Town Misleads Public with 5% Tax Increase Declared a 2% Increase on Residences Only

Summary:

• Town claims 2025 budget is for 2% tax increase on residents only

• Actual budgeted tax increase is 4%, includes businesses, and could by 5%+ for the final budget

• Messaging relies on ignorance of public about property tax system

Town of Drayton Valley Council approved its 2025 Interim Budget on December 11, 2024. The approved budget increases net taxation $493,052 or 3.8% from $12,860,997 in 2024 to $13,354,049 in 2025. Total taxation is higher at $17,099,241 but the difference goes to School and Seniors requisitions. There was no increase in the School and Seniors requisitions from 2024.

The Town has declared the budget is a responsible 0% tax rate increase for commercial properties and a mere 2% tax rate increase for residential properties. So how are taxes increasing by 5% for Homeowners?

Here’s the math:

How can the Town get away with the misleading verbiage? They are playing on the ignorance of the average resident that doesn’t understand how property tax rates work and hoping that “$12.47 per month” average increase will be just too small to care about.

Municipality property taxation is different than the income taxes we are familiar with. Municipalities determine what general taxation funds are needed to fund operations and finance capital expenditures and then allocate that across the value of all real property in its jurisdiction. This ‘mill rate’ determines how much each property owner pays in tax based on their property value. The taxes are apportioned by property value. By contrast, an income tax is simply a rate that applies to income, whatever that income may be. Likewise, a sales tax is a rate applied to all sales and those tax revenues will go up and down with spending. Property taxes are more or less fixed each year to realize the municipality’s target revenue.

Drayton Valley property appraisals peaked in 2016 at $1.43 Billion and declined through 2021, bottoming out at $1.17 Billion (see graph). In all these years, net taxation increased or were held flat to fund municipal operations. The increase in mill rates required to offset the decline in property values was never characterized as a ‘tax increase’ in these years as it was merely the offset of declining values.

Source: Alberta Municipal Affairs Website: Audited Financial Statements and Tax Rate Bylaws (1)

True growth in the form of new properties will increase the Town’s tax base without charging existing ratepayers more. During the boom years of 2008 to 2015 this provided a steady source of revenue growth each year and allowed for enhanced services at reasonable cost. Though the Town does not disclose that information in their budget documents, any resident will know that growth has been minimal since the last boom ended.

The Government of Alberta provides historical non-residential mill rate data (1), here is a summary of net taxation and mill rates for 2017-2024:

Source: Alberta Municipal Affairs Website: Audited Financial Statements and Tax Rate Bylaws (1,2)

We can see from the above graph that Net Taxation was flat from 2019 to 2021 while Mill Rates increased due to offsetting property value declines. Town communication during these years correctly described the budgets as ‘No Tax Increase’.

The drop in 2019 net taxation was a concerted effort by the council of the day to reduce the tax burden for the community in light of an ongoing difficult economic backdrop.

Therefore, it is completely disingenuous for the Town to now characterize 2025’s 4% tax increase as a modest 2% increase on residences and 0% on business. At the December 3, 2024, budget meeting, General Manager of Corporate Services, Elvera Thomsen, said that the municipal assessor is telling the Town there will be a 3% increase in property value assessments, with details available in the Spring. Some of the assessment growth is new properties but as residents are aware, there have been minimal new builds compared to the $1.2 Billion 2024 assessed value. Thus absent a change in Council’s tax and spend agenda when the final tax rate bylaw is passed in May 2025, it is very likely Residents will see a 5% tax increase (2%+3%) and businesses a further 3% tax increase.

Residents and businesses are paying higher taxes on the same properties they own, that is a tax increase pure and simple. If the mill rate could increase to offset property tax value declines, it can just as easily decrease to offset property tax value improvements.

Town Council should be ashamed of trying to pull the wool over residents’ eyes instead of honest disclosure. It is up to the residents and taxpayers of Drayton Valley to apply pressure to Council to fix this budget.

Sources

(1) Alberta Municipal Affairs; Audited Financial Statements and Tax Rate Bylaws

http://www.municipalaffairs.alberta.ca/mc_financial_tax_bylaws

(2) Government of Alberta, Municipal Tax Rates by Municipality

https://open.alberta.ca/opendata/municipal-tax-rate-by-municipality

(3) Town of Drayton Valley, December 3, 2024 Budget Agenda Package

https://draytonvalley.civicweb.net/document/30376/

(4) Town of Drayton Valley, December 11, 2024 Regular Agenda Package; includes 2025 Interim Budget Resolution

https://draytonvalley.civicweb.net/document/30713/