Five development tax incentive programs considered by council

By Tyler Marr
April 24, 2018 - 8:00am

Five short-term tax incentive programs aimed at spurring both residential and commercial development came before Monday night’s executive committee meeting.

Branded as ‘Building our Tax Base,’ the programs are designed to be rolled out as soon as possible to inject enticement into the sector ahead of construction season as development stagnates. A number of the programs are aimed at new home construction, as only one city lot has been sold to date in 2018 and new builds have dropped drastically over the past six years. 

  • Year       Number of permits issued from Jan - April
  • 2012     22
  • 2013     27
  • 2014     11
  • 2015     13
  • 2016     6
  • 2017     5
  • 2018     1

“This is a concerning trend,” a report on the program read. “This could be due to a combination of factors such as the new mortgage rules, CMHC requirements, additional PST costs and a general slowdown in the economy.”

The new home construction tax incentive will allow any new single-family home completed in 2018 or 2019 to qualify for a 100 per cent municipal and education tax abatement for 36 months. Lots sold through the city’s $1 lot program will also be included in the incentive, which is available for all vacant lots in the city including those privately owned. According to administration, similar programs are common in other municipalities.

Another housing incentive program aimed at infill redevelopment within existing neighbourhoods also came under scrutiny. Under this program, any projects built in 2018 or 2019 can qualify for a 60-month partial tax exemption on the difference between the pre- and post-development tax bill upon completion. This includes the demolition of existing residential buildings and the rebuilding of something new in its place. For example, if a single-family home taxed at $2,000 a year was demolished and a four-plex was constructed in its place and taxed at $10,000, the applicant would not pay the $8,000 in new taxes.

“Tearing down an existing home that may be unsafe and beyond repair not only provides new housing opportunities, but it also promotes redevelopment in existing neighbourhoods,” the report read.

The package was initially set to give a 36-month partial tax abatement, but was tweaked to sweeten the deal further as some councillors said there are extra costs that come with tearing down an old home.

“By going 60 months we are not hurting ourselves, as we are getting the taxes that they are paying today,” Mayor Greg Dionne said. “Adding those two years on helps.”

A declining scale tax rollback program also passed. The rollback was designed to entitle projects valued over $1 million, and which meet an “identified need and market niche” in the city, to an abatement on municipal and education taxes over a five-year scale: zero per cent in year one, 25 per cent in year two, 50 per cent in year three, 75 per cent in year four and full taxation in year five. Standard businesses like retail stores, restaurants and shopping centres will not qualify. Rather, the package will be on offer to “new businesses that create many jobs, introduce a new type of industry, etc.” It will rest with the city manager and council to determine if and for how long the tax exemption should run. 

The incentive was originally directed at projects over $5 million, but Ward 4 Coun. Don Cody feared this higher dollar amount would leave out smaller, equally-important ventures. Outside of that, he and others agreed with the program's aims.

“We are really saying the wealthiest people of our society are the only ones that can qualify,” Cody said. “There are people that may do equally as good work … without that incentive, they may not be able to do the job. That is what I worry about.”

A sweetener for multi-unit non-residential developments built by the end of 2019 also came forward. The incentive will waive both municipal and education taxes for up to 24 months. The first unit built will be subject to all taxes, though the remaining units will be exempt for the allotted time period or until it is leased or occupied, whichever comes first. Administration said this program is unique to Prince Albert.

The final program was aimed at waiving outstanding underground and surface improvement costs for new developments. Service connection fees like water and sewer will not apply.  A report said there are currently over 40 properties which have outstanding infrastructure costs, totalling around $370,000. These properties have had surface improvements made, like curbs and sidewalks, which are often viewed as unforeseen costs by developers and not paid. 

Under the proposed program, anyone who develops on the specific lots will not be required to pay these outstanding fees, some which date back to the 1970s. Most of these lots are vacant and full of weeds, and the current owners of the land will not be able to benefit from this program.

None of the programs are retroactive or “stackable," meaning any new project will only be allowed to qualify for a single incentive package. Each project will be subject to approval by the city manager and city council, and any school tax exemptions will need to be approved by the Ministry of Education annually. Each program will also come back before council yearly for a review to see if adjustments need to be made.

Defending the incentives, Dionne said “times have changed” and while no one likes giving away tax dollars temporarily, it will help inject growth into the city.

“That means more taxes for us,” Dionne said. “Are we going to have to wait a couple years? Absolutely, but you can plan for that.”

Ward 8 Coun. Ted Zurakowski agreed.

“We are going to shoulder this burden as a result of the province's decision [on PST on construction projects] so that we can keep our people at home, working and try to broaden our tax base so we can spend it on buses, on roads, and on housing,” he said.

The five programs all passed Monday night and will come back to council on May 7 to be voted into law.


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On Twitter: @JournoMarr

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