Terrace city council is looking at taking a $71,000 hit in heavy industrial taxes this year. And it wants to cover that loss by dipping into its surplus.
Council has been debating decreasing the heavy industrial tax rate to become more competitive with other communities, and laid out some numbers during budget meetings this month.
Terrace’s major industry tax rate is now one of the highest in the province, coming in at $82/$1,000 of assessed value in 2010; Houston’s is $53/$1,000 while Smithers’ is $47/$1,000 and Prince Rupert’s is $38/$1,000.
Council’s reasoning during initial budget discussions last fall was that the city lacks a substantial heavy industry in any case and lower rates would make it more competitive with other communities.
It discussed decreasing the heavy industrial tax rate incrementally in the next few years by $20,000 this year, then a further $20,000 in 2012 and $20,000 more in 2013 during the fall budget meeting.
There was also a push last fall from some councillors to decrease the light industrial tax rate, but this did not go through.
During its recent spring budget meetings, council decided to place the major industrial rate $5 above the light industrial; the light industrial rate was $51/$1,000 in 2010, so the major industrial rate this year is set at $56/$1,000.
Under the current formula, the city would normally expect $213,000 in heavy industrial taxes this year. But by reducing the rate to $56/$1,000, the city’s now anticipating $142,000 of revenue.
This comes to a $71,000 reduction in tax revenue due to the change in the major industry tax rate on the current industrial assessment. The money for this will come out of the city’s surplus.
All councillors agreed to the change except councillor Bruce Bidgood, who said that there’s no real evidence that a reduction in industrial tax rate would result in increased industrial activity.
He had proposed an incentive-type program for new industry coming to town, adding that council has always been willing to do just about anything to get industry here.
“There could be some industry…who just on an analysis of mill rates….might suggest that Terrace has too high a rate,” Bidgood conceded, but said the companies could contact council who could then adjust the tax rate for them if that was the only thing standing in the way of progress.
“I have always felt that we had that capacity and that willingness to industry,” he said.
Councillor Carol Leclerc noted that with potential of mines being developed north of here and with the prospect of bio-energy companies coming to the area, Terrace should be more competitive.
Councillor Bruce Martindale agreed a more competitive environment with neighbouring communities is needed.
“There’s an opportunity there with our surpluses to absorb this within the next few years….and I think it’s a responsible move,” Martindale said.
“I think that we’re trying to create an industrial environment, we’ve invested a lot in trying to create an industrial park…I think we need to be doing everything in our power to make sure that this community looks like we’re interested in that.”
Councillor Brian Downie said it’s an issue of fairness, and if the average of industrial taxes in the communities is around the $55/$1,000 range, Terrace should be too.
“We also have no industry. So the effect, right now, is not that much. The effect in the future, we’ll see increased assessment, increased tax revenue,” he said. “To me, it boils down to, do we want to be seen as being one of the ‘hardest’ on industry?…It is possible to look at our rate and compare it to any other municipality that could be a competitor…and come to the conclusion that we are not fair to our industrial taxes.”
Councillor Brad Pollard pointed out that all the businesses that are kicking tires in town are commodity-based.
“The closer they are to the commodity, the more money they’re going to make. So yes, it might be cheaper to process logs based on tax rates in Smithers, but if the logs are in Terrace, it’ll be based in Terrace,” he said.
“I honestly don’t believe changing this will bring a lot of business in the area, but I also agree with councillor Downie’s comment that being so far out of the pack doesn’t make us look very good and it doesn’t seem like a fair way of doing it.”
Mayor Dave Pernarowski later said that he is pleased with the decision.
“Reducing the ‘heavy’….industrial tax rate to be more competitive with the rest of the province allows us to add one more competitive piece to the many benefits to locate a business in Terrace,” he said, adding that the change won’t mean an increase to residential or small business tax levels to offset the loss of $71,000.
“We anticipate that the $71,000 decrease in taxes will be offset in future years by new industry,” he said, listing Skeena Sawmills and the planned bio-coal plant on the old Poirier log yard as two examples. The Skeena Sawmills site is anticipated to have a higher assessed value now that it’s been sold because it will become an operating mill and generate a higher level of tax. Should the bio-coal plant open this year, it would also add tax dollars to the city’s bottom line.
“The timing to make this change is actually very good,” said Pernarowski. “Since we have no active heavy industry currently in the city, the impact to our budget is minimal.”
There will be a public consultation session on the financial plan during the next council meeting April 26 starting at 7:30 p.m. at city hall. The five-year financial plan bylaw needs to be adopted by May 15.