Who should get property tax exemptions in Yellowknife?

Who should and should not receive municipal tax exemptions was the subject of significant debate among Yellowknife city councillors on Monday afternoon. 

Councillors were discussing a memorandum focused on whether to exempt the Yellowknife Day Care Association from property taxes on its 52 Street building, which would total $25,320 for 2020.

The daycare wrote to the City in early March requesting the exemption. The association has more recently described financial uncertainty during the Covid-19 pandemic, though the territorial government has provided some subsidies to offset losses.

City administration argues the daycare’s exemption request should not be granted, saying the association does not meet all of the City’s exemption criteria for societies.

Chiefly, senior administrator Sheila Bassi-Kellett said the daycare does not support a municipal purpose by providing services to the general public.

Bassi-Kellett stated staff opposed granting an exemption as childcare services are within the mandate of the territorial government, the association serves a small portion of the city’s population, and it relies on user fees. 

The daycare, a non-profit, provides childcare services for about 150 children every year. Comparatively, Yellowknife’s pre-school population was 1,464 in 2019. Less than one percent of the city’s population is eight years old and under, according to City figures.

About 64 percent of the association’s revenue over the past five years has come from daycare service and program fees. The territorial government provided 34 percent of the association’s revenue during that time. 

Bassi-Kellett said it’s a “balancing act” when it comes to considering these exemptions and shifting tax burdens onto others. While she understands the importance of supporting organizations that are doing good things in the community, she said, granting exemptions can be “a slippery slope” as there are many organizations that could make a compelling case for one. 

Councillor Stacie Smith agreed with the recommendation. She said she used to run a day home, adding that – in her view – such businesses “get a lot of funding and kickbacks” from the territorial government. 

City councillors debated property tax exemptions at their July 13 governance and priorities committee meeting.

Councillors Julian Morse and Shauna Morgan, though, said they felt the association did meet the City’s exemption guidelines. 

Morse said he considers childcare to be an essential service. He feels other organizations offering services that are less essential have been given tax exemptions. 

However, Morse said he was not entirely in favour of granting the association’s request as childcare falls under the territory’s responsibility.

“When it comes down to it, taxpayers are going to pay for it either way,” he said.

Morse added that the City’s bottom line is “being whittled away” by exemptions to organizations offering services covered by the territorial government. 

So far, the City has authorized $296,000 in tax exemptions for 2020, which amounts to about 1.02 percent of the municipality’s total tax revenue. 

Bigger conversation needed

Mayor Rebecca Alty said she also believes the association fits the City’s policy criteria. She pointed to organizations like community gardens and the Yellowknife Golf Club, which charge fees or have a limited number of spaces, but have been granted exemptions. 

She said this case highlights the need to re-examine the exemption policy.

“We’re in a difficult position when, on an individual basis, we’re picking winners and losers,” Morse said.

Councillor Niels Konge noted that an unintended consequence of the policy is that residences and businesses have to pay more in taxes.

He noted many religious organizations receive tax exemptions and said he “absolutely supports” taxing churches over other organizations that “don’t have bags and bags of money.”

“Why are we giving tax exemptions to some of the richest organizations in the world? That makes no sense to me,” Konge said. 

Councillor Steve Payne questioned if the City could reduce a percentage of an organization’s taxes, rather than taking an all-or-nothing approach.

That’s something several others supported, including Councillor Cynthia Mufandaedza. She asked how much other Yellowknife daycares and day homes were paying in taxes.

According to City Hall, currently three other similar programs operating as registered societies pay a total of about $16,000 in property taxes each year. Forty-six day homes pay a total of $112,000 in taxes annually.

City administration said it would look into whether legislation allows for partial exemptions of an organization’s property taxes.

Taxes for improvements ‘turned to ash’

Morse raised a separate issue related to who gets taxed: residents whose homes have burned down are still charged property taxes for improvements that have “turned to ash.” 

While homeowners in such difficult circumstances have asked the City for exemptions and been granted them in the past, Morse said this should be a universal exemption. 

“It kind-of strikes me as a bit of a no-brainer,” he said.

Konge, however, said people are taxed based on their property assessments at the beginning of the year. That means anyone whose home burned down would automatically see their taxes reduced after January.

Konge argued it’s reasonable for those exemptions to be on a by-request basis as, otherwise, taxation would become more complicated.

Ultimately, council appeared split on the issue of a tax exemption for the daycare association with four in favour and four against. A formal vote will take place at the next council meeting, on July 27.

The territorial government has previously said it plans to review the Property Assessment and Taxation Act, legislation that guides municipal property taxes in the NWT.

Mayor Alty told Cabin Radio the City has long asked for the government to review and revise this act.

One of the changes she’d like to see is allowing municipalities to send tax notices by email rather than just physical copies that are costly and take time to mail out.