Yellowknife contemplates shifting property tax burden

It’s that time of year again. The weather’s warming up, the birds are coming back to town, and municipal politicians are debating mill rates. 

Each spring, Yellowknife city councillors re-evaluate how the property tax burden is divided among different types of property owners. The mill rate represents how much tax a person has to pay per $1,000 of their property’s assessed value. 

Delivering a balanced budget, which the city must do by law, in part relies on using revenues like property taxes to match city spending. In 2021, 39 percent of Yellowknife’s revenue is expected to come from property taxes. 

There are six different classes of property in Yellowknife:

• Residential (49.64% of the city’s property tax assessment base)
• Commercial/industrial (38.09%)
• Multi-residential (11.77%)
• Mining and quarrying (0.25%)
• Agriculture (0.13%)
• High-density parking (0.12%)

Each of those can have its own mill rate.

On Tuesday, city councillors primarily discussed the difference in mill rates between commercial and residential property owners, as calculated by the mill rate ratio – the residential rate compared to the commercial rate.

The mill rate ratio between residential and commercial property owners is important because changing the ratio shifts the tax burden.

Sharolynn Woodward, the city’s director of corporate services, told councillors that while City Hall has traditionally taken a simple mathematical approach to the mill rate ratio, there are political questions to consider. 

She noted reducing the tax burden for commercial property owners could help attract and support local businesses, which would grow the economy. Reducing the tax burden on residential property owners, meanwhile, could help reduce the cost of living, attract and retain residents, and target more voters.

“There are no right or wrong answers. These are political choices that council must make,” she said.

City staff presented councillors with four possible scenarios for the 2021 mill rate ratio:

• maintaining the status quo with a ratio of 1:2.26 (for every $1 the residential property-owning community is taxed, the commercial property-owning community is taxed $2.26);
• increasing the tax burden on residential property owners by reducing the ratio to either 1:2.13 or 1:1.83; or
• more drastically, making the mill rate ratio even, shifting much more of the burden to residential property owners. 

	2020	Scenario 1	Scenario 2	Scenario 3	Scenario 4
Mill rate ratio	1:2.26	1:2.26	1:2.13	1:1.83	1:1
Non-residential Taxation % change		-0.24%	-1.53%	-5.44%	-20.19%
Residential Taxation % change		+0.24%	+1.53%	+5.44%	+20.19%

Councillor Niels Konge favoured Scenario 3, saying he wanted a more equitable mill rate ratio but a one-to-one rate would be “quite a shock to the system.”

Konge said commercial and industrial property owners currently shoulder more of the tax burden while representing a smaller portion of the tax base. (There was a minor decrease in the number of commercial or industrial properties between 2020 and 2021, largely due to eight properties in Kam Lake being reclassified as residential.)

Status quo and ‘shock to the system’

“I hope we don’t stay with the status quo,” Konge said. 

Mayor Rebecca Alty and councillors Rommel Silverio, Robin Williams and Stacie Smith, however, supported keeping mill rates the same as in 2020. 

Alty said she doesn’t believe changing the mill rate for commercial property owners will encourage new businesses. She said council’s energy would be better spent developing business development incentives. 

Councillor Julian Morse expressed concern that the mill rate is “too imprecise” to help target groups that could use tax reductions, like small business owners and people in lower income brackets. He described a disparity in Yellowknife between residents that work in high-paying government jobs and those who work in the service industry or private sector. 

Morse said the current mill rates place too much of the tax burden on business owners, but felt that changing the mill rate ratio to 1:2.13 would be too big a shift. He suggested changing the ratio to 1:2.20, a smaller alteration, but did not receive support from other councillors. 

Councillor Cynthia Mufandaedza favoured Scenario 2, saying a 1:2.13 ratio represented a gradual increase for residential property owners that the city could build on in years to come.

Councillors will continue to discuss mill rates at their next regular meeting on April 12.

Whatever mill rate ratio they ultimately select will affect how much tax individual property owners must pay this year. In December, councillors approved an overall 2.5-percent property tax increase for 2021.