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City continues shift of tax burden onto homeowners

A vote to reduce Thunder Bay’s commercial and large industrial tax ratios continues a years-long shift of the municipal tax burden onto local homeowners.

THUNDER BAY — Thunder Bay’s city council has approved a 2023 tax policy, solidifying changes that will see residential property owners continue to shoulder a larger portion of the city’s tax burden.

Council approved slight reductions in tax ratios for the commercial, large industrial, and multi-residential classes in a vote on Monday.

The ratios represent the rate at which the city’s total tax levy is applied to a property class, in relation to the residential property class.

Commercial properties, for example, with a tax ratio of 1.98, are taxed at nearly twice the rate of a residential property based on their assessed value.

The changes will add just over seven dollars to the median single detached homeowner’s tax bill, but two councillors who cast votes against say it’s part of a long-term trend that has let business and industry off the hook and inflated residential taxes.

The changes are in line with a long-term tax strategy is intended to bring the city into compliance with provincial “ranges of fairness” for each property class, which have pushed cities to bring tax ratios more in line with residential rates.

Those provincial guidelines have come with some carrots and a substantial stick, with the province allowing cities to apply only 50 per cent of any new tax increases to property classes that exceed the ranges.

That has meant the residential class has borne the brunt of tax hikes in recent years.

After two decades of reductions to Thunder Bay’s commercial, industrial, and multi-residential ratios, however, all will be within the provincial range for the first time this year.

“Now that all property classes are below the threshold, all property classes would see that levy increase — If it’s two per cent, they’d all see two per cent,” said Kathleen Cannon, the city’s director of revenue.

Monday’s vote continues a years-long trend that has seen industry and business pick up less and less of the city’s tax burden.

The commercial tax ratio has been reduced from 2.45 to 1.98 since 1998, when the province overhauled the tax system and ratios were introduced.

In that time, the industrial ratio fell from 3.23 to 2.37, while the large industrial ratio fell from 3.47 to 2.73.

In an interview, Coun. Andrew Foulds said he doesn’t accept that strategy.

“Shifting the burden onto residential, I don’t think is reasonable,” he said. “I’m comfortable with other property tax classes having [higher] ratios.”

He called the provincial thresholds “fairly arbitrary,” saying they infringe on the ability of municipalities to set their own local tax regimes.

Coun. Trevor Giertuga, who along with Foulds cast the only votes against the ratio changes, agreed.

“I am against the continual shift of the tax burden from commercial, industrial, and multi-residential classes on to the already high residential tax base,” he said. “The shift has been substantial over the years, resulting in increased residential taxes that are already too high, in my opinion.”

The ratio changes have combined with a rapid decline in industrial activity to tank revenues for the city.

Over the past decade, for example, the number of properties in Thunder Bay’s large industrial class shrank from 23 to five.

Because those industrial properties pay taxes at a higher rate, their loss hits especially hard, said Cannon.

“There has been a significant shift — the large industrial property class used to pick up much more of the tax levy,” she said. “It’s been shrinking every year, and the risk associated with that is that for every dollar in assessment that’s lost, we know that because the tax ratio is so high, you’re losing three or four times that in taxes.”

The industrial and large industrial classes are set to pay around $5 million in taxes in 2023, amounting to just two per cent of the city’s total taxation revenue.

That compares with $142 million in residential property taxes, and nearly $15 million from multi-residential properties like apartments.

The commercial class, meanwhile, is expected to generate just over $53 million in tax revenue.

City staff have recommended decreasing the ratios, reasoning that will not only meet provincial targets and avoid associated penalties, but also make Thunder Bay more competitive in attracting private investment.

“In Thunder Bay, we do have very high ratios compared to other municipalities in Ontario in what I call our business classes, which are multi-residential, commercial, and industrial,” said Cannon.

“Lowering the ratios promotes economic growth, because we know property taxes are one of the factors businesses look at when they’re deciding whether or not to move into a city. It’s also a factor when established businesses are looking at whether they can afford to expand or make improvements.”

“The spin-off to that is if there’s economic growth, it means new tax revenue for the city, which will actually reduce the tax burden on existing tax payers.”

Foulds is skeptical the reductions do much to lure businesses to the city.

“I think that’s a southern Ontario argument, when you have municipalities that literally have a street that divides them. So does a business decide to be on the south side of the street, or the north side of the street?”

The Current River Ward councillor said the fact the city has shed industry while lowering its tax ratios speaks for itself.

“Have we in the last 15 years that we’ve been shifting, seen the benefits of that?” he asked. “If it’s such an incentive, where’s the work? If it was an incentive that worked for Thunder Bay, I might change my position — but I’m looking at the evidence.”

The city’s long-term tax strategy envisions continued small reductions to ratios for commercial and multi-residential property owners in future years.

It also envisions eliminating the large industrial property class entirely over the next four years, wiping out the higher tax rate those businesses have traditionally been asked to pay.



Ian Kaufman

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