Abbotsford may be facing a tax shortfall that could be as high as $900,000, after the province changed the way farm buildings can be taxed by municipalities.
Every $1 million added to city budget expenditures roughly represents a one per cent tax hike for homeowners.
Coun. John Smith said this change is frustrating for a council trying to hold the line on local taxes.
“This is just another hurdle to get over, to reduce budgets generally,” said Smith.
Director of finance Salman Azam told councillors Monday night that Abbotsford has more than 700 farm properties that would have taxes reduced by amounts ranging from $5 to $13,700. He estimated the loss to the city will be $850,000 to $900,000 in 2013.
Azam proposed three options to deal with the shortfall:
1. All properties in Class 1 (residential) pay a 1.3 per cent higher tax rate in 2013, because the total Class 1 assessment base has decreased.
2. The city reallocate the lost revenue among all property classes based on their current share of the total tax revenue, to “spread the burden,” resulting in an overall tax increase of one per cent in all property classes.
3. The city absorb the impact through reduced programs or service levels.
Councillors expressed frustration at being surprised by this change, and will now lobby the province to mitigate the impact.
The city received notification of the new law on June 27. Staff said an earlier advisory from the province pointed to a shortfall of $300,000.
The province appointed a farm assessment review panel in 2008. New legislation passed on March 15, 2012.
The changes increase the limit on the assessed value of farm improvements exempt from taxation. Previously, that was capped at $50,000, but now rises to either $50,000 or 87.5 per cent of the assessed value – whichever is greater. It affects buildings (improvements), other than dwellings, which are erected on farms and used exclusively to operate a farm.
For example, a $1-million greenhouse would now have an exemption of $875,0000, whereas it used to be $50,000.
Council will lobby Victoria before choosing among the options available to deal with the impact of the new law.
