensive review of the PTE policy as a whole.”
None of the structures will receive a permissive tax exemption since they will be owned by BC Housing, which receives a tax-in-lieu designation from the city.
In discussing the policy it was maintained that the PTE funding cap guideline of .5 per cent of the tax levy for non-city owned properties would remain.
The Community Charter provides that on or before Oct. 31 in any year council may, by bylaw, exempt land and/or improvements from municipal property taxes.
In addition to the legislated requirements, those organizations applying for exemption must comply with the guidelines set out in council policy, said McClure.
Council’s key considerations to direct staff in preparing the bylaw were:
• organization’s must be non-profit and provide needed social and community services to city residents or provide arts, cultural or recreational activities of demonstrable benefit to city residents;
• ability of the organization to raise their own revenues;
• whether granting a PTE will result in an inappropriate shifting of costs from other levels of government to local taxpayers;
• applicant must offer their services primarily to the broader community of citizens of the city; and
• to stay within the funding cap guideline of .5 per cent of the tax levy for non-city owned properties.
Source: City of Nelson Finance Department
With the policy now in place and three readings given to the amendments, McClure said council will be considering three-year property tax exemptions for the current group of applicants — which are expected to end in 2024, according to the normal four-year cycle.
The one notable exception is the lands held by the Granite Pointe Golf Course, he added.
“Due to the potential development of a portion of this property, council felt it was not in the position to grant a multi-year exemption until there was more clarity on its future use,” McClure said in his report to council.
“As a result, a one-year tax exemption for this property is being proposed.”
Permissive tax exemptions will be reviewed again in 2022 as the 10-year exemptions will be expiring, allowing for the opportunity to include the golf course property for review.
Tax shell game
When a permissive tax exemption (PTE) is granted the municipal tax money has to come from somewhere else.
The granting of a tax exemption has the effect of redistributing tax that would otherwise be levied to all other taxable properties.
“It is important to note that when the city provides a PTE to a property it not only limits or eliminates municipal taxes it also does the same for school, hospital, RDCK and other taxes,” said McClure.
“As these taxes come in the form of a requisition from the related organizations the taxes not collected on these properties is funded by the remaining taxpayers of Nelson.”
Source: City of Nelson